Technical And Fundamental Analysis Of Stocks To Beat The Stock Market

Investing in the Stock Market

Fundamental analysis is considered as the analysis which is done on the company’s technical part statistics. As it is seen that the fundamental analysis and the technical analysis are the major terms that are used for the approaching market and are also considered as the opposite ends of spectrum (Sun, 2017). The present research is based on the technical as well as the fundamental analysis of the shares so as to beat the stock market. In this research assignment around 20 companies are taken into the portfolio so that as to achieve the objective of beating the stock market and achieving the 5% profit from investment. Also various theories and the strategies that are used to achieve the objective of target profit are discussed in this. At last the evaluation of the stocks that are taken into the portfolio would be discussed.

Investing in stock market is considered as an art where the scarifies is to be made in present so as to achieve the deriving future benefits. As it is seen that investing in the stock market is always a difficult task for the individuals who don’t have any information about the market hypothesis. Also it is difficult for them to predict what will happen in the next coming hours. So it is important for any investor to check and analyse the results and the strategies before investing into the stocks which would help them to achieve the objective of maximising the returns on the invested amount (Shen, Lin, Tang, Hsiao,2016). The amount that was invested in the stocks were able to give me a positive result to the some extend and in certain stocks their were negative result which finally helped me achieving the target of profit booking.

Investment includes numerous decisions such as the type of portfolio, amount, timing and the grade of the share in which the amount has to be invested. As investment includes number of theories through which the future benefits can be achieved. There are two types of analysis that are done while investing in any stock of the company which includes the technical analysis and the fundamental analysis.

Technical analysis is considered as the historical analysis of the data of the companies shares which includes both the price and the volume factor. This is done by using both the behavioural economies and the quantitative analysis (McAleer, 2018). Also the technical analysis aims to use the past performance so as to predict the future trend of the market. This is done through the following the chart patterns and statistical patterns. For technical analysis the Dow has defined its theory which includes the three trend theory. This theory helps in distinguishing the overall direction of the market. For this the theory uses the trend analysis. As it is seen that the market  does not move only in straight lines, there are different market trends according to which it moves (Lim, & Noh, 2015). As it is seen that the market not only moves or rally up to the peak it also sells off to the low at the same instance. So it is seen that it does not follows only one direction. These three movements includes the following:

• The main movement: it is the primary movement or the major trend in the index that last from less than a year to the several years (Aerts, Thewissen & Yan, 2018). This trend can be discussed as bearish to the bullish. As it is seen in the FTSE All share index that the market is going in the up trend movement from if compared to the last year.
• Medium Swing: This is the reaction of the market which last for only not more than 3 months. In this movement the price of the shares retraces from 33% to 66% where the major corrections and the profit booking on the shares are seen.
• Short Swing: this is the swing where the market trends changes from the hours and resist till a month or so. This is the way which helps the market to move upwards where the investor can book profit for the same and also can have a certain amount of loss.

Technical and Fundamental Analysis

It is seen that these three movements can be simultaneous and can also happen in a day. So these trends has to be keep in mind while investing (Kaplan & Atkinson, 2015). As while investing the chart of the companies has to be keep in mind so that the up trend and the downtrend are analysed. This was the main strategy that was kept in mind by me while analysing and investing in the shares. The shares that were taken into consideration for analysing and investment includes the following. These shares  made my portfolio for investment through technical terms.

These stocks were analysed on the basis of the technical charts and the statistics that they have. Fundamental analysis means the analysis of the stock that  is done on the basis real data of the stock so as to find the stock value (Hsiao & Tsai,2018). This is considered as the best method which helps in determining the health and the growth of the companies value and the future implication of this. In this method the stock revenue, profit margins, the return on equity and the future growth of the company is analysed.  For this the method that I have chosen to invest in the stock involves the price earning ratio. This method has helped in comparing the price and the earning that the company is giving to the stock.

Through this estimate of future earning can be seen and a forward P/E can be expected to take into the consideration the growth of the company (Holm, 2018). However if the estimate may turn out to be wrong, it would help to anticipate the future the same way the market does when it prices a stock. The stocks that are taken into consideration for this purpose includes:

These 10 stocks build the portfolio for the fundamental analysis and helped in achieving the objective of profit booking.

The Efficient market hypothesis is considered as the theory which helps in assessing the financial aspects of the company (Chu, Wang,  Xiao & Zhang, 2017). This theory initiates that the assets price of the company reflects the financial information of the company. This theory helps in depicting the alpha generation of the company. This theory is neither technical nor fundamental.

