Might technical analysts make a comeback? Although most investment banks don't maintain technical expertise as part of their research departments, more technicians are working with trading departments and some boutique research shops.
Investment Dealers' Digest says several firms are expanding the number of technical analysts working on their trading floors, and one large investment bank is adding a technician to each trading group. Merrill Lynch maintains a team of six technical analysts as part of its research department, the magazine says. Merrill analyst Mary Ann Bartels thinks the volatility created by hedge funds might be spurring some of the increased demand for her staff's analysis.
Technical analysis uses market statistics - such as stock prices and trading volumes - to determine when issues might move up or down. "It's not about looking at individual charts. It's looking at the market dynamics and what's happening in the whole market and not one individual pattern," in Bartels' words. "Our value-added is being able to be anticipatory as to where the major moves are about to occur."
IDD notes that the demand for technical analysis - and the specialists who conduct it - is relatively small. Still, "TA has found its niche," says the magazine, which may lie in helping traders determine the most opportune moment for transactions to be conducted.