PFF Panel 3
Seedly PFF 2019
Asked by Anonymous
Asked on 02 Mar 2019
Both are necessary to make decisions for investment.
Fundamental mostly gives you the basic financial condition of the stock its market reputation and sentiment. Whereas technical analysis give you an idea about how the stock is performing in the stock market with figure and facts. It also gives you an idea about the target price of the stock and its trend. All the important you get from technical analysis.
You can read about the techinical analyis from here
Honestly, this is a tough question. Technical analysis and Fundamental Analysis are 2 very different things that are actually quite polar opposites of one another, they each have their pros and cons.
Your usual, mutual Fund/ Financial analyst way at asset management firms and banks is usually exclusively fundamental analysis - analyzing business models, looking and balance sheets, comparing financial ratios such as debt to equity, liquidity ratios etc. and Discounted Cash Flow analysis to find out the fair value of the stock, and see whether currently the market price of the stock (or what it is currently selling for in the exchange) is more or less than that to determine whether they should buy or sell the stock. This forms the backbone of almost all financial institutions, every respectable financial analyst will have picked up this method and learnt it by heart.
All the way on the other side of the spectrum is technical analysis - you don't care about what the company does, what they sell, because all you care about is how the chart moves. You use indicators such as moving averages, volume, resistance and support levels etc. to produce evidence and signals that you should buy or sell that current stock. Essentially, you think that all the information comes from the chart movement alone, the price of the stock has it's own life, and history is prone to repeating itself.
To be perfectly frank, I subscribe more to the idea of fundamental analysis than technical analysis, because I think it is vital that you understand what you are buying into, and how they perform relative to their competitors. Fundamental analysis really allows you to understand the state of the company, and the direction that they may be heading to, because the numbers in the balance sheet gives many hints and clues about the health of the company. Technical Analysis wise, it doesn't really value add to your knowledge about the financial industry to me - rather it's more about recognizing patterns and having a good strategy that includes a multitude of indicators to provide buy and sell signals, and sticking to this strategy.
Hahaha he mentioned to take both into account because TA & FA looks at different aspects. One look at momentum (is it the time to invest) and another look at whether the company is a good potential. I don't think it's a which one is better option; more like you need to look at both.