Fundamental vs Technical Analysis

Fundamental Analysis tries to determine the intrinsic value of a stock. It relies on historical financial performance of a company and its projected future performance.

The three most useful reports in financial statements are the balance sheet, the cash flow statement and the income statement.

And you thought you would never hear of this stuff again!

Tools that are used in fundamental analysis include:

Earnings

Earnings Per Share

P/E Ratio

PEG

Dividend Yield

Dividend Payout Ratio

Book Value

Price / Book

Price / Sales Ratio

Return on Equity (ROE)

We will cover each tool in the next few weeks and practically evaluate stock in the market.

Technical Analysis tends to use charts and calculation to identify prevailing price trends in order to cash in on the price action.

Technical analysis doesn’t bother to look at the fundamental data. It assumes that all the data available is already reflected in the price.

So there will be no P/E, PEG yadi yada yada. Nice eh?

Well it’s not so simple.

Tools in technical analysis include:

Moving Averages

Relative Strength

Momentum

Bollinger Bands

Volume

Support & Resistance levels


We shall also cover these tools and how you can use them in the next few weeks.
Note that these are not the only tools available in both technical and fundamental analysis.

Sentiment Analysis is used to analyse the next hot tip. The next hot stock.It seeks to determine the emotions of investors in the market.

Tools used in sentiment analysis include:

Ear

Mouth

Eyes

Sentiment analysis comes in the form of rumors and misunderstanding in the markets.
This is where speculators reside.

We shall also cover aspects of sentiment analysis.

In covering these three areas Uncle James and I hope that you will be better equipped to make your stock picks a refined process rather the a “shoot first ask later” decision.

As a close friend of mine would say, have a fantabulous week!