| Technical
analysis is a method of analyzing stock statistics based on
market activity, past prices and volume. It is a method to
look for patterns and indicators on historical stock charts
that will determine a stocks future performance. Most technical
analysts believe that stocks move with very predictable trends
and patterns.
The
problem that lies with technical analysis in the penny stock
market is that very few OTC companies have a consistent or
reliable trading history. There are a number of reasons for
this. Some companies are new, some are shell companies with
no business operations, some lack the fundamentals or direction
to garner investor support, and then there are those few quality
companies that not enough investors are aware of.
Most
OTC companies have limited budgets and do not possess the
financial muscle to communicate their story to enough people
to build a consistent demand for their stock. Every so often
there may be a spike in the stock from a positive press release,
but for the most part there is not enough consistent investor
demand for the stock to maintain a reliable trading history.
Without consistent historical market data, no reliable pattern
can be found; therefore making technical analysis a virtually
useless method.
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