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Stock Analysis

There are two main approaches that traders and investors use to analyze a stock. They are fundamental stock analysis and technical stock analysisClick here to get a FREE instant in-depth analysis of your favorite stock or any stock.

 

Fundamental Stock Analysis

Investors use fundamental stock analysis to evaluate a stock for the long term. They look for companies that are either undervalue or growth stocks. Fundamental Analysis is the study of economy, financial statements, competitions and everything that can impact a company. Investors spend a lot of time reading income statements, evaluate competitors, study the management level of a company and their products to determine whether or not the company will rise in value in the future. Generally, investors hold their stock for a long time from a few years to many years. Warren Buffett, the second riches man in the world is the god father of this approach. He holds stock for as long as 25 years.

 



Technical Stock Analysis

Traders use technical stock analysis to trade stocks for the short term or swing trade. They use technical indicators and chart patterns to predict how a stock will perform in the near future. History repeats itself and so do the stock prices of a company. Technical Analysis is the study of human physiology where everybody act the same way when they experience fear and greed in trading stocks. Greed and fear are the two elements why stock market beginners and even experience trader lose money in the stock market, and that is why technical analysis work so well in predicting stocks in the short term.

 

Technical Analysis Stocks

I use technical analysis to trade stocks for the following reasons.

1. Technical analysis allows me to buy and sell stocks quickly and often more profitable than long term investment.

2. Technical analysis allows me to read hundreds of charts in a few minutes where it takes me days if not months to study a company using fundamental analysis.

3. Technical analysis allows me to cut loss more quickly than fundamental analysis when the whole stock market is not doing well. For instant, during the 2008 stock market recession, people who use fundamental analysis literally go broke because they believe if the balance sheet and income statements are strong, the companies should survive. Look at Bear Stearns and Lehman Brothers, they both collapsed when many analysts believe they are fundamentally strong companies. On the other hand, I was able to cut my loss quickly using technical analysis during recession. As soon as a stock hit my 5% stop loss, I’m out.

4. Technical analysis allows me to screen for stocks each night and I can swing trade or day trade to make a profit where I can only buy stocks and hold for a long time with fundamental analysis.

5. Technical Analysis Works

 

Technical Analysis Trading

Technical analysis is a complex topic and I can't possibly cover everything in this article. I will give you a quick walk through on how I trade stocks with technical analysis. If you like to learn more about technical analysis trading, you can check out these good technical analysis books.
The following stock chart is a daily chart for the company Ford. There are two buy signals based on technical indicators. The first buy signal happens at the end of November where the stock chart formed a "Morning Star Candlestick Pattern" and the stock price hit the trend line at the same time. The next buy signal was generated when the stock hit the trend line again 2 weeks later which offers me another buy signal. As you can see, the stock then rise from $9.5 up to $13 a share in 2 months. That is a 36.8% gain.

Click here to Learn more about Candlestick patterns.

Click here to learn more about trading strategies.

 

Free Stock Analysis

If you like to get a second opinion on any stock that you want to trade, try the following free stock analysis. The service is FREE and your stock will be analyzed using a combination of technical analysis and fundamental analysis using the Trade Triangle Technology.

Click here to try the FREE stock analysis.

stock analysis