How is Technical Analysis evaluated?

EVALUATION OF TECHNICAL ANALYSIS : Technical analysis has endeavoured to
forecast the future of the stock market. The averages are useful and interesting in showing
the course of the market and for measuring changes but not for forecasting the future.
Technical analysis is not by itself, the road to riches. It is a tool which should be used with
fundamental analysis and with commonsense. Despite assertions of some technicians,
technical analysis is still an art. It requires talent, intuition and experience for its successful
use. Investors can add a little luck and there may be the difference between modest and
good profits. The technical analysis has the following limitations :
(1) All data used in technical analysis is past data. Therefore, these indices cannot take
into account unexpected events such as natural disasters and economic crisis.
Charts, can only show activity by insiders well before privileged information becomes
public knowledge.
(2) A chart may show a sudden, deep decline which by strict interpretation is a signal to
sell. But this may be the result of one large trade of a lower than market price. The
value of stock may bounce back quickly. If the technician fails to wait for confirmation,
the investment decisions may go wrong.
(3) With actively traded stocks, the prices may be the result of a battle of wits. Trading
profits are realized at the expense of others who are trying to achieve gains on their
own terms. In such cases, the technicians must be cleverer and luckier than their
rivals.