Editing 2101: Technical Analysis

There are two recognized methods to attempt to predict the stock market, each with its own pros and cons:

*{{w|Technical analysis}} is more appropriate for traders seeking to benefit off short-term fluctuations in stock prices, by attempting to look for trends, momentum, patterns etc. in the stock prices.

*{{w|Fundamental analysis}} is more appropriate for investors seeking to benefit off long-term fluctuations in stock prices, by attempting to guess future earnings based on some fundamental factor about the companies whose stock is traded. Investors can choose to look for good Price/Earnings ratio, the potential of a company to disrupt markets or open new markets, or other indications that a stock may be a solid investment.

 

The theoretical value of a stock is its {{w|net present value}}, which is the sum of all its future earnings, with earnings in the future discounted appropriately to account for the {{w|time value of money}}. Because these earnings are never fully predictable, traders may have different ideas about the true value of a stock, and buy the stock if they believe the currently offered prices are particularly low, or sell it when the prices are high.

The comic displays a {{w|Candlestick chart|stock price chart}}, annotated with labels which purport to be technical analysis. These labels are nonsense from the perspective of technical analysis, but do accurately describe the graph itself: "{{w|allegro}}" (a musical term used to set the tempo at the beginning of a score), "{{w|prologue}}" (an introductory section of a play, book, or similar), "{{w|lumbar}} support" (the thing in a chair shaped to better support your back), "bathtub" (possibly a reference to the so-called "{{w|Bathtub curve}}"), "{{w|uptalk}}" (a speech pattern). One label celebrates that "these two points define a line! Promising signal." (In geometry, any two points define a line.)

The shape of the chart is similar to the exponential behavior of cryptocurrencies when they are successful, where price (positional height on the chart) roughly increases while volatility (height of the bars or candles themselves, and of the peaks and troughs, on the chart) does the same.  Technical analysis used to be an esoteric domain held by well-paid stock analysts, but as cryptocurrency has spread, and as financial companies have made it easier for members of the public ("retail investors", as opposed to "institutional investors") to engage in investment trading, people from all walks of life have begun staring at charts like this.

|Tempo notation in music: played quickly and brightly (translation from Italian: cheerful, lively) - a series of very small changes in this region of the graph might suggest notes played quickly

|A cushion or other device that provides support to the lower part of the ''spine'', a play on the preceding ''spline''.  "Support" is also used as a term in technical analysis to refer to a value that the stock price frequently approaches from above but does not pass through (until it does, which is taken as a sign that the price will fall further until it reaches the next support level).

|In geometry, any two points define a line; also looks somewhat like a communication line between two towers.  It is tempting when looking at market charts to draw imaginary lines that connect the extrema and hope it means something about the future. The drawn line in this case also just so happens to ignore the many periods of decline marked under "Declination" -- in this case it did eventually recover, but later labels (such as "likely to continue forever" at the end) suggest that this is more likely a case where blind optimism just so happens to have been right for those two particular points (as opposed to the many more possible pairs of points where the line wouldn't be so positive).  

|This section of the chart refers to the actual use of a candlestick chart, which is to document the difference between the opening and closing value of a stock. A long red bar shows that a stock closed at a much lower value than it opened at, which would be disastrous for someone trading that stock. The section shows a bearish {{w|engulfing}}

|Slope!

|The {{w|slope}} of a graph is the ratio of the "vertical change" to the "horizontal change". A measure of slope on a financial chart can be used to predict possible specific returns or losses, or to analyze those from the past, but Randall simply prints the word in his chart annotation, with an exclamation point possibly indicating how exciting its value is, rather than labeling the actual numeric slope.  This could also be a play on a second meaning of slope, meaning a rising or falling surface in general.

|Could be an omen?

|Red and green are traditional colors for the {{w|Christmas}} holiday in the U.S.  This could be a "sign" that the stock price is about to rise, as in a sort of Christmas present or bonus, or the [https://www.bloomberg.com/news/articles/2020-01-23/bitcoin-slumps-in-wake-of-chinese-new-year-slowdown-warning widely-held belief in the cryptocurrency community] that prices fall during {{w|Chinese New Year}} as Chinese holders of cryptocurrency sell off in preparation for their holiday expenses.

|This is a mistaken opinion often held by buyers in a rising market. It's been rising so much, surely it's the best time to buy!  We could make millions!  Such times are generally followed by a sharp downturn resulting in significant losses, as can be seen historically farther back on the chart.  Cryptocurrency communities have significant members who call themselves "holders" -- these people always trust that the price will eventually go up even higher, because it has recovered so many times in the past.