Market Analysis: From Evidence to Conclusion

Why identifying a few price levels is not, by itself, a complete analysis

Ali Mirzaeii | Author of SIXSIGNAL and financial market analyst

When I read a market analysis, my first question is not, “Will the price go up or down?” I want to understand how the analyst reached that conclusion.

What did they observe on the chart? Why does that observation matter? Why do they consider one path more likely? How did they derive their expected target, and what would make them change their view?

For me, the value of analysis lies in making this chain explicit: evidence, reasoning, conclusion, and the conditions for reassessment.

Show the level—and explain the reasoning

“If resistance breaks, the price could rise” may be part of an analysis, but it is not a complete explanation on its own.

Why is that area considered resistance? What price behavior demonstrates its significance? What exactly counts as a breakout: a brief move through the level, a candle close on a specified timeframe, or some other confirmation? If the breakout occurs, how is the next target derived?

When these questions remain unanswered, the reader can see several levels but cannot understand the logic behind their selection.

Different tools, explicit reasoning

Analysts do not all need to use the same tools. One may focus on trend structure, while another works with price patterns, divergences, Fibonacci relationships, or wave counts.

Differences in method do not prevent a useful discussion. What makes that discussion possible is a precise explanation of the observations and their connection to the conclusion.

Even the identification of a pattern can be disputed. When an analyst states which chart characteristics support that interpretation, we can discuss those characteristics, rather than simply placing two opposing predictions side by side.

The number of tools used is not, by itself, a measure of quality either. Several signals that all reflect the same price movement are not necessarily independent confirmations. What matters is the information each piece of evidence adds—and its limitations.

Every scenario needs a basis

Scenario analysis is an important part of market analysis. The problem is not the existence of multiple scenarios. It is failing to explain why they have been proposed and what distinguishes one from another.

If an analyst favors one path, they should explain both the reasons for that preference and the evidence against it. If the evidence is insufficient to favor a path, explicitly acknowledging that uncertainty is valuable too.

An analyst does not have to make a definitive directional call at all times. But they should explain what information or confirmation they need before reaching a conclusion.

Targets and invalidation belong to the same reasoning

A price target should not be a number detached from the analysis. Its basis should be clear: a pattern measurement, trend structure, a specified ratio, or another stated method.

The same logic applies to invalidation. What specific change would weaken or reject the original thesis? Over what period, and against what criterion, should that change be assessed?

The time horizon also matters. A view about a short-term move cannot simply be extended to a long-term trend without explanation.

Analysis is not the same as a trading decision

An analytical view is not, by itself, an instruction to enter a trade. Once we discuss a trading opportunity, additional questions arise: What is the entry condition? How is risk limited? When should the position be closed?

The point that invalidates an analysis and the stop-loss for a particular trade are not necessarily identical. If they differ, the reason should be clear.

Document the view before the move; review it fairly afterward

A market review is meaningful when it can be compared with a view recorded before the move. Which condition was met? Which was not? Was the target reached within the expected time horizon? Had the invalidation condition already occurred before that?

The fact that price eventually reached a level is not enough to evaluate the analysis as a whole.

I do not expect an analyst to be right every time. I expect a clear explanation of why they hold a view and under what conditions they would revise it.

An analysis that can be evaluated is one in which, even when the outcome is wrong, we can identify which part of the reasoning needs improvement.

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