Price is also dependent on future earnings, if future earnings are expected to grow due to prospects, the current stock price may increase to reflect this anticipated financial growth.
It is based on the premise that the price of share move in trends, i. There are also many traders who review charts then look at the fundamentals to see if future supply and demand is sufficient to potentially move price through support or resistance or create a supply or demand situation which makes price potentially trend for a long period of time.
It reflects the degree to which changes in the price of securities have taken place in the market as per the overall trend. The average individual will likely be far better served focusing on a fundamental analysis investment strategy. While fundamental analysis aims at ascertaining the true intrinsic value of the stock, technical analysis is used to identify the right time to enter or exit the market.
Select few stocks that meet your technical indicators requirements.
Rule 3: Price patterns always repeat—given enough time. ET in the Classroom has explained several fundamental analysis topics in the past, and now, starting a new series on technical analysis. In fundamental analysis, the future price of the security is decided upon the past and present performance and profitability of the company.
In a nutshell, you can think about fundamental analysis as the more logical, pragmatic part of investing in which you are looking at the financial soundness of a company and its business prospects.