Technical Analysis (TA) Fundamental analysis: Analyzing business fundamentals using financial statements, valuation models, etc Technical analysis: Analyzing stock charts by identifying patterns in the stock price caused by supply and demand
The Keys to TA Price and Volume The result 10,000 decisions, graphed Everything else is derived from those two
Supply and Demand The magnitude of the move is determined by supply/demand factors Impacted by the float size, type of shareholders In the short run, supply/demand imbalance can be caused by fundamentals can supersede fundamentals
Supply and Demand Supply/demand sweet spot: Owning a stock with a low float that is being accumulated by large funds Stated float vs. effective float What will cause investors to hoard or dump this stock?
Fundamentals & Momentum Fundamentals should drive long term price Effect of earnings surprises and rising consensus earnings estimates Momentum may wane as investors await next catalyst Price response to news is important indicator Overbought vs oversold Correction by time or price
Entry Checklist Price patterns: Bottom: Losing downside momentum (double bottom, higher low, successful test of trendline, etc) Breakout: Upside breakout after basing/consolidating (continuation patterns, rectangular breakout, etc) Volume patterns: Bottom: Declining volume on down days Breakout: >Avg volume on breakout, up days
Exit Checklist Price patterns: Top: Losing upside momentum (double top, lower high, etc) Breakdown: Breakdown after basing/consolidating (continuation patterns, channels, etc) Volume patterns: Top: Higher volume on down days, declining volume on up days Breakdown: >Avg volume on breakdown