I am taking the opportunity to help others learn the fundamentals in assessing stocks for investment using the technical and fundamental analysis. Both tools are equally important in making serious decisions with your hard earned CASH!
If you would like to invest in stocks, then treat it like a business, NOT A HOBBY. (ex: a retail outfit can not earn money if it does not have products to sell; the exact same is true for investors, without money, you can not invest). You need rules and you want to follow these principles or cash is going to be LOST. Once proven rules are established, they can’t be broke or you may lose money. Everybody loses money in investing but we have to learn how to reduce losses fast and allow gains to grow. Small losses are acceptable because they teach us lessons that enable us to win big!
Start your search by searching for stocks with superior fundamentals. After fundamentals are established, look to find out if this specific stock is in good business, by this I mean a strong business group – similar stocks, historically move in precisely the exact same direction (this is fact not opinion). This isn’t to say every stock in the business group will move higher or lower as a sister inventory is going in that direction (this is a generalization rule). After the industry group was confirmed powerful, determine if overall economy is at a particular trend (up, down or sideways).
If you are long a stock, the marketplace has to maintain a confirmed up-trend, if you’re short a stock, affirm a downward trend. Note that 75% of all stocks will follow in the direction of the overall market. Do not fight the trend, the industry is always perfect.
Allow the industry and the stock dictate how long you’ll be able. Don’t be worried about time frames; cost and volume will let you know when to exit the position provided that you follow rules.
After basic have been established, you must examine the technical aspect of every individual stock, the particular industry group and the overall market trends. Record whether the stock is forming a suitable base, if it is going to break out of a foundation, if it is extended or if it is pulling back to a crucial support line.
At this time, add any qualifying inventory to your watch list or purchase the stock in line with the technical entrance signals (recall the fundamentals are established earlier).
Key numbers to use in principles:
– Earnings (present, past: quarterly, annual and future estimates)
– Sales (present, past: quarterly, annual and future estimates)
– Return on Equity (ROE)
– Price/Earnings Growth (PEG)
– Price/Earnings Ratio (rise over time of foundation )
– Assets, Liabilities
– Accumulation/Distribution ratio
– Up/Down Volume over past several months
– Amount of Institutional Holders (is this decreasing or increasing lately )
– Key items to use for technical evaluation:
– Look at the 1 year daily graph
– The 1 year weekly chart
– Assess volume action when foundations are formed
– Look at Point & Figure charts for resistance and support lines
– Look for new 52-week highs