By Janine Guenther CFA, CMT, CFP®
In her submission to the CMT Association’s Technically Speaking, Janine Guenther shares an insightful reflection on the importance of thinking critically and independently when it comes to investing—a task that technical analysis is well-suited for.
This was the answer that my good friend, a well-known pediatrician, gave to my question of how he can possibly figure out what is wrong with a child who is too young to articulate what hurts and what they are feeling. He said he runs through his checklists looking for anything that doesn’t resemble a horse and then figures out the problem—the zebra—from there.
I think that this analogy holds up well for our industry and, as I reflect on my three-plus decades within it, showcases how technical analysis complements fundamental research.
We can think of the herd as the broad range of observable financial and economic data. Fundamental research, which includes intrinsic value, macro narratives, and supply-demand dynamics, paints a bigger picture for understanding an asset’s potential, serving as the foundation for making informed investment decisions.
By nature, however, fundamentals are lagging indicators that tell us what already happened. They give us an understanding of what should be, but not when or how markets will react. Given the current environment, this is important—capital markets are an aggregate of investor sentiment driven by human feelings, biases, and actions that aren’t always logical. By extension, indices can feel just as emotional as the people investing in them.
And in those moments, we can start identifying the zebras. The inconsistencies, the standout trading volume, the clear evidence of patterns forming, breaking, or diverging—when momentum swings or resistance levels are broken, investors are sending quiet signals through market participation. Technical analysis isn’t about predicting the future, but rather, about engaging with the present and learning how to translate the combined feelings of millions of buyers and sellers into real-time, actionable data. Those early tells can be incredibly valuable.
Picture a company with stellar underlying fundamentals. Their earnings are impressive, new products have been announced, and they’re under sound leadership. The proverbial horse here is healthy. But if the stock price continues to stagnate at certain levels and shows less trading volume when it climbs, there could be a zebra in the herd. Investors could be selling to crystalize gains, being unwilling to go above a certain target price. Perhaps larger funds are silently exiting the safari. It could also mean there’s an underlying issue that hasn’t materialized in the fundamentals quite yet. Here, technical analysis gives reason for pause, allowing us to reconsider our base case for the investment—are we too rich in our valuations?
On the other end of the stable, we have a lame horse, and experts are lowering their forecasts based on slowed earnings growth. At the headline level, the company’s stock is falling by entire percentage points into the red. Taking a closer look, however, reveals a wall of resistance that’s arresting the decline at a specific level, and as it nears that inflection point, trading volume picks up quickly. Even with the visible—or perhaps “perceived” is more accurate—weakness, there are positive indicators. Here, the zebra is inviting fundamentals-based investors to dig a bit deeper and see if it’s a buying opportunity before others have seen it.
Like virtually everything in the world of portfolio management, it’s not that one approach is inherently better than the other; they simply have different aims, means, and outcomes. The real strength lies in applying the right blend of methodologies for the situation.
Technical analysis helps us sort through noise, but more importantly, it challenges us to assess whether our fundamental beliefs are validated by market data—if they are, it also helps us know when to act on them. Throughout my career, this checks-and-balances strategy that combines the two helped me navigate market swings, identify opportunities others missed, and seek more risk-aware outcomes for the portfolios I managed.
To call technical analysis just “chart gazing” (“grazing” if I want to stay on the equine metaphor) or “guessing the future” is a misnomer. It’s a field based on how people act financially, making sense of underlying statistics, and identifying patterns. It’s about quantifying how people engage with the market. Technical analysis provides a clear system that prioritizes objectivity to manage risk in an uncertain world.
Personally, I benefited from an early introduction to technical analysis when I was an equity analyst working toward my CFA designation. I was exposed to the O’Neil maroon books, globally recognized technicians, and evidence-based performance results that unveiled how multidimensional our profession is. It showed me that profitable investments come from a combination of fundamentals and sentiment, and it inspired me to get the CMT designation.
As a board member of that same credentialing institution, I plan to help more people understand and use technical analysis, especially how it works with fundamental research. Our goal should be to give financial professionals the tools to see not just the whole market (“the herd”) but also the important individual movements (“the zebras”) that show unique chances and hidden dangers. This combined approach can inform smarter decisions, enhance risk-adjusted returns, and ultimately help clients and the wider financial world. This is exactly the full set of skills the CMT Association, through the Chartered Market Technician (CMT) designation, wants to build in future financial pros.
