Technician or Fundamentalist?


Akin to the 3 teams in Pokemon GO, the world of investing is split into two factions, those who believe in Technical Analysis(TA) or Fundamental Analysis(FA) .
Technical Analysis is the art of studying price patterns in order to forecast the future price movements. Fundamental Analysis on the other hand, relies on studying the books of the company such as the Balance Sheet and Income Statement to gauge the profit and growth potential.
While both methods are proven to be successful for investors around the globe, I personally feel that a combination of both methods are able to produce stellar results for the retail investor like yourself! FA will aid you in making decisions on what to buy while TA tells you when to buy at the lowest point and sell them at the highest point!
What to look out for in FA:
1. Company has to have consistent profits and sales
-Make sure the management is capable in generating sales rather than being a one trick pony in their sales for that year.
  1. Cash is king
-Ensure the company has positive cashflow to cover the cost of their operations
  1. Company share buybacks or board of director purchases.
– Share buybacks occur because the management feels that it’s shares are undervalued and want to consolidate their holding. Similarly, the BOD will purchase shares back as they generally feel that it is undervalued and will appreciate in the near future.
  1. Quality of management
-A nation’s greatness depends on it’s leader. The same could be said for a company, what we are looking out here is the effectiveness of the management to maximise output with the given resources. Is the management looking out for shareholder’s interest or personal gains?
What to look out for in TA:
  1. Price is on an uptrend (150DMA has to be moving upwards)
-Prices always move in trends and you do not want to buy a stock that is falling, As the saying goes, never catch a falling knife.
  1. Volume
-Signals are signs of potential movement, presence of heavy volumes affirms it.
  1. Reversal Signals (catching the bottom of a down trend)
– There has been a track record of certain reversal signals that indicates a bottom and start of an uptrend! But these are tricky and depend on your due diligence to find, it is akin to finding an empty seat on the peak hour train after an exhausting day! (Rare, but hey, it happens)

These are my stock selection criteria and I’ll be adding on to it as I go along in my journey towards financial independence. I will be doing a follow up and more in-  depth posts on FA and TA separately.
For Honour and Glory,
CDOInvestor

Comments

Post a Comment

Popular posts from this blog

The Big WHY

Image
Many people would ask, why invest and risk losing money when I could save it all and one day have enough to survive? Common misconceptions by our parents and perhaps friends, would be that investing is akin to gambling and I quote : “Don’t burn your fingers in stocks!” “Investing? Same as going to MBS what…” “ If can make money, everyone also go invest what” But hey, haters stay hatin’ right? In a conformist and conservative society like Singapore, people say this because they are defensive towards an idea or concept they do not understand and wish to stay in their bubble where they feel safe and protected.  Financial literacy  and  ambition  will allow you to break out of this thought and give you the courage to stand up for yourself and tell them : “I want a better future for myself and get out of the rat race! No more sleepless nights over the fear of losing my job!” With that in mind, let me give you some facts which you can graciously bestow upon the lesser naysay
Read more

When you have nothing left but money

Image
Recently, a close friend of mine shared a video with me which caused me to really reflect and change how I envisioned my life, when I make it big in the stock markets. I always thought that when I earn my first bucket of gold, I would buy that dreamy Maserati I always loved, enjoy the finest food the world has to offer, party till the world ends and do it all over again. However, after watching this particular video, I thought to myself ; would I truly be happy with all the material gains? All of us might have started this journey into investing for different reasons, be it for ego ,fame ,power or hopefully provide financial security for your loved ones. I would like you to watch this inspiring video of a man that once thought he had it all, lost it all and found a new perspective on life through his journey. Sometimes we get so consumed with improving our financial situation and gaining traction in our career, but pause to think, time does not stop for you to achieve succ
Read more

Crowdfunding. Yay or Nay?

Image
Hey guys, In my first blogpost, I am going to share my experience with crowdfunding with you! For those who aren’t familiar with the concept, Crowdfunding  is the practice of funding a project or venture by raising monetary contributions from a large number of people.  Crowdfunding  is a form of crowdsourcing and of alternative finance. In 2015, it was estimated that worldwide over US$34 billion was raised this way. I have personally invested through MoolahSense , a “Leading P2P lending platform” in Singapore. In Nov 2015, I invested a sum of money in a company called Jova Marine Services that had a healthy balance sheet, growing P&L statements and most importantly, promised 20%p.a. return in a year via monthly repayments. ( Sounds amazing right?) . But no. In the initial period, Jova made good on it’s loan, communicated with investors and was punctual with the repayment schedule and yeah, investors were smiling and everyone was havin’ a jolly good time! Then b
Read more