In finance, technical analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume.[1] Behavioral economics and quantitative analysis use many of the same tools of technical analysis,[2][3][4][5] which, being an aspect of active management, stands in contradiction to much of modern portfolio theory. The efficacy of both technical and fundamental analysis is disputed by the efficient-market hypothesis which states that stock market prices are essentially unpredictable.
A fundamental principle of technical analysis is that a market's price
reflects all relevant information, so their analysis looks at the
history of a security's trading pattern rather than external drivers
such as economic, fundamental and news events. Therefore, price action
tends to repeat itself due to investors collectively tending toward
patterned behavior – hence technical analysis focuses on identifiable
trends and conditions.