Invest Fundamentally and play technically

It is very interesting to see that some of the house view calls are purely basis a company's fundamental performance

For a company performing consistently quarter on quarter it is very important that investors stay invested continuously and maintain a steady growth rate and with profitability related metrics taken care. There is always this game of higher growth & higher margins. Not always you can double up your revenues and similarly your game cannot be to always focus on higher profit margins

A company should have a well balanced approach and the way it runs can be seen through its corporate governance on handling issues at a broader level

Now here is the point, if company goes good on performance, then why do we have the stocks moving up & correcting and then after a while consolidates before moving up again. The answer to that question is fundamentals don't change overnight, bankruptcies are not filed over night suddenly. Similarly even though a company performs well, it may be due to various reasons that you see some fluctuations at a daily level

Those fluctuations could be because of economic factors, political influences, sudden shocking news on natural disaster, industry performance muted, speculation, global events and the list goes on. Now with so many dependencies around how do you know that the stock price is going to go up basis fundamental factors?

The answer to that question above is psychology of trading, over a period of time starting early 1900s till now several tools are built which are tested under multiple conditions, scenarios basis which a stock even though can fundamentally go up but may not be able to technically move up because of other external factors that influence it

I use this framework of watching company's performance and do short term trading on those particular set of stocks technically. The reason is like me many others think the same way and the general psychology is to boost the stock up.

When you say that someone's buy or sell call really worked, it is because of the ability to predict how the others are going to do the short term trading along with you. The best part of that is you don't even know the retail or bigger fish players who trade but all you know is that they leave a scar on the charts. That easily shows the mindset of majority on movements.

Now technically how can you say that a stock will move up only this much and then it will correct. Well it is very much possible through indicators that have been built for a very long time. Patterns cannot go wrong, reasons for patterns go right may be different.

Any stock that is fundamentally good, will also go to a range call over bought zone and that is captured through momentum indicators, and the minute it does that it will slowly start correcting. Similarly a stock which falls down cannot keep falling down it has to go to a over sold zone and then from there is moves up. For folks who are not able to understand that say that I bought the stock and it fell down. Similarly some say I shorted it but then it hit my stop loss and started moving up

The reason for that is, most of the retail traders do not see technical charts because they think it is scary or more efforts required to be put to analyze stuff. Some may be analytically challenged, or do not have the right method of approach to read patterns. Many require guidance and mentoring, I keep getting this requests every other day from many and I'm very glad to help people and show the way to play market technically and choose which ones to buy and sell

Over a period of time I have got many requests asking for technical software that can help do all of this for us. Let me tell you this, software can be great but if our approach towards understanding that is not right then it doesn't really matter which software you use results are going to be same or also worse

So in short, pick up stocks that fundamentally get marked good, some of the firms are good in doing that and use technical charts to play it technically

I strongly advice not to do day trading as it involves your entire time to be spent, if your only job is that then you can consider doing that. However for those who work, refrain from day trading and start short term trading i.e. keeping a stock for about 25 to 30 days period max and then keep investing and making profits cyclically

So here is the final view invest basis a company's fundamentals and play the market using technical charts and that approach will give you a better gain on purely focusing on fundamental or technical

While I advocate the above approach I personally follow 80% of my time reading technical charts and then 20% to know what the company is all about