Chapter 3

Fundamental and Technical Stock Analysis and Tools

The Second Step in Your Analysis

The attempt to predict accurately the future course of stock prices and thus the appropriate time to buy or sell a stock must rank as one of investors’ most persistent endeavors. This search for the golden egg has spawned a variety of methods ranging from the scientific to the occult. There are many people today who forecast the future stock prices by measuring sunspots, phases of the moon, or measuring the vibrations along the San Andreas Fault. Most, however, opt for one of two methods: technical or fundamental analysis.

—Burton G. Malkiel A Random Walk Down Wall Street

Once you have formed your macro market thesis, it’s time to drill down to the individual company itself and decide if there is a potential trade there and then what strategy you will employ based on your research and opinion.

In this chapter I explore some basic fundamental data points I look for as well as get into depth on the technical formations and indicators I use to trade. I tend to focus more heavily on technical and statistical analyses for my trades and back them up with a basic fundamental and macro thesis. In addition to all that, risk is always a consideration and how much risk I want to assume will be dictated both by strategy and by amount invested.

Fundamental analysis is the examination of a company’s past, current, and future financial health. There are many data points to examine when assessing a company’s ...

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