Let's say you want to analyze some market that is not one of instruments usually discussed here on ET (retail prices of cell phones in Malaysia for example). Would you consider TA to be an appropriate tool to predict price changes? If yes, why? If no, why?
TA works for trading for obvious different reasons ie one side is trapped and self fulfilling prophecies.
TA is partly a graphic display of market players' "greed and fear". Doubt that psycho exists in cell phone prices.
If you can chart it, you can assign some indicator to it. Medical devices are TA as many oscillate, so am sure cell phones can as well. But where many are wrong, TA tracks the past, of course can be back tested and have probabilities of having patterns, charting has patterns, but regardless of how one enters the market, we all are predicting profitable future.
In reply to all... imho you can apply TA to almost anything, for example (using hypothetical statistics) I predict MS will interject within ~ 48 hrs... and have a greater than 50% chance of being correct. Even with a Binary Bet, this strategy has positive expectancy It is an established pattern, which can be back tested... (The percentage's I chose are arbitrary and may be conservative, but if one is so inclined and has even less to do than I do on vacation, the actual percentages can be calculated and I wouldn't be surprised if they are very close...) Take a sufficient sample size let us say 1 year. Identify how many threads contain the word Technical Analysis, TA, Price Action, PA or some derivative thereof during the sample period. Identify how many threads MS had responded to one or more times Identify of the responded threads minimum, maximum and average response time. Obtain the percentage of Threads responded to by MS (let us use 75% as an example) Obtain the percentage of Threads responded to within 48 hrs, etc... (again using 75% as an example) You can now assume with some certainty that MS will respond 3 out of 4 times... You can also assume with some certainty that MS will respond within 48 hrs 3 out of those 4 instances. This provides us with a 56% chance that MS will respond to this thread within 48 hrs (assuming the variables were correct) This data can also be graphed Hence, my believe that TA can be applied to most anything... Happy holidays - now back to my vacation of doing absolutely nothing but relaxing... ;o)
Interesting question. My answer is yes in terms of what i consider to be valid aspects of TA such as identifying trends. Dubious aspects such as identifying head and shoulders, cups and saucers and teaspoons etc, no. So for your example of price of mobile phones, analysts and phone sellers are no doubt looking at a chart of price and sales (i.e. volume) and looking at how prices are moving over time i.e. the trend. The notion that they would be looking for cups and saucers patterns in the chart would be pretty absurd.
I remember the first charts I saw. My friend and I walked in on a meeting his mom (a real estate agent) was having at her house with other real estate agents at her firm...my friend and I were suppose to stay at a friends house for 2 hours. Anyways, I remember she had these charts showing monthly graph of high, low, close, open prices of homes. She was using the information to forecast prices of homes across several counties. Chart analysis and anyone can do such without using technical terms that we see used in technical analysis.
If you consider that the market works because of supply and demand, and that TA is simply noting this change of supply and demand and seeing the reaction of traders to an apparent case of more demand or more supply, then it stands to reason that the price of phones can also be analyzed with TA. Often times when things go on sale, lots of people come in to buy, when the price is too high, prices drop (so price controls the demand and supply pressure). Companies already drop prices of products when they have too much inventory in order to get rid of it faster (they have too much supply). An initial rollout of a product might see prices spike because the demand is too great, and the factory cannot make enough units to satisfy all the demand, so people are willing to pay higher prices. So I think its very possible to do this. But you gotta remember that unlike a market with many participants, you're dealing with a "thinly traded" market here in terms of cell phones. Only one company makes them, and hence controls supply (if you are talking about only one model, and if you consider that the price is set my the company and not the retailer), and there is also a floor to how low price can go. (rarely will a company sell below the cost to make it, although this does happen sometimes)
%%%%%%%%%%%%%%%%%%% Yes + no; yes, on real estate.....NO its not about prediction; wisdom is profitable to direct. Electronics tend to get cheaper, cheaper long term; not a prediction=LOL