17
CHAPTER
TECHNICAL ANALYSIS AND
INVESTING WITH THE TREND
Many skeptics, it is true, are inclined to dismiss the whole procedure
[chart reading] as akin to astrology or necromancy; but the sheer
weight of its importance in Wall Street requires that its pretensions be
examined with some degree of care.
BENJAMINGRAHAM ANDDAV I DDODD, 1934^1THE NATURE OF TECHNICAL ANALYSIS
Flags, pennants, saucers, and head-and-shoulders formations. Stochastics,
moving-average convergence-divergence indicators, and candlesticks.
Such is the arcane language of the technical analyst, an investor who fore-
casts future returns by the use of past price trends. Few areas of invest-
ment analysis have attracted more critics, yet no other area has a core of
such dedicated, ardent supporters. Technical analysis, often dismissed by
academic economists as being as useful as astrology, is being given a new
look, and some of the recent evidence is surprisingly positive.289(^1) Benjamin Graham and David Dodd, Security Analysis, 1st ed., New York: McGraw-Hill, 1934, p.
618.
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