Technical analysis vs Fundamental analysis ?

[sebfr]

Hi,

It is common to oppose Technical analysis and fundamental analysis...

Two words about those two strategy :

1. Fundamental analysis : Fundamental analysis is a security or stock valuation method that uses financial and economic analysis to evaluate businesses or to predict the movement of security prices such as stock prices or bond prices. The fundamental information that is analyzed can include a company's financial reports, and non-finanical information such as estimates of the growth of demand for competing products, industry comparisons, analysis of the effects of new regulations or demographic changes, and economy-wide changes. Company factors to consider might include dividends paid, the way a company manages its cash, the amount of debt a company has, and the growth of a company's revenues, expenses and earnings. A fundamental analyst may enter long or short positions based on the result of fundamental analysis.

2. Technical analysis : Technical analysis, also known as charting, is the study of the trading history (the price and volume over time) of any type of market traded by humans - whether stocks, commodities or any other market - in an attempt to predict future prices or to follow the trend.A technical analyst looks only at "the chart," at the price history, completely ignoring the nature of the company or commodity in question, treating the actual price chart as the only significant factor in predicting the future price.

Personnally, more i trade more i am a technical analysis. But i am open on others ideas..And i believe It shouldn't really be versus one another, it should say instead  complement each other.

My personnal strategy of using each strategy :
1. Use Fundamental analysis to answer at the question : What to trade ?
2. Use Technical analysis to answer at questions : When to trade ? When to exit positions ? When to take profit ?
3. Use another technical : Money management to answer at the question : How many shares ?

As you can see on this "3" rules, technical analysis is fundamental  for my strategy...I have a plan and technical analysis is crucial for mastering the plan.

Some examples on how to use fundamental analysis with technical analysis...Do you know "Zacks.com" or the "Motley fool" sites.
Here, i am going to use "Zacks" because some informations are free ! They have several sections called " Zacks Rank Buys AGGRESSIVE GROWTH", '"GROWTH AND INCOME", "MOMENTUM", "VALUE"..

In section "VALUE" we can see a "recommendation" : OVERSEAS SHIPHO (OSG)
Sep 22, 2006 "Overseas Shipholding Group, Inc. (OSG) topped the Street's earnings estimate in six out of the past eight quarters by an average margin of 22.1%. Profit forecasts for 2006 and 2007 have shot upward. The Board of Directors authorized a $300 million share repurchase plan and declared a quarterly dividend of 25 cents in June. OSG is currently yielding 1.7%. This Zacks #1 Rank stock has a price-to-book ratio of only 1.2, compared to 5.3 for the market" -> Fundamental analysis.

When we see chart, a good technical opportunity appeared
1. end of the second wave ?
2. Great volume on the the first wave
3. Retracement between 40% and 60%
4. Price is near good support (gap)

Strategy :
Close at 60.75
target at 69
stop-loss at 58

In section "MOMENTUM"see a "recommendation" : GREIF BROS-CL A (GEF)" Aug 30, GEF announced fiscal third quarter EPS at $1.45, versus 88 cents per share in the same quarter in 2005. In addition to this 65% EPS growth, the earnings report was a 32% positive surprise over analysts' expectations. In addition, sales were reported at $691 million, up 13% from 2005. "

When we see chart, a good technical opportunity appeared
1. long resistance breakout
2. Great volume since the breakoutween.

Strategy : waiting for a pullback near 40%retracement and support
Price entry : 74.62
target : difficult to say...Use Oscillator or bollinger bands or reward in function of risk level
stop-loss at 70

BUT We have good fundamental stocks that technical analysis says me it is not time to buy...At contrary !

Examples :

In section "Aggressive growth" we see ACI rch Coal, Inc.'s (ACI) dominant position in the low-sulfur coal market is its key asset. The company has met or exceeded earnings estimates in five out of the past six quarters, with the most recent quarter being a 41.67% surprise. Five different analysts have raised their numbers for 2006 and 2007. Estimates for 2007 have increased 11.1% over the past 90 days due to strong demand."

BUT technical analysis : BEARISH -> we can see a "head and shoulders" pattern and price is under MA(200). We can buy this stock for playing a minor pullback near 32 - 35 price. But it is dangerous. It is better to go with the trend than against him.

