FundaTechnical Analysis - The way of the future

[rbbrain]

Hi.

My recent research and public presentations led me to conclude that since the GFC, the best way forward is to use FundaTechnical Analysis - it is the analysis method of the future.

FundaTechnical Analysis states two key things about stock selection:

1. Fundamental Analysis - Should be used to identify quality companies in which you would be happy to invest; and
2. Technical Analysis (charting) - This is the tool to use to optimise the timing of both your purchase of the stock, and your eventual disposal.

This approach is based on the idea that quality companies should not go bust - like a few large companies did during the recent GFC.

And it is based on the idea that the buy-and-hold strategy is not useful for optimising your available capital. This is because bear markets and market corrections come around far too often, and can decimate your funds.

Now, what about the details? How should we use Fundamental and Technical Analysis to do all this? Well, that is not so straight forward.

The key idea here is to use a BLEND of the two analysis methods.

All of the old buy-and-hold investors need to bend a little and adopt some charting tools. And the chartists / technical analysts could benefit from using some fundamental analysis to choose only quality companies.

Stay tuned for more details soon.

 

[Mr J]

Are you posting out of the goodness of your heart, or to offer a service further down the road?

 

[wayneL]

What's wrong with Technimental Analysis?

1. Technical Analysis - To find tradeable signals.
2. Fundamental Analysis - To see if you want to own the piece of crap for any length of time.

 

[Krusty the Klown]

I reckon there would be a fair few people who do this already.

FA for qualifying the stock to lower risk.
TA for timing entry, hold time and exit.

 

[nunthewiser]

WHOA!

a new market approach .

Where do i sign?

 

[nunthewiser]

Actually happy to hear your stuff about an ancient and well proven strategy as long as your here for good and not trying to sell us a "suck eggs" trading program/course.

 

[rbbrain]

As someone who likes to help others, I have felt sorry for the many people who lost a lot of money in 2008-9 because of the GFC. And I have been asked to talk to groups about these ideas. So I thought I would post a snippet here to see what sort of response we might get, and what others think of this way of looking at it.

I know that many people will already be doing this. But there are also many people out there who are struggling to find a sensible way through the maze.

So, I am not here to sell a course, or program, or anything. Just to pull together some of the ideas that are out there to hopefully help those who are looking for help. (I do believe in karma - what goes around comes around - or is that the wrong word for it?).

But which comes first? - FA? or TA?

My logical thinking says that if I use charting software with a good watchlist facility, then I should firstly prepare a watchlist of quality stocks using FA. Then I can use the charting software scan / filter facility to find those stocks that currently fit my selection criteria. If I only watch 300 or 400 stocks, there is no point in running a scan over 2,000 stocks.

The next discussions will probably be about things like:
"What is the best FA criteria to use to select quality stocks for my watchlist?"
and
"What is the best way to find a stock in my watchlist for investing TODAY?"

Cheers

 

[So_Cynical]

I tend to agree with rbbrain as ive been sorta using a Funda/Technical approach for the last 16 months, so i probably don't need to be sold on the benefits of that approach...its nothing new to me.

I find the Funda/Technical approach very suitable to my personality and, buy and watch, value buying, medium term, high yield, investment goals.

 

[sammy84]

I would suggest most technical trader would subconsciously in one way or another employ fundamental factors in their decisions making process. I classify myself as a technical trader, yet I know I have on more than one occassion been more willing to enter a trade if it is in sector I am fundamentally bullish on, or an individual stock which I think has good prospects.

My

 

[Julia]

I reckon there would be a fair few people who do this already.

FA for qualifying the stock to lower risk.
TA for timing entry, hold time and exit.

Yes, exactly. This is hardly an innovative approach, Brainy!

I would suggest most technical trader would subconsciously in one way or another employ fundamental factors in their decisions making process. I classify myself as a technical trader, yet I know I have on more than one occassion been more willing to enter a trade if it is in sector I am fundamentally bullish on, or an individual stock which I think has good prospects.

My

That's interesting, sammy. We seem to have many pure chartists here who say they have no idea even what the company does when they buy a stock.

 

[Julia]

As someone who likes to help others, I have felt sorry for the many people who lost a lot of money in 2008-9 because of the GFC. And I have been asked to talk to groups about these ideas. So I thought I would post a snippet here to see what sort of response we might get, and what others think of this way of looking at it.

My earlier comment wasn't meant to be scornful, as you're right, there are lots of folk who have no idea why they lost as much as they did.

Perhaps you could tell us a bit about yourself, rbbrain, and in what capacity you have been 'asked to talk to groups' about these ideas?

 

[rbbrain]

Hi,

You have asked to know a little about myself. Happy to oblige so you can understand where I am coming from, and where I am going to.

I am a technical analyst who used to rely 100% on the charts, and I did not care about the fundamentals. This did not get me into any trouble - perhaps more luck than anything.

I am also the Vice-President of the Vic chapter of the ATAA (Australian Technical Analysts Association), and a director on the national board.

I am also the convenor of the Australian BullCharts Users Group. We have monthly meetings in Oakleigh. A lot of the members there work full time and are learning more about TA so tht they can better manage their "investments" by trading over either a short term, or longer term (they are all different).

In these capacities, I was approached by the Manningham U3A (University of the Third Age), and one of the SIGs of the Melbourne PC User Group (the WASINT SIG), to talk to them about charting, and these things called bear markets. (And also the EIS group of traders - followers of Phil Anderson - who meet monthly at in Flinders Lane, Melb).

