Stock Analysis, Stock market tips, Indian stock market tips

A stock market analysis is an evaluation of the market in an attempt to predict future market actions or to provide a general insight into the market. Basically there are two types of stock analysis: technical analysis and fundamental stock market analysis. A technical analyst performs a stock market analysis by looking at market trends and chart patterns, and analyzes past market actions. A fundamental analyst looks at a company’s financial records, its assets, its market share, the quality of its management, its products and other data specific to a company or a market sector when making a stock market analysis. Each type of stock market analysis is used in an attempt to understand current and future market actions. Apart from this you should have some idea about BSE, NSE, NASDAQ…etc

Fundamental research

Most stock analysis is done through fundamental research. Analysts base their stock analysis upon potentially improved earnings over a specific period of time. This is how most MBAs are taught as far as the basis for stock analysis. Unfortunately, there is one major flaw with this approach. The fundamental elements may be pertinent today but may not be important in six months from now. This becomes the biggest risk for long-term stock analysis. In years past, the fundamentals of a company could be anticipated for the future based upon one fundamental projection. The technology of that company/industry was not likely to change very fast. Until recently, meaning the past decade, the technological improvements of most industries was relatively slow.

That is not true today. Stock market analysis today has one major additional criteria. What are the technological improvements in that industry capable of doing in the near future? The near future could mean anywhere between three months to three years. What might be a viable advantage for a company today, with the announcement of improved technology, could be completely negated in mere months if new technology enters that market. We are living in a technology boom. Investors in the share market may have seen the bubble back in the early 2000’s but that was a bubble in technology stock prices, not technology itself.

Trend analysis

Let us talk about trend analysis. There are various ways of trying to determine the trend of the market. This can be done by using moving averages, various indicators, various filtering techniques, an algorithm technique, and with the market cycle tops and bottoms technique. All these methods have a market time lag associated with the results, but they can still be quite effective.

Tops and bottoms analysis of the market is reasonably simple, but it has a few little quirks associated with it that you must understand. I will attempt to explain this technique. The market or stock behavior is comprised of some small cycles in about 8 days in duration, 4 days up and 4 days down. If this cycle really held, you could simply find the bottom, buy, and sell in 4 days and make a lot of money. It isn’t quite that simple, but if you investigate the data (it is more prevalent in an index like the S&P 500) you will be able to see the cycles. In general, you will be able to identify the top of the cycle and the bottom of the cycle. If you are in a BULL or rising market, the tops and bottoms will be rising, and of course if they are falling you are in a BEAR or falling market. As these rising or falling amounts change, the strength of the trend is changing. If you study the tops and bottoms relationships you can get a good indication of market strength and trend.

You can use the early indication as the top is not rising well for a BULL market as an exit criteria or the bottom is not falling well for a BEAR market. Or you can wait until the results of the next cycle, but of course that will give you some decision lag. You can also use a combination of the top and bottom to cut that lag in half. It by itself is not a complete trading system philosophy, but rather a effective trend analysis technique. So the two techniques fundamental analysis and the technical research are the most popularly used techniques of stock analysis.


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