Direct Share Research
When it comes to investing in the stock market, there are two primary methods of analysis that investors use: fundamental analysis and technical analysis. Fundamental analysis involves examining a company’s financial statements, industry trends, management quality, and other qualitative and quantitative factors to determine the intrinsic value of a stock. On the other hand, technical analysis involves studying charts, trends, patterns, and other market indicators to identify potential entry and exit points for a stock.
While some investors may choose to rely solely on one method of analysis, combining both fundamental and technical research can provide a more comprehensive view of a stock’s potential value and help investors make more informed investment decisions.
Start with fundamental analysis
Begin by researching the company’s financial statements, earnings reports, management quality, industry trends, and other relevant factors. Use this information to assess the intrinsic value of the stock and determine whether it is undervalued or overvalued.
Identify key technical indicators
Once you have assessed the intrinsic value of the stock, identify key technical indicators that may be relevant to the stock’s performance. These indicators can include moving averages, support and resistance levels, and momentum indicators such as the Relative Strength Index (RSI) or the Moving Average Convergence Divergence (MACD).
Analyse technical indicators in relation to fundamental analysis
Next, analyse the technical indicators in relation to the fundamental analysis. For example, if the fundamental analysis suggests that a stock is undervalued, but the technical analysis shows that the stock is in a downtrend, it may be best to wait for the stock to reverse its trend before making an investment.
Consider risk management
When combining fundamental and technical research, it is essential to consider risk management strategies. This includes setting stop-loss orders to limit potential losses, diversifying your portfolio, and keeping an eye on overall market trends and volatility.
Monitor the stock regularly
Once you have invested in a stock, it is crucial to monitor it regularly. Keep an eye on both fundamental and technical factors that may impact the stock’s performance. This can include quarterly earnings reports, changes in industry trends, and technical chart patterns.
In summary, combining fundamental and technical research can provide a more comprehensive view of a stock’s potential value and help investors make more informed investment decisions. By starting with fundamental analysis, identifying key technical indicators, analysing technical indicators in relation to fundamental analysis, considering risk management, and monitoring the stock regularly, investors can increase their chances of picking the right share.