Question from the curriculum

[pianok]

Whose statement regarding the technical analysis department is most accurate?
Carter believed the technical analysis department is compatible with sound investment practices.
Suzuki believes that identified opportunities are not true market anomalies but rather they are associated with higher risk exposures
Rodriguez believes that technical analysis has the potential to uncover opportunities where there are over- or under- reactions to relevant infomation.
The answer was that Rodriguez was correct. ” momentum can be partly explained by short term under reaction to relevant information, and longer term over reaction and thus supports Rodriguez’s view that the technical analysis department has value”. Honestly I don’t get this whole thing. I thought Suzuki is right also and frankly I dont understand Carter’s phrase. And most importantly I ddnt understand why Rodriguez is right.
Could someone please help?

 

[MrSmart]

Technical analysis is a price chart tool, it does not take fundamental risk into account, and the entry-exit points always have asymmetric return/risk pay-offs, so you cannot say that it is not an anomaly, by definition. So point number 2 is wrong.
Point 1 may be compatible with sound investment practices, but it sometimes points in the other direction.
Point 3 is correct by elimination. If you want to know why it is correct, you’ll just have to read a TA book, lol.

 

[gad4]

People use technical and fundamental analysis to find underpriced securites. Apparently technical doesn’t work that great any more, Rodriguez answer is the closest. It also says potential, not definite.
These types of questions can be a royal pain because at times two of the three have potential and the best way to narrow it down is a combination of which is closest to the definition and the use of definite words like always, sometimes, never.