In section "Aggressive growth" we see VMC "Vulcan Materials has exceeded earnings estimates in two out of the past three quarters, with two analysts raising their estimates for this year. Over the past 60 days, this year's estimates have increased 10 cents to $4.74 per share, while next year's numbers have jumped 13 cents to $5.54 per share. The company said in early-August that its second-quarter profit rose 22% as margins improved, and raised its outlook for the year. Revenue rose 14 percent to $888.2 million from $782.1 million last year, as the cost of revenue grew only 10 percent to $630.4 million."
BUT technical analysis says : BEARISH...We can see that price is on a major downtrend. Volume is low on the pullback. Price crosses under MA(200)..Price is stopped by GREAT major resistance at 50%retracement...Very Good...First target at 70...

Conclusion : Technical analysis is essential, after money management of course ! But fundamental analysis can help any technical analyst to select stocks...Even if fundamental doesn't work all time (like technical analysis !) in short term strategy, this stocks coulde be great in long-term strategy (for investors)...But for me only technical analysis can give me a good entry price...Sometimes it is great to be patient.

[hawk]

 :)nice post..
goes from back to basics, to some more complex stuff..

i like it , since it reinforces the idea that responsible D.D , can bring very nice profits.

keep em coming.

[sebfr]

Thank you Hawk;;;

[sebfr]

Hi,

Look at ODFL...Information source : ZACKS.com at section "Aggressive Growth Highlight" on Sep 26, 2006. "Old Dominion Freight Line has exceeded earnings estimates in six consecutive quarters. Year-to-year growth has routinely exceeded 30% over that time period. Seven analysts have raised their estimates for this year, while six have done so for next year. Over the past 60 days, this year's estimates have increased 5.3% to $1.97 per share. As of March 1, 2006, it operates 171 service centers. As of December 31, 2005, the company operated 4,028 tractors; and a fleet of 15,701 trailers, including linehaul tractors, pickup and delivery tractors, pickup and delivery trucks, linehaul trailers, and pickup and delivery trailers.
ODFL said in late-July its second-quarter profit rose 55% on a 25% jump in revenue. Old Dominion earned $21.6 million, or 58 cents per share, compared with $13.9 million, or 37 cents per share, for the same quarter in 2005. Revenue grew to $330.8 million from $264.3 million in the year-ago period. Analysts only expected 51 cents." Good fundamental value

BUT Technical analysis shows divergence : you can be buyer but also seller !

Buyer : We are near a MAJOR RESISTANCE at about 29-30...And this level represents between 40%-60% of the major uptrend (Cf. Long-term chart). Analysis of volume is good in differents phases : high on uptrend and low on pullback.

Seller : A head and shoulders is formed..RSI confirm this fact..Less and less low. otherwise, an descending triangle at top is formed..Prcie is more and more near MA(200).

Conclusion : We can waiting for a movement of price near resistance...If resistance is broken (neckline of head and shoulders), a sell signal is done..But if resistance is good (white candle or long shadow), a short-term buy signal could be done. tHE MOST IMPORTANT FACT is we have LOW-RISK and be patient to see in wich trend price wii go

[sebfr]

Hi,

Look at LNT...Information source : ZACKS.com at section "Value Highlight" on Sep 26, 2006.

"Alliant Energy Corporation (LNT) exceeded analysts' earnings estimates for five consecutive quarters by an average margin of 45.2%. This Zacks #1 Rank stock recently upped its 2006 earnings per share guidance. The Board of Directors authorized a $200 million share repurchase plan in early August and declared a quarterly dividend of 28.75 cents per share in mid July. LNT has a price-to-book ratio of only 1.7, compared to 5.2 for the market.
Alliant Energy Corporation is a public utility holding company serving approximately one million electric and over 400,000 natural gas customers in Iowa, Illinois, Minnesota and Wisconsin.

LNT topped the Street's earnings estimate over the past five quarters by an average margin of 45.2%. The company produced a double-digit earnings surprise in each of the five quarters.

On Aug 3, LNT reported second-quarter profits of $46.1 million, or 39 cents per share. The results crushed the consensus earnings estimate by 25.8%. Compared to the prior-year period, however, earnings were down a penny. Revenues declined slightly to $696.8 million, from $699.8 million in the second quarter of 2005.

Commenting on the second quarter, Chairman, President and CEO William D. Harvey stated, "We are once again pleased with the strong and more predictable financial results our ongoing businesses produced this past quarter. Over the past several years, we have made significant progress executing our planned divestitures and improving the financial strength of our company."

