# Technical Analysis of the Financial Markets The term "market action" includes the three principal sources of information available to the technician - price, volume, and open interest. (Open interest is used only in futures and options.) There are three premises on which the technical approach is based: * Market action discounts everything. * Prices move in trends. * History repeats itself. As a rule, chartists do not concern themselves with the reasons why prices rise or fall. Market price tends to lead the known fundamentals. Stated another way, market price acts as a leading indicator of the fundamentals ## TECHNICAL CHECKLIST * What is the direction of the overall market? * What is the direction of the various market sectors? * What are the weekly and monthly charts showing? * Are the major, intermediate, and minor trends up, down, or sideways? * Where are the important support and resistance levels? * Where are the important trendlines or channels? * Are volume and open interest confirming the price action? * Where are the 33%, 50%, and 66% retracements? * Are there any price gaps and what type are they? * Are there any major reversal patterns visible? * Are there any continuation patterns visible? * What are the price objectives from those patterns? * Which way are the moving averages pointing? * Are the oscillators overbought or oversold? * Are any divergences apparent on the oscillators? * Are contrary opinion numbers showing any extremes? * What is the Elliot Wave pattern showing? * Are there any obvious 3 or 5 wave patterns? * What about Fibonacci retracements or projections? * Are there any cycle tops or bottoms due? * Is the market showing right or left translation? * Which way is the computer trend moving: up, down, or sideways? * What are the point and figure charts or candlesticks showing? ### After you've arrived at a bullish or bearish conclusion, ask yourself the following questions * Which way will this market trend over the next several months? * Am I going to buy or sell this market? * How many units will I trade? * How much am I prepared to risk if I'm wrong? * What is my profit objective? * Where will I enter the market? * What type of order will I use? * Where will I place my protective stop?