THE TWO ANALYTICAL MODEL TO DETERMINE WHAT STOCK TO BUY

There are two basic methodologies investors rely upon when the objective of the analysis is to determine what stock to buy and at what price, :

1.     Fundamental analysis maintains that markets may incorrectly price a security in the short run but that the "correct" price will eventually be reached. Profits can be made by purchasing the wrongly priced security and then waiting for the market to recognize its "mistake" and re price the security.

Ø  Fundamental analysis includes:

·        Economic analysis

·        Industry analysis

·        Company analysis

2. Technical analysis maintains that all information is reflected already in the price of a security. Technical analysts look at trends and believe that sentiment changes predate and predict trend changes. Investors' emotional responses to price movements lead to recognizable price chart patterns. Technical analysts also evaluate historical trends to predict future price movement.

Investors can use one or both of these complementary methods for stock picking. For example, many fundamental investors use technical for deciding entry and exit points. Similarly, a large proportion of technical investors use fundamentals to limit their universe of possible stock to "good" companies.

                   The choice of stock analysis is determined by the investor's belief in the different paradigms for "how the stock market works