FundaTechnical Analysis - The way of the future

[motorway]

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.

Very True .

I remember seeing Stock Screens that had criteria like;

No Institutional or Fund Ownership
No Stock Broking or Analyst Coverage
No News or Visibilty

But Did have - Significant Director Holdings etc

Also others which only looked at Companies with "too much Debt"
Were at significant LOWS ( by some definition )
Etc

In both cases PRICE ACTION was an important entry criteria and time was with at least one an important exit Criteria

Screens that focused on very small caps
or less liquid ones
Which were NOT in an INDEX etc

"Elephants don't gallop - but fleas can jump to over two hundred times their own height" -- Jim Slater

]

Probably selecting the right Universe to explore in
( For what you looking for ) Is a KEY -->Then Price Action ( large Topic -->Instrument only ... Or plus Sector , Mkt & Breath criteria )

Nothing can Fail like success
Or can succeed like Failure

Motorway

 

[lukeaye]

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

No i wasn't was refering to the OP post

 

[lukeaye]

That quote is brilliant from jim slater.

Exactly what im trying to say. It is often the riskier fundamental stocks that give the greatest returns.

And i take a lot of them.

 

[rbbrain]

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

Hi condog,

My picks for 2010-2015?

I am sorry to disappoint; but my investment horizon is limited to several months, plus/minus several months.

My analysis of Aussie bull and bear markets over 2 decades shows that we can only hope to find a good stock for the next 1 to 2 years at most (usually - sometimes longer; but usually just 1 to 2 years). This is because of the cyclic nature of our market cycles.

So, if I was to pick a stock for now, I know that I might need to exit it at any time over the next weeks or months, and "probably" dump it within a year or so.

The other thing that makes this tricky is that my exact "preferred" stock selection criteria might not suit other people who have their own "preferred" selection criteria. The broad concept of the FundaTechnical Analysis approach means that we do the FA using our own preferred criteria (mine are stated above) to produce a watchlist, and then use our own preferred TA criteria for timing the entry and exit. I prefer to use Weekly and Daily charts, so the stocks I choose today might be different to the ones that I might choose next week.

Cheers.

 

[rbbrain]

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

Hi DaveMac and others who are advocating high-risk trades that don't use funnymentals.

There is one important aspect of trading that is often overlooked.

That is, while it is very important to have a documented Trading Plan and Strategy (for a number of reasons we can't go into here), it is also very realistic to have MULTIPLE TRADING STRATEGIES.

That is, it is a good mitigation of risk to have one strategy that follows some relatively conservative approach (like FundaTechnicals), and to also have a high risk speculative approach that like some of the methods that are mentioned throughout this thread. And a good analyst will have rules like "I will only risk up to 30% of my trading capital on the speculative trades".

Multiple Trading Strategies are a wise approach.

Mitigating risk in this way is sensible.

More food for thought?

Cheers

 

[condog]

So what are the 5 best current stock on your current watchlist from a fundamental viewpoint....irrespective of technical pricepoints...

 

[DaveMac]

Hi DaveMac and others who are advocating high-risk trades that don't use funnymentals.

Hey Brainy,

A strategy is sound as long as it has a positive expectancy. And expectancy is not made by using fundamentals or technicals, or a combo of the two. It is made by how much you risk per trade, and how agressively you manage the trade (i.e. stop to break even).

Based on this, the funda / tech approach could be high-risk, depending on the investor and how the above is managed.

That's the only thing I disagree on, everything else you've said is spot on IMO .

 

[condog]

This thread is rubbish , its going no where talking about complete garbage...by all....I smell rats...

 

[wayneL]

This thread is rubbish , its going no where talking about complete garbage...by all....I smell rats...

Just don't read it then.

But be assured that rats receive a cranium full of buckshot if discovered.

Meanwhile, lets cut brainy a bit of slack... innocent until proven guilty etc.

 

[Sir Osisofliver]

My analysis of Aussie bull and bear markets over 2 decades shows that we can only hope to find a good stock for the next 1 to 2 years at most (usually - sometimes longer; but usually just 1 to 2 years). This is because of the cyclic nature of our market cycles.

Hi Brainy,

So is your analysis only over the last two decades? You've mentioned the cyclical nature of our market, but your comment that you can only find good stock to trade in the early part of the share cycle after a corrective pattern seems... simplistic.

Commodities for example (generally) don't have their largest movement until the latter part of the cycle (due to consumer confidence, low stockpiles etc).

My preference is to consider the early part of the cycle as being the best point in time to create a longer-term buy and hold portfolio (based on solid fundamental factors and TA for entry).

The mid and late cycle market movements on the other hand tend to be more volatile and are more suited to a trading strategy IMO.

Cheers

Sir O

 

[Boggo]

My preference is to consider the early part of the cycle as being the best point in time to create a longer-term buy and hold portfolio (based on solid fundamental factors and TA for entry).

