There are thousands of stocks to choose from. Which ones should you buy? When should you sell? There many different methods and approaches to buying and selling stocks. Most people make their decisions based on "hot stock tips" from a friend, or hearing a business news headline on a particular stock, or a recommendation from a their broker. Only a small minority, however, will actually take it a step further and analyze the stock before they make a buy/sell decision.
Historically, there are two schools of thought to analyzing a stock. There are the fundamentalists who analyze a stock on a company's fundamentals like profitability, management effectiveness, cash flow, and the company's income statement and balance sheet. And there are the technical analysts. Technical analyst's attempt use a stock's price history in order to predict the future direction of a stock's price primarily through the use of charts. A technical analyst often has no idea or even cares what the company behind the stock does, what industry it is in, or whether is is profitable.
Can a daily history of stock prices really predict the future direction of a stock's price? Many will argue that they certainly can not. Others are convinced that they can. Let's look at the arguments for both methods.
