"The trend is your friend."

"Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble. . .to give way to hope, fear and greed."

                                                                        -Benjamin Graham

Fundamentals are the focus of my successful approach to investing in small-cap stocks. Ultimately, it is the fundamentals that determine the long-term direction of a stock. But long-term growth and strong fundamentals alone don’t assure successful investments though. As with most things in life, timing is everything when it comes to investing. Fundamental research must be complimented by technical analysis, a useful tool for determining the ideal time for buying or selling a stock.

*****One simplified way to think about it is: fundamental analysis helps you decide what to buy; technical analysis helps you decide when. 

Today, we’ll briefly examine some of the basic technical theories and principles.

In the time before the Internet, technical analysis was a cumbersome process because it demanded constant monitoring of a stock’s price and volume, as well as calculation of moving averages and other metrics. Historically, technical analysis was not available to the average investor. However, technical analysis has been reborn due to automatic calculation of stock charts, multiple moving averages, instant calculation of even the most complex formulas, and—most important of all—simple and inexpensive access to streaming quotes. All of these are essential, and the good news is that today, even an amateur technician has a stream of data that would make the best-heeled technician of just 25 years ago green with envy. If you have a personal computer and an internet connection, everything you need to perform technical analysis is at your fingertips. 

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