Why technical analysis stays secondary

"Nobody does it alone. We all sit in the shade of trees that were planted by others."

Nobody does it alone. We all sit in the shade of trees that were planted by others.

Technical indicators help you choose when to enter a stock the fundamentals have already flagged as interesting - they don't decide whether a company is worth owning.

The technical score you see on every company page rolls up RSI, moving averages, MACD, and volatility into a single number, kept separate from the fundamental score on purpose: a company can have a low technical score - the price is falling - at the very moment its fundamental score signals it's worth more than it costs. For a value investor, that combination is often the most interesting moment, not the most worrying one.

A drawdown - how far a stock has fallen from its recent high - isn't enough on its own to judge whether it's worth buying. You need to know what share of similar past drawdowns recovered within a reasonable timeframe, and how many past cases that share is based on: a high recovery rate calculated from just three past cases isn't the same thing as one calculated from fifty.

Technical analysis can absorb hours: dozens of indicators, different time horizons, chart patterns that seem to predict the next move. But time spent decoding a chart is time not spent reading a balance sheet, understanding a company's competitive advantage, or estimating what it's really worth. That's why, in this masterclass, the technical score stays a timing corrective, never the criterion used to decide whether a company deserves a place in a portfolio.