Here's a clever chart from regular contributor Chris Kimble, a 30-year+ market technician and student of Sir John Templeton. His accompanying email, which I quote verbatim below, is basic justification for technical analysis. Please read before clicking the chart for a larger version:

Technical analysis can be very beneficial, by seeing patterns and understanding risk, prior to news events.

The chart attached reflects a "head and shoulders" pattern being formed, with the head hitting the 61% fib retracement level. This setup was suggesting a high risk situation that investors should either "harvest" (store some current values/take some money off the table/reap the gains of the rally) or start putting protection in place.

Have any idea what stock I am discussing?

Did the pattern know an oil rig would collapse and create one of the largest spills in history? NO! Does that give you a clue?

With the broad indexes up against fib 61% and creating year long rising wedges, does it mean some major news event could happen? The patterns aren't suggesting that. They are suggesting that "harvesting" or applying some risk management strategies are something to consider at this point in price and pattern.