Behavioural finance is considered as the field of economics that helps explain the stock market anomalies which includes the severe rises and the fall in the stock prices. This helped me to check that how many volume of shares were invested in the company and also the anchoring level is seen through which the stock is determined (Harrison & Lock, 2017). Also the tendency of people to make the stock at self rating level is checked so that the highest rated stock is purchased which would give maximum results.

The Dow Theory

The companies that were selected for the purpose of purchasing the portfolio includes the technical method which is used for the selection of stocks (Garofalakis, Gehrke & Rastogi, 2016). As the technical method includes the Dow theory through which the swing and the trends of the chart are analysed. While purchasing the share of the company past trends of company share price are analysed and the shares are done accordingly. As most of the trend showed up ward movement and the charts were positive which helped in purchasing and making decision for buying shares. Also the profitability of the companies in the recent years has been checked and if the company is having a consistent growing market then it is taken in the portfolio.

By investing in the two portfolios where the stock contained the technical as well as the functional group it was seen that stocks that were chosen showed a significant results. Also it was seen that the technical portfolio of the stock was able to outperform the functional portfolio. The technical portfolio showed the profit of around of .10%  and the functional portfolio returned very good (Gibson, Scott & Cheng, 2017). From the investment that was made it was seen that the stock that showed the best result was ASHTED group PLC. This was one of the best and outperforming stock of the portfolio. As of the result it is seen that the charts of the company which were referred before purchasing or investing in the share were best and were profitable. So this way this share was chosen and the future profits of the company was also growing which helped in deciding about investing the share.

Conclusion

From the above report it is concluded that making investment in stock market is not an easy task. The individual has to go through different steps before they start to invest in the share of the company. Also market analysis before making investment is important. Technical and functional methods or approaches should be used for analysing the market demand and the chart of the company. EMH and behavioural finance is important part of strategy that helps in deciding about investing in company.

References

Auto Trader Group plc (AUTO.L). 2019. Available through (online). <https://finance.yahoo.com/quote/AUTO.L?p=AUTO.L>

BAE Systems plc (BA.L). 2019. Available through (online). <https://finance.yahoo.com/quote/BA.L?p=BA.L>

British American Tobacco p.l.c. (BATS.L). 2019. Available through (online). <https://finance.yahoo.com/quote/BATS.L?p=BATS.L>

Centrica plc (CNA.L) 2019. Available through (online). <https://finance.yahoo.com/quote/CNA.L?p=CNA.L>

Compass Group PLC (CPG.L) 2019. Available through (online) <https://finance.yahoo.com/quote/CPG.L?p=CPG.L>

EasyJet plc (EZJ.L) 2019. Available through (online). <https://finance.yahoo.com/quote/EZJ.L?p=EZJ.L>

Experian plc (EXPN.L) 2019. Available through (online). <https://finance.yahoo.com/quote/EXPN.L?p=EXPN.L>

FTSE ST All shares index (^FTSE). 2019. Available through (online). <https://finance.yahoo.com/quote/%5EFTSE/components?p=%5EFTSE>

GVC Holdings PLC (GVC.L). 2019. Available through (online). <https://finance.yahoo.com/quote/GVC.L?p=GVC.L>

Prudential plc (PRU.L) 2019. Available through (online) <https://finance.yahoo.com/quote/PRU.L?p=PRU.L>

Schroders plc (SDR.L). 2019. Available through (online). <https://finance.yahoo.com/quote/SDR.L?p=SDR.L>

Scottish Mortgage Ord (SMT.L). 2019. Available through (online). <https://finance.yahoo.com/quote/SMT.L?p=SMT.L>

Scottish Mortgage Ord (SMT.L). 2019. Available through (online). <https://finance.yahoo.com/quote/SMT.L?p=SMT.L>

Smith’s Group plc (SMIN.L). 2019. Available through (online). <https://finance.yahoo.com/quote/SMIN.L?p=SMIN.L>

SSE plc (SSE.L). 2019. Available through (online). <https://finance.yahoo.com/quote/SSE.L?p=SSE.L>

St. James’s Place plc (STJ.L). 2019. Available through (online) <https://finance.yahoo.com/quote/STJ.L?p=STJ.L>

TUI AG (TUI.L). 2019. Available through (online). <https://finance.yahoo.com/quote/TUI.L?p=TUI.L>

Vodafone Group Plc (VOD.L). 2019. Available through (online). <https://finance.yahoo.com/quote/VOD.L?p=VOD.L>

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