Chapter 12

Applying Technical Analysis

Now let’s turn our attention to Technical Analysis. While Fundamental Analysis (FA) looks at the value and outlook for a stock, Technical Analysis (TA) essentially shows the demand for a stock and how it perceives those fundamental valuations. This chapter goes into that and more as we detail several price and volume screens along with moving averages as well.

I should note that some fundamental guys pooh-pooh TA while some technical guys do the same for FA. But nowadays, most people give both techniques the respect they deserve.

I have a long history of using fundamental analysis to pick winning stocks. But my experience using TA goes back just as far. That being said, I prefer to look at TA more as a confirming indicator, if FA is used first. In other words, once my fundamental criteria are met, I can then look at the charts. But if TA is used first, it can act as a spotting indicator. In other words, a method to put stocks with certain technical analysis characteristics on my radar screen so I can then layer my fundamental analysis on top.

You can also do both at the same time and those are the screens we’re going to start off with.

Increasing Price and Volume

What’s better than increasing stock prices? Increasing volume to go with it!

Rising prices and increasing volume of a stock can be a sign that new buyers are coming in and some short sellers may be giving up. But rising prices and decreasing volume suggests a lack of new buyers and ...

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