Fundamental Analysis by Tradingrite.com

Learn how to trade stocks by using fundamental analysis, i.e. researching a stocks earnings, headlines, analysts' ratings, etc.
By: Trading Rite
 
Oct. 10, 2009 - PRLog -- Fundamental analysis focuses on researching the company behind the stock. For instance, if you are interested in trading Google (GOOG), you first want to start with researching Google as a business. This involves the company’s earnings, news headlines, analyst ratings, etc. Another important aspect of fundamental analysis is understanding market sentiment. Nothing will move the markets and your stock quite like fear can.

Corporations announce their earnings quarterly, and analysts will already have their estimated earnings published beforehand. If a stock beats their earnings estimate, you can usually expect to see a nice pop in the stock. When researching a company’s earnings, it is good to look at past earnings to see the trend in the company’s profits. If their earnings have been on a nice up-trend then that is great. However, if the earnings have been consistently lower you are going to want to find out why. Is it the economy that is lowering the earnings or is the business itself loosing steam. Check the stock’s competitors earnings to see if they are also declining to confirm that it is the economy or the business itself. A great website to check earnings is Earnings.com; they will have everything you need to know about earnings – from a calender of upcoming earnings for almost every publicaly traded company, to the analysts’ earnings estimates.

Next you want to look at the news headlines. Whenever a company is doing good or bad, it will be in the news. Research articles and find out what media is saying about this company. Find out what the company is saying about its business and the outlook. I like to go to CNN Money for the day’s Wall Street headlines. You can also plug in your own stock ticker to research specific news towards that stock. Google Finance and Yahoo Finance are also good for this.

The next step are analysts’ stock ratings. There are quite a few analysts out there and they all have something to say about your stock. Try to limit the noise you hear by only using reputable analysts. The best place to find these sources are with the big online brokers like Charles Schwab – they provide reputable analysts’ ratings to their clients free of charge (all you need is an account).

The last key component to fundamental analysis is understanding market sentiment. Here, the first thing you want to ask yourself is: what are the markets doing? Are we in a Bear Market or are we in a Bull Market? Most individual stocks will follow the trend of the overall market. For instance, if the Dow Jones is having a down day, most likely your stock will too. Investors seem to follow the crowds, and you will be more successful going with the trend than against it.

You also want to look towards economic reports, such as the CPI (consumer price index), the Jobs Report, or FOMC (Federal Open Market Committee) meetings. These reports usually can determine what kind of day the markets will have. However, the key word here is usually. Analysts will sometimes contradict themselves when it comes to what will happen to the markets with a good report or a bad report. For instance, if the stock market is very volatile – like it was during 2007 – 2009, the direction of the market can have no logical explanation.

In summary, fundamental analysis is brokent down into four parts: Earnings, news headlines, analysts’ ratings and market sentiment. If you have a good grasp on this then continue your training with technical analysis (studying the stock’s chart). For more info, please visit http://tradingrite.com.

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Learn how to trade stocks and options with an easy stock trading guide written by a Wall Street stockbroker. http://tradingrite.com
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Source:Trading Rite
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