In the financial world, investors and Wall Street analysts deploy two main methods in forecasting price trends for stocks, bonds, and commodities: "fundamental" and "technical" models. The fundamental approach relies on bedrock, underlying business factors that traditionally swell or deflate values on the public exchanges. For equities, those basics include projections for sales growth based on, say, forecasting whether a Nike, Apple, or McDonald’s is gaining or losing customers versus rivals, and estimating where their "total addressable markets" (TAMs) will go over the next five or 10 years. Other widely used fundamental yardsticks include measuring the "moat," or durable competitive advantage an enterprise enjoys because of its powerful brands (think LVMH) or irreplaceable infrastructure (America's freight railroads) that should ensure rich margins going forward, and what share of cash flow from operations an enterprise can channel into profit-making new projects, versus the "maintenance" capital expenditures required to just keep its existing plants and fabs in top working order.
By comparison, the technical side looks not at this essential financial information that should, and eventually does, drive prices, but the past patterns in those prices that repeat over time, and may provide a road map to where they're headed. The technicians regularly study charts showing price movements over many years to identify "resistance levels" or "head and shoulders" formations that signal moments to buy or sell.
