Technical Analysis, or Trend Analysis, is employed to evaluate securities and attempt to forecast their future movement by analyzing statistics gathered from trading activity, such as price movement and volume. Unlike fundamental analysts who attempt to evaluate a security's intrinsic value, technical analysts focus on charts of price movement and various analytical tools to evaluate a security's strength or weakness and forecast future price changes. Technical analysts believe that past trading activity and price changes of a security are better indicators of the security's likely future price movements than the intrinsic value of the security.
Two basic assumptions of the Dow Theory that underlie all of technical analysis
1) Market price always reflects the sum total knowledge of all market participants.
2) Market price movements are not purely random but move in identifiable patterns and trends that repeat over time.
Have you ever heard the old adage, "History tends to repeat itself"? Well, that's basically what technical analysis is all about! Since, theoretically, if price reflects all the information that is out there, then price action is all one would really need to make a trade.