Stock Fundamental Analysis - A Key Component For Success
When it comes to investing in the stock market, one measurement stands out above the rest; how much did the investor earn at the bottom line. Traders use many tools to help determine their stock trading plan, but the best tool for assisting an investor is basic stock fundamental analysis. Stock fundamental analysis is the process of examining businesses at the most essential levels. This method of review evaluates key risk reward ratios of a business to attempt to determine the stability and financial health of a company and to determine the value of its stock.
Many investors use stock fundamental analysis alone for their determination of future stock purchases. While stock fundamental analysis is a powerful practice, it should be an important part of an investor’s overall stock trading plan. This plan should include stop loss strategies, as well as a stock trading system such as Japanese Candlesticks. Such a trading system, coupled with basic fundamental analysis can provide the trader with a valuable insight into the murky waters of the stock market.
Basic fundamental analysis helps an investor to know how much money a company earns. This is the ultimate measurement of its success, both currently and in the future. Earnings can be difficult to calculate, but that is to be expected when dealing with the stock market. When a company is growing and profitable, its stock generally increases; earnings create higher stock prices and in some cases, regular dividends and successful trading. Lower stock value can have the opposite effect, making the market bearish on the stock. By evaluating a stock with stock fundamental analysis, it is possible to look for basic candlestick chart formations and determine the direction of a stock. When the direction is known, an investor can implement stock market strategies which reflect either a bullish or bearish approach.
In addition to understanding a company’s earnings, there are a number of ratios involved in basic fundamental analysis that help the investors to evaluate the worth of a company’s stock. These ratios focus on earnings, growth and value in the market. Evaluating these dynamics together can provide unique reflections on the value of the company. When a company can be identified by basic fundamental analysis, its stock can be tracked using candlestick chart analysis. With this information, an investor can move confidently to make a trade.
Stock fundamental analysis is a key component in any trading plan. Investors can find patterns and trends in the stock price history and use this information to help make decisions about a company’s value and the value of its stock. Incorporating a stock trading system such as Japanese Candlesticks teams up with stock fundamental analysis to form a powerful team in evaluating stock.
The bottom line is the ultimate measure of the success of an investor. Using basic fundamental and technical analysis, a stock trading plan and a stock investing system, an investor increases the possibility of moving from the hope of being a good trader to the reality of becoming a highly successful trader.
Market Direction: The markets are starting to show some tiredness. The Dow formed a Bearish Harami Wednesday. This occurred at or near the recent highs of late November. The continued selling today, after the positive trading in the early part of the day, illustrates a lack of conviction from the Bulls. This now becomes a Bearish Harami at recent highs being confirmed with more selling. Does this mean a reversal has occurred in the markets? Not necessarily, the 20 day moving average will continue to be an indicator. Support at that level would reveal that the uptrend is still in progress, although at a very slow pace.
DOW
Weakness in the markets was also confirmed by a Bearish Engulfing signal in the NASDAQ. A close below the 20 day moving average in that index makes the upside potential more tentative. The markets appeared to be in a consolatory resting area. This would induce adding some short positions to a portfolio.
NASDAQ
Strong stocks will continue to remain strong in a lackluster market environment. Strong stock charts can be identified with the proper combination of candlestick signals and gaps. The strength produced by a signal, followed a gap up in price, will create enough strength in a price move to work contrary to the markets in general. This creates an advantage of having positions moving positive when the rest of the market is starting to turn over. This not only improve profits but permits an investor to be prepared to move those funds out of profitable positions without giving back profits, and establish new positions, such as shorts, based upon the new direction of the market in general.
WYNN is an excellent chart to illustrate that point. Candlestick signals followed by gaps up in price has produced an easy chart pattern to evaluate. The initial strong move, followed by an indecisive pullback, was a set up for a Jay hook pattern. Another gap up after a hammer signal became a clear indication that the Jay hook pattern was in progress and the next move was also starting after a candlestick signal followed by strong investor bullish sentiment. Having the ability to recognize a candlestick signal in a pattern produces much greater probabilities of being in the right trade at the right time.
WYNN
Knowing which patterns produce a high probability strong trend makes placing option strategies on that trade much easier to apply. Buying the December 95 calls the day after the gap up at the first of the month becomes a viable trade. However, because the length of time before expiration was not real great, selling the December 100 calls reduces the amount of funds exposed to the trade. Creating high profit/ low risk option trade scenarios becomes much more viable when knowing the direction of a price.
Options University has now just presented new option trading strategy programs. This information, presented by Ron Ianeri, helps investors make quick and decisive decisions when applying option trades. His techniques are designed for investors to quickly understand the best trading strategy. Other option trading teaching courses present their material in such a confusing manner that most investors have to continue to pay more money to clarify what they have already supposedly learned. Ron teaches like a Bull a china shop. He makes sure you understand the important criteria required for each trade. Click here for more information on the Options University trading program.Holiday specials - Mr. Bigalow's books on candlestick investing have provided a very clear understanding on how to use candlestick signals correctly. The common sense applications utilized in candlestick analysis makes understanding investing in general much easier to master. These books make great holiday gifts for those people that are new to investing as well as a sophisticated trader. Do not miss the opportunity to provide a gift to family and friends that will be able to utilize this knowledge for the rest of their lives. Please order early so shipping can be accomplished with plenty of time before the holidays. Click here for the holiday specials.
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The Candlestick Forum Staff