PATTERNS
25 May 2016 By PDSNETThere is an on-going debate in the investment world about whether share prices move in patterns or are simply random. Obviously, it is impossible to predict a random series - by definition. So if share prices are random then all forms of analysis are a waste of time. The research departments of big institutions and stockbroking firms around the world indicate that most investment professionals believe that there are patterns that can be exploited through either fundamental or technical analysis. The subject of technical analysis begins with the assumption that there are patterns and that all that is required is to find the mathematical formulae that will identify and exploit those patterns. The random walk theory begins from the idea that there are no patterns and advocates a portfolio which is as close to the market's average beta as possible. One of the best ways to analyse a share price chart is to look for common patterns like the "head-and-shoulders" formation, "double tops" and "double bottoms". These formations can give a very good indication of what will happen next.
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