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Stock Analysis-Fundamental Analysis and Technical Analysis




In stock market mainly there are two type of analysis for to find right shares for investment- Fundamental analysis and Technical Analysis.We have learned about investments,Equity shares But how will you choose the right company for investment at right price.Here come the importance of fundamental and technical analysis. Fundamental analysis as it name signifies analysis of fundamentals(balance sheet,profit loss statement,cash flow statement etc) of company and economy analysis(GDP,percapita income etc). Balance sheet is the back bone of a company.A good company have strong balance sheet and fundamental analyst try to find the intrinsic value(ie fair value of company) by analysing the financial health(balance sheet),Growth rate(Profit and loss,Cash flow(cash flow statement) Leverage(balance sheet) Valuation ratio's,Industry analysis and economic analysis.A good fundamental analyst should have in depth knowledge about the business of the company and have good analytical skills in interpreting the reports.Fundamental analysis is a vast topic before concluding we just want to investor to check atleast some fundamental parameter like EPS(Earning per share),Growth rate of company,Book value of company(Accounting value of company) Debt-Equity ratio(leveraging of business) P/E ratio(what the investor pay for earning of 1 Rs).So in nut shell a good company have high growth rate,low levarage,good management,Low P/E ratio compared with peers,Low debt-Equity Ratio.As a thumb rule never invest in company having debt equity ratio of more than 3.Share value greater than 3 times the book value,P/E ratio of more than 20 unless high P/E ratio supported with high growth rate and fundamental analysis is good for long term investment.. Fundamental analysis is good for investment but main problem with fundamental analysis is Difficulty in getting in depth information of company,lot of resource is required for fundamental analysis and for most investor it is out of their hand,unavailability of hidden news and difficulty to judge the companys valuation etc. Here comes the importance of technical analysis.Technical analyst uses the demand supply theory to judge the price and they belive past price movement will have an impact on future movemnt also.Share price increase or decrease whenever there is a change in fundamental and it will be reflected in its demand/supply and in turn it will affect the price.So technical analyst use historical price/volume to judge the future price movement of stock.Technical analyst uses charting software and use various tools like movinng average,oscillator to find the support level ( share price at which there is demand for share-Buy will occur) and resistance level (share price at which supply wil occur-sell happens) of share. Important technical indiactor are ,moving average ,RSI,Stochastic oscillator,etc Other important tools for technical analyst are Candle stick analysis,Line study,Fibonacci levels,Gann theory etc.In fact big demands and supply in stock market are created by large institution and fund house and these institution will keenly watch the fundamental of company and Economyand if there is any change in the fundamental they will act in market and this action will create demand/supply of specific company share or whole market and these change will reflect in volume and share price movement and this in turn will reflect in Technical chart.So Fundamental is the real base for technical analysis..

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