Two Proven Ways to Analyze Stocks
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I: Technical analysis focuses on charts and graphs showing past stock price and volume patterns. There are a number of patterns technical analysts recognize to be historically recurring. The trick is to identify the pattern before it is completed, then buy or sell according to where the pattern indicates the stock is headed. Those who use this technique believe you can forecast future stock prices by studying past price trends. They make trades based primarily on stock price movements. Technical analysts tend to do much more buying and selling than fundamental analysts.
What's a good first step in selecting stocks?
Learn about all the products and/or services offered by the company you're considering. A company may have one high-profile product and several other products and/or services that are not as visible. Even if a high-profile product is getting rave reviews and profits, the company's lesser-known products may be taking a toll on the total profits — or vice versa.
Fundamental analysis is a long-used, common way to review stocks. The technique involves an analysis of the company's ability to generate earnings and an examination of the value of the company's total assets. Value investing and growth investing are two subdivisions of fundamental analysis. Proponents of fundamental analysis believe that stock prices will rise as a result of growth. Earnings, dividends, and book values are all examined, and a buy-and-hold approach is usually followed. Fundamental analysis advocates maintain that stock in well-run, high-quality companies will become more valuable over time.
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