[btw - there were about 65 U3A people at the presentation, and we had an engaging and interesting discussion for 1+ hours about why they lost money, and how to avoid it next time.]

My presentation to each group was a sub-set of the powerpoint slides entitled "Beware the Bears - they are never far away", and subtitled "Lessons from the GFC for traders and investors".

My extensive research for this, and subsequent conclusions, are that we need to get the message to those unfortunate "investors" that they need to adopt some degree of charting and a readiness to sell at the start of a bear market in order to preserve their capital.

A number of traders also lost money in 2008 because they did not agree with the market's interpretation of the value of some companies. When some stocks well 50% +, some traders said "it's cheap, so buy more!!". This is not a good approach for traders who want to preserve their capital.
So the lesson for ALL traders is that it is worth doing at least a little homework about a company before buying shares in the company. In this way we can mostly avoid getting suckered into losers like ABS Learning, Allco Finance, MFS, and a few others. (Did any of you lose money in these last year?).

So, my goal and mission here is to simply get the message out to those who want to listen - to employ some sort of balance between FA and TA. The balance will be different for different people. If anyone wants to press on and invest in ANY stock on the market, regardless of their fundamentals, then go ahead, by all means. If the stock suddenly goes into a trading halt, and then plummets in value, well bad luck.

Cheers

 

[condog]

Hi Brainy

Wellcome to ASF....I hope your here for legitimate reasons....

This has been discussed man times and there are people firmly in all camps including yours.......

The cycnic in me wants to ask what your selling and how bigs your own personal portfolio and recnet returns plus stock holdings, but if some one asked me Id tell them to MTOB.

So politely I will say yes I agree use fundamental to identify which stocks to touch... use technical as a timing guide....

Never use technical without fundamental.....but to use fundamental without technical is Ok but you may lose in the short term....or ay too much....

It aint necesaryily the way of the future its the way its always been for most.... I just hope your not a SellerFundTechniSalesFruitCakeCrpaSytmRubbish posing as a new member....

 

[Wysiwyg]

Hello, how do you do? Apologies for the paranoiacs on line here.

Is wondering what your fundamental criteria are?





.

 

[rbbrain]

Hi,

To answer a couple of the latest questions above:

How is my own portfolio performance? Let me say that in early 2008 I "switched" my superannuation asset allocation within the managed fund from shares to cash and bonds. So I did not lose money in 2008. Unlike most people who Buy-and-Hold, or who solely use FA.

I think that using FA 100% and no TA is financial suicide (ie. it is NOT ok to use 100% FA and no TA - sorry to disagree with some investors). If you take a good look at how the market moves up and down week after week, and month after month, you can see there are significant market moves. In the long term they do get ironed out (averaged out), so that if you have a good mix of stocks (diversification) then you might also do okay. But these bear market periods can do significant damage to a portfolio. And the FA will not help you to liquidate and to "protect profits". This is one thing that TA does help with. TA also helps to stop you buying at the top of the bull market during the period of irrational exuberance. Don't you hate it when you buy in, only to see the stock fall in value?

Now, my preferred Financial Criteria? There are 3 must-haves:

• ROE should be at least 10% pa for at least a couple of years - the higher the better.
• Debt to Equity should be below 70% or even 50% (the lower the better).
• Interest Cover — Earnings should be at least 3 times interest.

These criteria will help to weed out the not-so-good companies. In some ways it is the good quality company management that helps steer companies along this sort of road.

Cheers

 

[condog]

Now, my preferred Financial Criteria? There are 3 must-haves:

• ROE should be at least 10% pa for at least a couple of years - the higher the better.
• Debt to Equity should be below 70% or even 50% (the lower the better).
• Interest Cover ”” Earnings should be at least 3 times interest.

These criteria will help to weed out the not-so-good companies. In some ways it is the good quality company management that helps steer companies along this sort of road.
Cheers

So what 5-10 stocks would you suggest should make up a share platform for 2010 - 2015 and why?

 

[DaveMac]

Hey guys,

The funda / technical approach SOUNDS good, but haven't we all seen stocks shoot to the moon, while still having terrible fundamentals? Wouldn't there be too many missed opportunities as we wait for the fundamentals to catch up to the greater market opinion? Just my

Although to back up your idea: Market Wizard William O'neil uses a similar approach in his CANSLIM method, fundas and techs, and has had great success over 30+ years.

 

[Garpal Gumnut]

I use funnymentals to screen out the garbage.

Something gets announced, everyone piles in and then about 3 months later it has retraced then I look at my charts.

It works for me.

gg

 

[lukeaye]

Well what you have stated is hardly anything new.

I rarely use fundamental analysis. I might keep my ears open to possible announcments, but when looking to trade a stock that i pick up technically, i don't do a full backround check on whats going on with the stock, PE, or anything else.

Everyone else is looking at fundamentals and that is then interprated on my chart as volume and price.

I personally don't have time to check fundamentalls out on everything.

Some of my best returns have been from the greatest risks, ie companies that would not fit your fundamental filter. So i don't think your style would suit alot of traders.

If you are here to help could you please take us through some of your strategies so we may look at what you are talking about

 

[Garpal Gumnut]

lukeaye, if you were referring to my post, that is all there is to it.

Some folk think the more complicated a system is the better it performs.

Thats all there is mate, after the three months its price and volume.

gg