A stock price represents the value that people think that a stock has based on its fundamentals and future expected cash flows.

But a technical analyst will look at price and see that since others are selling the stock and forming a downtrend, being short is a good bet. (Over simplifying here)

But if the entire universe of people who participated in the market used technical analysis then would this not detach the value of a stock from fundamentals.

Suppose you created a fictitious ticker that had no connection to any underlying asset, and yet you could trade it.

Suppose you priced this tradable item at $100.00, and it opens on the first day, you have buyers and sellers who are just trying to predict what the next buyer or seller will do. They will draw lines and look for support and resistance.

To these traders it doesnt matter that this ticker means nothing in the real world. Since they are trading off their patterns.

It doesnt matter if appl is at 700.00 or 400.00 to a technical analyst, because the assumption is that the price already represents all the information about its fundamentals. That there are other players who are baking this information into the price. I am using their work to tell me what it should be worth and using my understanding of psychology to make money.

Now if the whole universe traded using technical analysis, the assumption that somebody else out there has already baked the fundamentals into the price would be void. The stock now just trades based on playing a game of hot potato hoping to dump it to the next guy as quick as possible.

It is my theory that the fewer people who use technical analysis the more it will work.

That technical analysts need fundamentalists to tell them what a stock should be worth.

Just random thoughts in my head really all of this and looking for a discussion.

Thanks