Technical Analysis in Stocks | CTFA Exam Prep

Understanding Technical Analysis in Stocks

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Question

In stocks, technical analysis is based on studying:

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Explanations

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A. B. C. D.

D

The correct answer is D. Stock Charts.

Technical analysis is a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. The approach is based on the belief that past market trends and behavior can provide insight into future market trends. Technical analysis is primarily used to identify trading opportunities by analyzing price movements and volume.

Technical analysts use charts to identify trends and patterns in stock prices and volume. These charts can be used to determine the overall direction of a stock's price movement, as well as to identify key levels of support and resistance. Technical analysts also use various technical indicators, such as moving averages and momentum indicators, to help identify potential entry and exit points for trades.

In contrast, fundamental analysis is a method of evaluating securities by analyzing financial and economic data, such as earnings reports, balance sheets, and economic indicators. Fundamental analysis seeks to determine the intrinsic value of a security and whether it is overvalued or undervalued based on its financial and economic characteristics.

Therefore, options A, B, and C, which all relate to fundamental analysis, are incorrect. Technical analysis, on the other hand, is based on stock charts and patterns, making option D the correct answer.