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Learn More about Stocks with Technical Analysis

Updated: May 15

After learning fundamental analysis, investors can move on to technical analysis to further understand the world of the stock market. Technical analysis measures chart patterns of price movements over time to make decisions on buying and selling stocks.

There are some key differences between technical analysis and fundamental analysis:

Technical Analyisis

Fundamental Analysis

Used for short-term investment decisions.

Used for long-term investment decisions.

Focuses on historical changes in stock prices, including market data and transaction volume.

Focuses on macroeconomic conditions and the performance of related companies.

Determine when to sell or buy stocks.

Determine which stocks should be bought or sold.

Stock price movement chart patterns give investors clues about trading opportunities. There are many technical terms such as support, resistance, breakout, and so on.

Technical analysis

Technical Analysis Indicators

Investors can gain greater insight into technical analysis with the following indicators:

  1. Moving Average (MA): Calculates the average price movement of a stock within a time frame, for example 50 days or can be called MA50.

  2. Moving Average Convergence Divergence (MACD): Determine the trend direction by subtracting the exponential moving average (EMA) of the 12- and 26-day periods.

  3. Stochastic Oscillator: Shows the last closing price point compared to the lowest or highest price range over a certain period of time.

  4. Relative Strength Index (RSI): Calculates the ratio between the magnitude of rising and falling prices, also displays a single line of price movement with a base setting of 14 periods.

The Steps of Technical Analysis

  1. Observing the trend on the graph: Investors sell their stocks when the trend is up (uptrend) and buy them when the trend is down (downtrend).

  2. Determining support and resistance levels: Investors look for buying opportunities in support areas and selling opportunities in resistance areas.

  3. Utilize one or more indicators: With the aforementioned indicators, investors can recognize trends in stock movements as well as overbought or oversold conditions in the market.

  4. Setting a stop loss: Investors can set a stop loss limit by taking a position when the price approaches the false breakout area to minimize losses.


Support: The level at which the stock price reaches its lowest point and will rise again.

Resistance: The level at which the stock price reaches its highest point and will go back down.

Overbought: A period of significant and consistent uptrend. The stock price is likely to fall because many investors are selling shares (taking profits).

Oversold: A period of significant and consistent downtrend. The stock price has the opportunity to rise because many investors are buying shares.

Stop loss: The automatic sale of a stock when its price is at a certain minimum limit.

False breakout: A breakout is when a stock price breaks out of its support or resistance limit. Meanwhile, the term false breakout is when a stock is signaled to break the resistance level, but fails.

Reference: IDX Channel


Disclaimer: The content is made for educational purposes, not a recommendation to buy or sell a particular stock. PT KAF Sekuritas Indonesia is licensed and supervised by the Financial Services Authority (OJK).

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