DEFINITION of 'Technical Decline'

A technical decline is a fall in the price of a security caused by factors other than a change in the fundamental value of the security. Typically a security is said to experience a technical decline when the security or the overall market are trending upwards overall and the price dips downward based on technical factors. Generally the connotation is that a technical decline will prove to be only a momentarily dip in demand, followed by an appreciation back to the fair market value suggested by business fundamentals.

BREAKING DOWN 'Technical Decline'

Proponents of the efficient market hypothesis dismiss the concept of a technical decline as being inconsistent with what they see as the rational price-setting mechanisms of the stock market. These theorists contend that if the price of a security were to deviate significantly from its fundamental value, market participants would quickly recognize an opportunity for profits and buy the security, increasing its price until it returns to its fundamental value. By contrast, many other investors believe that with sufficient research, it is possible to identify temporary windows in which undervalued securities can be bought, allowing for significant gains from the return to fundamental value.

RELATED TERMS
  1. Technical Rally

    An upward movement in a security's price following a declining ...
  2. Fundamental Analysis

    A method of evaluating a security that entails attempting to ...
  3. Buy The Dips

    A slang phrase regarding the practice of purchasing stocks following ...
  4. Generic Securities

    A security backed by recently issued loans or mortgages. Its ...
  5. Fundamentals

    The qualitative and quantitative information that contributes ...
  6. Universe Of Securities

    A set of securities that shares a common feature such as the ...
Related Articles
  1. Investing

    Technical Vs. Fundamental Investing - Friends Or Foes?

    Making money in the stock market has been likened to gambling by some, but experienced investors who do their homework usually profit by doing market analysis. However, even experienced investors ...
  2. Investing

    What Are A Stock's "Fundamentals"?

    The investing world loves to talk about fundamentals, but do you know what it means?
  3. Investing

    Fundamentals And Technicals: Together At Last

    It's a big mistake for a fundamental investor to ignore technical analysis. Find out how to become chart smart.
  4. Investing

    Fundamental Analysis For Traders

    Find out how this method can be applied strategically to increase profit.
  5. Investing

    Introduction To Fundamentally Weighted Index Investing

    If you believe the market smiles on those who focus on value, growth or income, this vehicle may be for you.
  6. Investing

    Fundamental Investment Metrics For Buying Stocks And Bonds

    Don't let the name fool you. Even a "fundamental" investor has to pay attention to certain metrics.
  7. Financial Advisor

    Moving Average

    Learn about this basic technical indicator and how you can use it to chart the value of a security's price over a set period.
  8. Investing

    What Type Of Trader Are You?

    There are different ways stock traders attempt to profit from market movements. Which of the strategies do you use?
  9. Investing

    Key Fundamental Investment Metrics

    Fundamental investors believe certain factors dictate a stock’s performance. There are a few key indicators that fundamental investors should know.
RELATED FAQS
  1. How does fundamental analysis differ from technical analysis?

    Learn about the differences between technical analysis and fundamental analysis, such as how these investment strategies ... Read Answer >>
  2. What are the characteristics of a marketable security?

    Find out what it takes for a financial asset to be considered a marketable security, including its liquidity, intent of use ... Read Answer >>
  3. Is it better to use fundamental analysis, technical analysis or quantitative analysis ...

    Understand the difference between fundamental, technical and quantitative analysis, and how each measurement helps investors ... Read Answer >>
  4. What is the difference between fundamental and technical analysis?

    These terms refer to two different stock-picking methodologies used for researching and forecasting the future growth trends ... Read Answer >>
  5. How can I calculate the expected return of my portfolio?

    Understand the components of the equation used to calculate the expected return of an investor's portfolio. Learn why the ... Read Answer >>
  6. Does working capital include marketable securities?

    Learn how marketable securities such as Treasury bills (T-bills) and commercial papers are part of current assets and the ... Read Answer >>
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center