By Deborah Baldini
Technical analysis is an investment technique for assessing statistical price trends and patterns to identify potential trading and investment opportunities. It differs from “fundamental analysis,” which focuses on analyzing business metrics such as revenues, earnings, cash flows, expenses, and net income to predict future price movements that offer potential gains.
How Does the Analysis Work?
Technical analysts assess the supply and demand for a certain security by examining changes in price, trading volume, and volatility. The method assumes past trading activity and price movements can indicate where the price of that security may move next when disciplined trading rules are applied.
Charts depicting past price movements often show patterns in past activity that may repeat in the future. Chart patterns may also help in evaluating the strength or weakness of an individual security relative to its peers and to the market and assist in estimating whether a trade is warranted or not.
Technical analysis was created by Charles Dow, (who also created the Dow Jones Industrial Average (DJIA) Index, or “the Dow,” and founded The Wall Street Journal). The Dow Theory is a financial theory that says the market is in an upward trend if one of its averages (e.g., industrials or transportation) advances above a previous important high and is accompanied or followed by a similar advance in another average. For example, if the Dow Jones Industrial Average (DJIA) climbs to an intermediate high, an investor might watch the Dow Jones Transportation Average (DJTA) climb to confirm an upward trend. The methods and techniques have expanded considerably since then, especially when computer-assisted analysis became available.
Dow also had two basic assumptions that establish the foundation for technical analysis today:
- Markets are efficient with values (prices) that reflect all the known knowledge about the security and factors that influence the security’s price.
- Even seemingly random price movements appear to move in identifiable patterns and trends that tend to repeat over time.
Common indicators include price trends, chart patterns, volume and momentum indicators, moving averages, and pattern “support” and “resistance” levels. The method is a science unto itself, and many major investment companies have entire departments devoted to technical analysis of the many financial markets in existence today.
Using the Analysis With Investing
Technical analysis may be used with any security with historical trading data including common stocks, fixed-income securities, and especially commodities and currency trading. Professional analysts and investment managers most often use technical analysis in conjunction with other forms of research. As an example, a professional investment manager may utilize technical analysis and fundamental analysis of a company stock, along with other factors such as comparative competitor analysis, sector and economic trends, and other data to determine whether an opportunity truly exists with the particular security.
Introducing the Baldini Method
In my own financial and investment management practice, I employ an innovative, proprietary trend-following investment discipline I’ve termed “The Baldini Method.” This methodology has been crafted and honed over my 30-plus years of market analysis and experience and applies both fundamental and technical analysis to stock selection and trade timing.
As investors have become more sophisticated and charting tools more available, the occurrence of false signals, or “fake-out breakouts,” has increased. Under the Baldini Method, a buy or sell signal must be confirmed by additional indicators, such as moving averages, momentum oscillators, relative strength, and other proprietary indicators. These filters greatly reduce the odds of a false signal and increase the probability of identifying a profitable new trend.
Technical analysis (and past performance) cannot predict the future, of course, but it can provide valuable data that can help improve portfolio results over time to meet the investor’s goals and objectives. Investing is hard and it makes sense to use both fundamental and technical analysis to help improve the decision-making process.
Reach Out for Help
If you have questions or need further clarification on how technical trading may help you realize your investment and other financial goals, our team is here to help. We can guide you so you feel confident that your investment portfolio is working for you.
Our ultimate goal is to earn our clients’ trust each and every day by fully understanding their personal and financial goals, giving unbiased advice, utilizing appropriate investments, and by offering unparalleled service in a comprehensive and timely fashion.
To learn more about our team, the Baldini Method, and the ways we can help guide you, call 480.258.6104 or email [email protected] today.
About Deborah
Deborah Baldini is a Senior Financial Advisor at ABLE Financial Group, a financial services practice that focuses on transition planning and simplifying the complexities of their clients’ wealth. A seasoned professional with over 30 years of experience and a lifelong learner in the realm of financial markets, Deborah was formerly the founder and president of Baldini Investment Strategies. At her independent practice, Deborah offered innovative wealth, retirement, and investment strategies tailored to the unique needs of her clients, aiming to help them effectively manage and safeguard their wealth.
She has drawn on her extensive background and experience in capital markets, technical analysis, and discretionary portfolio management to create a proprietary investment process that is designed to adapt to changes in market conditions in a systematic and disciplined way, potentially giving clients the confidence to stay the course and steer clear of the emotional minefields of fear and greed.
Before founding Baldini Investment Strategies in 2013, Deborah spent 20 years at Prudential Securities, working her way up from Margin Clerk to Operations Manager, to Assistant Vice President, to Financial Advisor. She spent nine years at RBC Dain Rauscher, where she held the title Vice President-Investments before joining Raymond James in 2008. She holds the Series 7, 8, 63, and 65 licenses and has a Bachelor of Arts from Tulane University and a Master of Arts in Italian Language and Literature from UCLA.
Deborah lives her core values of compassion, kindness, and service to those in need on a daily basis as she cares for her disabled adult daughter who requires assistance to be able to live on her own. Over the years she has been a fierce advocate for her daughter and is well-versed in the laws governing the Arizona mental health system and federal disability benefits. Her husband, Ken, now retired, shares the same values, which he put to good use working with autistic children and children with a history of trauma, abuse, and neglect as a Senior Behavior Management Specialist with Arizona’s Children Association.
Deborah was born and raised in Ohio. After attending university in New Orleans, Rome, Italy, and Los Angeles, she moved to Tempe, Arizona, in 1978. She and Ken have three children, Micol, Robert, and Alia, and two grandchildren. Deborah enjoys the arts, crafts, foreign languages and cultures, mountains, beaches, hiking, reading, learning new things, and spending time with family.