LNT announced that it has increased its earnings per share guidance for the full year of 2006 to between $2.25 and 2.45, compared to its prior outlook which projected between $2.15 and $2.35. The company listed a number of reasons for its revised forecast, including continuing economic development and sales growth in its utility service territories as well as continuing cost controls and operational efficiencies

The Board of Directors authorized a share repurchase plan in which the company can buy back up to $200 million of its common stock by the end of 2007. Moreover, on Jul 14, the Board declared a quarterly cash dividend of 28.75 cents per common share of stock. Dividends on the company's common stock have been paid for 243 consecutive quarters since 1946. LNT is currently yielding 3.3%.

The consensus estimate for 2006 currently resides at $2.35 and represents a 4.4% increase over the past 60 days. Profit forecasts for 2007 jumped 4.3% to $2.45 over the same period of time. Three analysts upped their estimates for this year while two did so for next year.

"

Technical analysis recommendation :
PRUDENT -> waiting for a pullback

Why ?
1. Trendline is broken
2. Volume are very low on the last uptrend...
3. Divergence between price and indicators like RSI...

Entry target possible :
34.65 - 33.10 The second seems to be the best

[sebfr]

Hi,

Today we can analyse JBL for a short position..

Comments on zacks.com "Jabil Circuit (JBL) has experienced operational problems, leading it to reduce expectations for the May quarter and full year 2006. Challenges are likely to continue into coming quarters, and we therefore reduce estimates for the full years of 2006 and 2007.

In addition to the company's operational issues, its stock option grant practices are being investigated by the SEC. Moreover we believe that valuations industry-wide are inflated as growth is likely to slow in the future. We therefore maintain our Sell recommendation on the stock with a six-month price target of $20.00.
"
Fundamental analysis : SELL

Technical analysis : SELL.
Reasons :
1. Candlestick : a filled black candle is appeared ->end of the pullback
2. Divergence between price and indicators like MACD and RSI
3. Breakaway gap on june 2006 -> JBL experiment a major DOWNTREND..
4. 50% retracement
5. Oscillators : Overbought

Strategy :
Entry price : 28.35
Stop-loss at 30.70
First target at 22.5
Reward/Risk ratio of 26 / 8.2 = 3.17...

Great....Fundamental analysis + technical analysis => WIN

[sebfr]

Hi,

BID a good candidate...

News :
exceeded analysts' earnings expectations for the past six quarters by an average margin of 19.5%. The company recently reported record revenues and income from continuing operations in the second quarter. Consensus estimates for both this year and next year have been on the rise. Earnings per share are projected to grow 18% over the next 3-5 years. BID has a current dividend yield of 1.3%.

Income from continuing operations of $72.4 million, or $1.17 per share, for the second quarter marked an historic high for the company. It also beat the consensus earnings estimate by an impressive 19.4%. In the prior-year period, income from continuing operations amounted to $42.5 million, or 67 cents per share. Revenues of $248.3 million for the quarter also were a record and represented a 39.2% improvement when compared to the $178.4 million achieved in the second quarter of 2005.

For the first six months of the year, another record was set with revenues of $344.3 million—a 36.4% jump when compared to revenues of $252.5 million for the first six months of 2005. Income from continuing operations soared 109.2% to $68.4 million.

Technical analysis :
Cup and handle is formed...

[sebfr]

I like technical analysis because technical analysis permit us to predict sometimes the impact of major economics results...Why ? Some people have informations before others. And price doesn't lie.

Look at CRTX on 13th september :
Price break a major support
Volatility is increasing (Band with + close < lowerbands)
Long red candle is formed

And on 15th september new arrive :
"Critical Therapeutics, Inc. (CRTX : critical therapeutics inc com
News , chart, profile, more
Last: 2.39-0.01-0.42%

