The Stock Market Cash Flow by Andy Tanner

Author:Andy Tanner [Tanner, Andy]
Language: eng
Format: epub
ISBN: 9781937832483
Publisher: RDA Press, LLC

Once we know what is likely to happen it’s natural to want to know when it will likely occur.

Whether the news is good or bad, we like to know the details. If I tell my son what is going to happen, like going to the dentist’s office, he immediately asks when we will be leaving.

If I tell the kids we’re going to take a family trip to visit a Disney resort, they want to know what time we are leaving. Leaving in ten minutes has a completely different value to them than leaving in 10 days.

You will notice that fundamental analysis did much more than just show us the strength of the entity. Now that we have learned a little more about how fundamental analysis works, you can see that it also helps us figure out if we are receiving the value we want for the money we spent on buying shares of a company’s stock. It helps us diagnose problems with policies—on the personal level, the corporate level, or the sovereign level. It can help us see both sides of the coin, such as when you compare what your mortgage looks like on you financial statement and what it looks like on your bank’s financial statement. In looking at your mortgage from two points of view, it’s easy to see the winner and the loser in a transaction. But another thing you might have noticed in the last chapter is that fundamentals can give us keen insight into what is likely to happen next.

For example, suppose we have been closely watching the sovereign fundamentals of the United States. As the Federal Reserve enacts more quantitative easing, we think about what is likely to happen: inflation, an increase of systemic risks, weakening of the dollar, and volatility. All of these are distinct possibilities. In these circumstances, we might consider some investments to guard against volatility and exploit inflation. But when, and at what price point should we make these investments?

Keeping our eyes on the stock charts and technical analysis strategies can help us know when to make our move. This is true for all types of investments, not just individual stocks. The charts we use in technical analysis show us whether a company’s stock price is revving in place, moving up another gear, or has run out of gas.

Technical analysis is the business of looking at the charts to find the right time and place to enter or exit an investment. This is what we’re going to delve into more deeply in this chapter.

Let’s begin by looking at the forces that can make a stock price move.

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