Does it have any chance of working, or is it just like reading tea leaves?
There are a couple of plausibility arguments. One is that the chart patterns represent the past behavior of the pool of investors. Since that pool doesn’t change rapidly, one might expect to see similar chart patterns in the future. Another argument is that the chart patterns display the action inherent in an auction market. Since not everyone reacts to information instantly, the chart can provide some predictive value. A third argument is that the chart patterns appear over and over again. Even if I don’t know why they happen, I shouldn’t trade or invest against them. A fourth argument is that investors swing from overly optimistic to excessively pessimistic and back again. Technical analysis can provide some estimates of this situation. A contrary view is that it is just coincidence and there is little, if any, causality present. Or that even if there is some sort of causality process going on, it isn’t strong enough to trade off of. A very contrary view: The past and future performa