1:28pm 09/29/2006

Delayed quote dataAdd to portfolio
Analyst
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Financials
Sponsored by:
CRTX2.39, -0.01, -0.4%) today announced the results of its Phase II clinical trial designed to assess the safety and preliminary efficacy of CTI-01, an anti-inflammatory compound, in patients at risk of serious complications, including organ damage, while undergoing major cardiac surgery involving the use of the cardiopulmonary bypass (CPB) machine. The results from this double-blind, placebo-controlled trial covered the 102 patients enrolled in the trial prior to March 15, 2006 when the Company discontinued the trial due to a manufacturing issue related to the drug container closure system.
The trial, which was not powered for efficacy, showed no signal or positive trends in efficacy between patients receiving CTI-01 (n=49) and those receiving placebo (n=53) in reducing major complications within 14 or 28 days of surgery. The primary efficacy endpoint for the trial was a composite endpoint measured as a reduction in major complications within 14 and 28 days of surgery. Major complications were defined as death; mechanical ventilation any time after the first 48 hours following surgery; acute renal failure; or a requirement for intravenous vasoconstrictors any time after the first 48 hours following surgery. The adverse event profile for patients receiving CTI-01 was similar to that of patients receiving placebo. "
Not Good...
Here is the result on chart :

[sebfr]

Hi,

Today we focus on DCGN...

analysis By ZACKS.COM :
"deCODE Genetics, Inc. (DCGN), incorporated in 1996, is a genomics and health informatics company that uses genetics and healthcare information to develop drugs, diagnostics, and pharmacogenetics for the healthcare industry. We were pleased to see the recent positive data on phase II candidate DG031. However, we would like to see more late-stage or large-scale data on the drug before we become aggressive buyers of the stock.
We believe DCGN will trend sideways over the next several months as investors wait for more information regarding the pipeline. We rate the shares a Hold, with a $6.00 target.

Technical analysis :
1. DCGN is in a MAJOR dOWNTREND
2.  but Gap is filled...And gap play as support...

Short-term strategy :
1. Like Zacks.com buy now for a profit target at 6.00 (resistance) with a stop-loss at 5.20
2. Long-term strategy if news will be good : 7.15...

[sebfr]

Another stock to watch...NAT

analyst : good news
Nordic American Tanker Shipping Limited (NAT), a Zacks #1 Rank stock, topped the Street's earnings estimate for the past three quarters, most recently by 19.3%. An increase in the company's credit line to $500 million, along with a public offering of five million shares of its common stock, should help NAT add to its current fleet of vessels. The company has a price-to-book ratio of 1.6, compared to 5.2 for the market, and is currently yielding 12.3%.

The company expects to boost its third-quarter dividend to between $1.28 and $1.31 per share, compared to 60 cents per share in the third quarter of 2005. The Board of Directors declared a quarterly dividend of $1.07 for the second quarter. Investors requiring additional cash flow in the form of a dividend have been extremely pleased with NAT's current dividend yield of 12.3%.

Technical analysis :
1. We are on a major uptrend
2. 50%retracement
3. a triangle is formed...
4. Macd turns

Strategy : long-term strategy
1. Buy on triangle breakout

Stop-loss :
32.00

First target : 40.00

Second target : 46.00

[sebfr]

NEOL is a good candidate : good fundamental analysis + good chart + money management => high probability of success.

http://www.3stocksonfire.org/trading/index.php?topic=2970.0

[sebfr]

Have a look on GGB http://www.3stocksonfire.org/trading/index.php?topic=4533.new#new

[sebfr]

Hi,

Zacks.com post :
"Since we first featured Aspreva Pharmaceuticals Corporation (ASPV) back on Jul 18, the company is up nearly 30%. ASPV is currently trading at a valuation of 9.9x trailing 12-month earnings and at 8.3x current fiscal-year estimated earnings. The market, as represented by the S&P 500, is trading at a valuation of 16.9x trailing 12-month earnings and at 15.9x its current fiscal-year estimated earnings. The company's PEG ratio currently sits at 0.42. ASPV exceeded analysts' earnings expectations in four out of the past five quarters. "

Chart show an ascending triangle and a channel...

Recommendation :
Waiting for a breakout and have a look on channel ( no breakout is a good sign)

[sebfr]

AMZN...http://www.3stocksonfire.org/trading/index.php?topic=1494.0

[sebfr]

HSY...

Fundamental analysis :
By zacks.com... "The compagny's operating margin is expanding from cost cutting efforts as the share repurchase plan continues. Double-digit earnings growth. A strong pipeline  of new products is being introduced in 2006."

Technical analysis :
a channel is formed...I don't buy this stock now...I need low-risk entry zones.

Buy zones :
1. If a "head and shoulders" is formed, buy on the breakout of the neckline
2. Buy near channel at about 50.00
3. A channel breakout..