And while it’s impossible to know every single one…
It’s important to learn as much as you can.
There’s a key difference between what we call “fundamentals” and what we call “technicals.”
“Fundamentals” are the stories that we hear that predict movement in a stock. If you hear a company declare bankruptcy and the stock crashes, that’s a “fundamental” reason.
A “technical” is what we see on our charts. If you identify a bullish candle pattern and place a trade, and the stock goes up, that was a trade based on “technicals.”
A lot of talking heads and wannabe traders rely entirely on fundamentals and their own “feelings” about a stock. That’s not a great strategy.
On the other hand, a lot of traders are concerned only with “technicals.” They’re staring at charts all day and wouldn’t notice a major headline if it bit them in the face.
The problem is, that’s also a mistake, because those traders forget that the market is controlled by people and people react to news.
So the best trading strategies are going to rely on a mix of both fundamentals and technicals.
Let’s walk through one example of what this looks like with an earnings report that just took place.
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So, Under Armour is hosting its earnings call before the markets open on Tuesday.
Now, full disclosure, I am writing this on Monday evening, so I can’t know what will happen yet. But it really doesn’t matter for our purposes.
What you need to know, on a fundamental level, is that after Q1, Under Armour beat earnings expectations, and yet the stock is still down significantly since then.
Every retail company has suffered some serious consequences over the last year, but UAA still seems pretty healthy, and most analysts are expecting good things again from their earnings report.
That’s great news, especially as we get closer and closer to the Christmas season, which is of course the most important time of year for a lot of retail companies.
If we turn to the charts, we see this:
In pink, we circled a big gap up that they saw around their last earnings call.
But since then, we’ve seen a fairly dramatic and consistent downtrend in price.
Until yesterday, when we saw another big gap up (circled green).
Now, could we see the exact same pattern repeat itself? Possibly.
But those series of smaller candles for about the last week could be a consolidation setting up for a move upward.
And if we see a break above either of those dotted black lines of resistance marked on the chart, that should be a very bullish sign.
Of course there are never any guarantees in trading.
But the one thing we can feel pretty confident of is that from a fundamental perspective, this is a healthy company, and from a technical perspective, there’s definitely an argument to predict a bullish move.
Armed with both perspectives, we’ve given ourselves a great background to trade if this move ever starts to happen.
And that’s why it is so important to analyze the story of a company and it’s charts so you can try to anticipate what comes next!
Chat soon,
Markay
Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. You may lose more than you invest. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. The information on this website is intended as educational in nature and we do not recommend that you buy or sell any specific financial instrument.
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