Cheers

Sir O

There is no doubt that this is a valid method, go back to 2002,3 for the likes of WOR, JBH and most of our mining stocks.

Not trying to ramp NQM and I do hold in my SMSF and it is perhaps an example of what Sir O is referring to.
NQM, current example, a 30c stock that pays a dividend, has had a large increase in revenue and earnings per share in the last year.
NWH, past example, was $3.50 in 2007 partly on hype and speculation, was 20c a year ago, got the fundamentals sorted out, is now $2.

Going back a few years ago, Onetel, fundamentally a basket case but everyone was buying the spin and creating the technical parameters.
The tech analysis did give a heads up eventually but the dodgy fundamentals were there all along.

I use tech analysis to find and manage candidates but if I have half a dozen choices that are technically identical then it comes down to fundamentals to narrow the field.

Just my

 

[lukeaye]

And a good analyst will have rules like "I will only risk up to 30% of my trading capital on the speculative trades".

Multiple Trading Strategies are a wise approach.

Mitigating risk in this way is sensible.

Cheers

Excuse me, you want to risk 30% on a high risk trade? I wouldnt risk that on low risk trade.

No offence brainy, but i fail to see what you are contributing here. What is it that you are helping with?

So far you have told us to use fundamental and technical analysis? Im still waiting for the rest?

 

[wayneL]

Excuse me, you want to risk 30% on a high risk trade? I wouldnt risk that on low risk trade.

No offence brainy, but i fail to see what you are contributing here. What is it that you are helping with?

So far you have told us to use fundamental and technical analysis? Im still waiting for the rest?

I think you missed the point.

30% refers to the amount of total capital allocated to higher risk trades. Any individual trade must still adhere to individual trade risk parameters... 2% or whatever the trader has decided.

 

[lukeaye]

I think you missed the point.

30% refers to the amount of total capital allocated to higher risk trades. Any individual trade must still adhere to individual trade risk parameters... 2% or whatever the trader has decided.

ahhhh, i see. Thank you for clearing that up.

 

[DaveMac]

This thread is rubbish , its going no where talking about complete garbage...by all....I smell rats...

Hmmm I see how it looks. I know newbs have to prove themselves here (I've read the hundreds of other posts where they get hammered )

Will post elsewhere for now.

P.S. Go the techs!

 

[Wysiwyg]

Hi,

To answer a couple of the latest questions above:

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

Thanks for your reply. That sure does narrow the stock choices down.

For longer term, nowadays I like to rove an eye over a companies financial situation, where they have been, their goals that have & have not materialised, where they are going and management language.

About an hour of reading is all I devote to any particular company research. Mostly Technimental.

 

[Wysiwyg]

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.

Hello again. I have been perusing fundamental screening programs such as Value Gain (+4KAUD), Conscious Investor (subscription) , Share Pricer (+$29USD) and Australian Stock Screener (free).

Do you use a software program to sift out stocks that meet your criteria?

 

[alphaman]

Fundamental analysis involves more than just a few simple ratios based on reported accounting numbers.

An analyst who makes a living from fundamental research typically covers just 1 or 2 sectors and goes though an excruciating amount of time just to understand and undo the distortions built into accounting numbers. And despite all that focus and effort, analyst recommendations remain unreliable.

Not saying rbbrain's system does not work. I think for certain longer term systems, naive financial ratios may add value as a filter or profit target. But the combination of price and "fundamentals" is not as robust as one might think.

 

[rbbrain]

I think you missed the point.

30% refers to the amount of total capital allocated to higher risk trades. Any individual trade must still adhere to individual trade risk parameters... 2% or whatever the trader has decided.

Hi WayneL,
Yes - spot on.

And some of the very successful TA traders I know will only risk a total of 5% of their trading capital on the spec trades.

An important point here is that this percentage amount is up to each individual to decide for themselves, and then record in their Trading Strategy.

I also know of some people who are very gung-ho and happy to risk a lot more than 30% of their capital on trades that they would not consider speculative; but they select the stock based on gut feeling, or their broker's advice, or some other criteria - with no FA or TA at all. Now that is gambling.

Cheers

 

[SmellyTerror]

Re FundaTechnicals: My golden cross is when Nick Radge and Charlie Aitken agree.

And some of the very successful TA traders I know will only risk a total of 5% of their trading capital on the spec trades.

"Only" 5% on a spec? The damp slap you just heard was the sound of my sphincter clenching in terror. I feel all courageous and daring when I go to 3%. I strut around the city looking at the crowds, and wondering, "do they know I go to three? Can they tell from my devil-may-care stride? MAKE WAY, PEASANTS! A HERO WALKS AMONG YOU".

But 5% on a spec... No wait - ONLY 5%. I'm going to have nightmares, now. I'm going to be leaping out of bed screaming "my capital, my precious capital!" and my wife is going to keep me away from my charts for a couple of weeks. :

But hey, if it works for you guys, more luck to ya.