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A Technical Approach To Trend Analysis: Practical Trade Timing for Enhanced Profits by Michael C. Thomsett

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Comparing Fundamental Trends to Technical Trends

The ultimate test of fundamental trend analysis is how it becomes reflected on stock charts. In fact, a consistent “cause and effect” is found between the two sides. Companies with strong fundamentals tend to also demonstrate bullish stock price trends, and those with weak fundamentals tend to report bearish trends.

Key Point

Fundamental trends ultimately will play out in price trends, but this does not always occur immediately.

This becomes true over time, but the actual cause and effect are distorted by marketwide trends. For example, when the market (as measured by index movement such as the DJIA or S&P 500) is moving in a particular direction, individual stocks tend to exhibit a similar ...

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