Fundamental versus Technical Analysis

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Fundamental versus Technical Analysis

There are two basic means of analyzing stocks, commodities, stock options, or futures contracts. One is fundamental analysis and the other is technical analysis. The question is when do you use fundamental versus technical analysis and when do you need to use fundamental and technical analysis to most profitably predict the movement of stock prices, commodity prices, options prices or futures prices? When a biotech company invents a new wonder drug, that fact is fundamental information. So is the information about the progress the drug is making through the steps that the Food and Drug Administration (FDA) requires in order for doctors to prescribe the drug to humans. The market reacts to any new fundamental information such as a new cancer drug passing a stage three trial in about a nanosecond. Those who have done their homework will have an idea about how the new drug could be priced and how much money the company could make selling it. This use of fundamental versus technical analysis is critical as it will dictate the immediate reaction to the news. The next part of fundamental versus technical analysis will be reading the market’s reaction to the news and to the rise in stock price. At this point the use of Candlestick analysis will help the trader read market sentiment and anticipate further stock price movement.

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Fundamental versus Technical Analysis

  1. 1. Fundamental versus TechnicalAnalysisBywww.CandlestickForums.com
  2. 2. There are two basic means of analyzingstocks, commodities, stock options, orfutures contracts.www.CandlestickForums.com
  3. 3. One is fundamental analysis and theother is technical analysis.www.CandlestickForums.com
  4. 4. The question is when do you usefundamental versus technical analysisand when do you need to usewww.CandlestickForums.com
  5. 5. fundamental and technical analysis tomost profitably predict the movement ofstock prices, commodity prices, optionsprices or futures prices?www.CandlestickForums.com
  6. 6. When a biotech company invents a newwonder drug, that fact is fundamentalinformation.www.CandlestickForums.com
  7. 7. So is the information about the progressthe drug is making through the stepsthat the Food and Drug Administration(FDA) requires in order for doctors toprescribe the drug to humans.www.CandlestickForums.com
  8. 8. The market reacts to any newfundamental information such as a newcancer drug passing a stage three trial inabout a nanosecond.www.CandlestickForums.com
  9. 9. Those who have done their homeworkwill have an idea about how the newdrug could be priced and how muchmoney the company could make sellingit.www.CandlestickForums.com
  10. 10. This use of fundamental versus technicalanalysis is critical as it will dictate theimmediate reaction to the news.www.CandlestickForums.com
  11. 11. The next part of fundamental versustechnical analysis will be reading themarket’s reaction to the news and to therise in stock price.www.CandlestickForums.com
  12. 12. At this point the use of Candlestickanalysis will help the trader read marketsentiment and anticipate further stockprice movement.www.CandlestickForums.com
  13. 13. Fundamental analysis is important inthat it helps in long term investing instocks.www.CandlestickForums.com
  14. 14. Investors will look for a margin of safetysuch as substantial cash reserves,property,www.CandlestickForums.com
  15. 15. and the like that will provide a cushion incase of stock market crashes or badnews specific to the stock itself.www.CandlestickForums.com
  16. 16. Likewise investors will look at stockfundamental analysis to calculate thestock’s forward looking incomestream, its intrinsic stock value.www.CandlestickForums.com
  17. 17. For the investor interested in buy andhold investing this information is criticalas he will rely upon its accuracy andignore shorter term price moves.www.CandlestickForums.com
  18. 18. In trusting in fundamental versustechnical analysis the buy and holdinvestor believes that by not buyingwww.CandlestickForums.com
  19. 19. stock and selling stock on a routine basisthat he will save in commissions andfees.www.CandlestickForums.com
  20. 20. He also believes that the profits from awell run company will outperform whathe could make as a trader over theyears.www.CandlestickForums.com
  21. 21. To the extent that the investor is moreattuned to fundamental versus technicalanalysis and to the extent that his “dayjob” takes all of his time this strategymakes a degree of sense.www.CandlestickForums.com
  22. 22. However, when the long term investorwants to buy stocks or sell stocks he isstill well advised to use technical analysiswww.CandlestickForums.com
  23. 23. tools such as Candlestick patternformations to optimize his profits inselling stock and minimize what he paysin buying stocks.www.CandlestickForums.com
  24. 24. Fundamental versus technical analysiscomes out on the side of the technicaltrader when traders are profiting fromshort term stock price movement.www.CandlestickForums.com
  25. 25. In this case the fundamentals are knownand it is market sentiment that thetrader reads and anticipates byinterpreting Candlestick stock charts.www.CandlestickForums.com
  26. 26. By reading the easy to interpret signalsof Candlestick patterns it is possible forthe trader to anticipate stock pricemovement and most profitably entergood trades or avoid bad trades.www.CandlestickForums.com
  27. 27. In this case of fundamental versustechnical analysis the trader uses thetechnical tools of the market to profit inwww.CandlestickForums.com
  28. 28. the short term while keeping an eye onfundamentals so far as they predictlonger term market movement.www.CandlestickForums.com

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