Use Fundamental Strength to Make Buy Sell Decisions
A Stock represents a public enterprise. And Fundamental Analysis shows the strength or weakness of the enterprise through company’s fundamental data. Fundamental analysts rely on a Stock’s fundamental parameters, ratios, etc. to decide whether to Buy or Hold or Sell.
A Fundamental Trading System helps in identifying which Stocks are healthy; these are the Buy candidates. And which are weak, the Sell candidates.
To be practical, a Fundamental Trading System and Technique needs to have the following characteristics.
Avoid Fundamental Analysis that Says a Lot without Telling Anything
For a Stock, there is no scarcity of Fundamental data. Much of it is available in public domain for free. And some analysis may be obtained for a free. Is that plethora of information useful? Not necessarily. There is too much of Fundamental data available for any retail trader to make sense of that.
Some traders fall into the trap of analyzing every available Fundamental data. Creating Fundamental Analysis report on a Stock that spans across 10, 20 to even 50 pages. These reports tend to say a lot. Covering many angles of Fundamental Analysis. However, in the end, the story coveys little if anything.
One can interpret such an analysis both as Bullish or Bearish depending on which section of the report one is focusing. The net effect is to confuse the trader. Or, worse, to let one’s internal bias take over. In this regard, the analysis is merely confirming what the trader wanted to do with the Stock even before he started the Fundamental Analysis.
That is why you may avoid carrying out Fundamental Analysis or use reports prepared by others that say a lot about Fundamental data without telling you how a Buy or Sell or Neutral decision was reached.
For trading successfully, a retail trader needs a Complete, Unambiguous and Easy to use set of parameters and rules to decide which Stock is Fundamentally strong and which one is weak. And you should be able to apply the technique consistently to all the Stocks. CUE Vital, CUE Edge, and CUE Scorecard allow you to carry out Fundamental Analysis and make Buy/Sell decisions yourself on any Stock using consistent and easy to use parameters and rules.
Don't Spend So Much Time Analyzing that you Miss the Trade Opportunity
An analyst who works for a corporation has only one job. His job is to analyze Stocks. Make a lot of analysis, draft comprehensive reports full with charts and graphs and trends and whatnot. Preparing such a report may take days if not weeks. By the time the study is ready, a trade opportunity is probably gone. That is why a Fundamental Analyst who focuses on producing lengthy reports may not be a timely Stock trader. Afterall a typical Swing Trade is held for about 5 to 7 trading days. A study that takes that long time is practically useless, at least for Swing Trading purposes.
You don’t have to spend weeks or even days finding a Fundamentally strong Stock. You can identify it efficiently if you know the essential and sufficient parameters. CUE Systems allows you to do that. Watch the Weekly Market Roundup videos to see this CUE Technique live in action.
Remember that Fundamental without Peer Analysis is of Little Use, If Any
In isolation, Fundamental Parameters mean little, if anything. For example, a Dividend Yield % of 7% may be thought as high only until you find many Peer Stocks in the same Industry paying between 10% to 15% Dividend Yield. A Stock’s Earnings Growth of 25% may be appealing until you discover that many Peer Stocks in same Industry are having Earnings Growth of 100, 200 or even 500%. Cases like these are not imaginary. Far from that. They are commonplace. To find a truly Fundamentally strong Stock, you have to compare the Fundamental Parameters with its Peer Stocks.
CUE Systems lets you carry out comprehensive Fundamental plus Peer Analysis quickly without taking weeks or even days. In fact, you can complete this analysis in minutes using visual Scores and Heat-Map.
CUE Vital (or CUE Scorecard) allows you to carry out the Stock Peer Analysis for a Peer Relationship that you want to use. It can be Stocks in same Industry, Stocks in similar Industries, Stocks in the same Sector, or even Global Peers. In a few keystrokes, you can find the Fundamentally Strongest Stock in the Peer Group of your interest. And you can carry this out for Global Stocks, that is, Stocks in any country of the world. You may watch this Peer Analysis in action in the Weekly Live Market Roundup videos.
Make sure you can carry out a Complete Top Down Analysis, even in Real-Time
When trading or investing based on Fundamentals, it is not only the Stock that matters. It is equally important to identify the dominant Sector and Industry. In fact, you may find the fastest moving Sector and Industry first and then drill down into them to carry out Stocks Fundamental and Peer Analysis. This Top-Down Analysis allows you to buy a Stock that is Fundamentally Strong relative to Peers, in an Industry that is rotating into strength and in a Sector that is in favor.
Take only Truly Highest Probability Trades based on Data-Driven Analysis
To find truly Highest probability Trades, align forces from multiple dimensions; Sector, Industry, Stock; supporting your trade.
Aligning edges in support of your trade from all the levels of Sector, Industry, and Fundamental and then looking for optimal Low-Risk Buy Point is probably the most reliable way to take the highest probability trades.
You can align the forces with ease using CUE Edge (or CUE Scorecard) that allows you to carry out the Top Down Analysis in Real-Time, keeping you ahead in the game. Complete Top-Down Analysis is carried out regularly on the live Market in the Weekly Market Roundup sessions that are open to the public; you may register on our Live Class page.
Combine Fundamental with Technical Analysis for Improved Results
Fundamentals of a Stock does not change every day. Or, even if they change frequently, it is usually not known to the public. For common stocks, public come to know of a Stocks’ key performance parameters from quarterly earnings results. Because of that, Fundamentals are almost always lagging variables. They show the Stock’s performance in the past.
Because of this lagging nature, Fundamentals alone may not provide a robust basis for a complete Trading System. For example, it may not be able to pinpoint the most optimal Entry Price as accurately as Technical Analysis may. Or, it may not tell where to put the Trailing Stock in a profitable Stock position.
Finally, one may make profit Buying a Stock only if the Stock goes up. Fundamentally Strong Stocks does not necessarily mean that the Stock is going up. One, therefore, must check the Stock’s price move to make sure that one is Buying a Stock that is going up, or, at a minimum, it has stopped falling.
Deciding precise Entry Price, setting Trailing Stop, making sure that a Stock is going up before buying it: all these decisions come from the realm of Technical Analysis. Combining a Technical Trading System with Fundamental Analysis gives the most powerful tools for investing and trading Stocks. For Technical Trading System, you may use CUE Global for global investing, or CUE Elite for the USA Market focused investing. Both are best in class, complete, unambiguous and easy to use systems.