[ix] Lesson 3: Fundamentals or technical analysis?

The important aspect of trading is to pick the “right” stock and buy in at the “right” time but so far, for most of us, it is seldom right. The mind boggling part is to determine which is the best approach:

• read the latest news and analysts’ reports
• check the fundamentals of the stocks worth to buy
• learn technical analysis

But all said and yet so difficult to decipher.

News and reports?

Not me as I think there is not much latest news even though we are in the internet age.

I prefer to know a little – good to know.

Fundamentals?

Yes, possible but not enough. If any good accountant can read fundamentals well, then these accountants would be rich already.

As I know, investors go for companies in evergreen or blue ocean industries, strong earnings growth and high yields. Well managed companies have yearly earnings growth and can pay dividends. So capture these important factors in screening the market for good stocks. How? Read on.

Technical analysis?

Yes, it is still the best approach. The market is a place filled with emotions of fear and greed. There is no fair value. All prices and volumes are perception. So if we can analyze the history, we may anticipate the probable trend direction the next day or period.

So where can we get such information?

TRY THIS SITE:

Finviz.com

To scan for good stocks to buy, try these steps:

Screener

• descriptive – dividend yield +ve, average volume >2million, current volume >2million, optionable

•  fundamentals – EPS growth next 5 years +ve, EPS growth past 5 years +ve

•  technical – performance year up,

Now you are left with less than a hundred or so counters and you can keep it in your watch list.

Example:

http://finviz.com/screener.ashx?v=111&f=fa_div_pos,fa_eps5years_pos,fa_estltgrowth_pos,sh_avgvol_o2000,sh_curvol_o2000,sh_opt_option,ta_perf_52wup

note 1: at least 2 million shares traded can enhance better as higher volume means more demand.

Note 2: performance of year up ensures we buy up trend stocks

Charts? Where can we get free charts?

Follow either of these:

http://chartnexus.com/software/cnx.php

click DOWNLOAD

Once installed, you can set your charts which look like this -

 

Of course nothing is absolutely free but this is loaded into your computer with a choice of multiple market data, not just USA! However, you only get 3 years data free of charge and have to download prices daily. You have to pay to get more features.

Or,

http://www.freestockcharts.com/

This is a web based version but only US market.