The normal contrast to fundamental analysis is ‘chartism’, which is also called ‘technical analysis’. This is concerned exclusively with the movements of share prices in the recent past to forecast how they will move in future. The really dedicated chartist does not even inquire whether the price chart is for houses, airline tickets, gold bars, indices like the FTSE100, or the shares of banks, since all relevant information is assumed to be in the pattern of movements.
This is in complete contrast with fundamental analysis in that it totally ignores the underlying worth of the business. Technical analysis is concerned not with whether the company is efficiently managed but with when the market price is likely to change. It can, however, indicate which share prices are due for a turn – in either direction – and so provide a stimulus for active traders. That means it does not so much indicate which share to buy as when to do so – and this is examined in detail in Chapter 10.
Source: Becket Michael (2014), How the Stock Market Works: A Beginner’s Guide to Investment, Kogan Page; Fifth edition.
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