TECHNICAL and FUNDAMENTAL ANALYSIS

Financial education

With this first article we begin to explain financial concepts that will serve to better understand our articles and analysis.


Let's start from the first concept with which we analyze and divide the selected stocks: each of our articles analyzes the single stock either from a technical analysis point of view or from a fundamental analysis point of view.


Technical analysis

Technical analysis focuses its study on the price fluctuations of a particular financial instrument, trying to identify its trend.

This analysis therefore goes to study the effects of the price movement.


By trend we mean a period of time in which prices move irregularly but in a constant direction. An increasing formation of maximum and minimum prices is defined as an uptrend. A decreasing formation of maximum and minimum prices is defined as a downtrend.

We will talk later about the different types of trends.


Consequently, when we analyze a financial instrument from a technical analysis point of view, the factors that we are going to analyze and take into more consideration are price fluctuations, time (the so-called "timing") and trading volumes (the number of shares negotiate).


Example

Let's take as an example the stock Schneider National, Inc (NYSE: SNDR) and the analysis published on June 23, 2021:


The first aspect to consider is the price fluctuation: we can see how from March 2021 the stock began to move between $ 21.00 and $ 26.00: the area of ​​$ 21.00 is called support and that of $ 26.00 resistance.


As for the time factor, we can see that when the price approaches the area between $ 21-22.00 it tends to regain ground and have an uptrend. Conversely, when the price reaches $ 26.00, the stock begins to lose strength and reverse to the downside.


In the uptrend from April to September 2020, we can see the increasing formation of highs and lows. Reverse speech, and therefore formations of decreasing maximum and minimum prices from September 2020 to January 2021.


Looking at the trading volumes, we note how the volumes tend to grow when the price fluctuates between $ 21.00 and $ 22.00 and instead tend to decrease in the $ 26.00 area.


Fundamental analysis

The fundamental analysis is instead based on the study of those economic forces (supply and demand) that cause the movement of prices.

This analysis studies the causes of price movements and examines all the economic forces relevant to determine the right price of a financial instrument. If this value is above the current price, the security is overvalued and should be sold. Reverse speech for an undervalued stock.


To do this, we therefore use financial analysis tools, growth prospects, competitor analysis and much more to understand the intrinsic value of the company we are analyzing.


The point of attention is therefore shifted more to the company rather than to the daily price fluctuation of the stock.

Example

Let's take the Everbridge, Inc (NASDAQ: EVBG) stock and the analysis published on June 9, 2021 as an example.


The analysis, after an introductory description of the stock, took into consideration growth factors and financial indicators.


Among the growth factors, what we often look for are, for example, important contracts signed by the company for the near future or partnerships for the development of innovative products.

What convinced us most of Everbridge were the numerous collaborations with American states including California and Florida. Combined with Federal States' estimates of an above-average tornado season, where the Everbridge platform would play a key role.


As for the financial indicators, we focus on cash flows and the costs that the company is incurring to understand if a promising future lies ahead for the company in question.

An indicator that convinced us was the fact that we had both short and long-term assets greater than liabilities.


Finally, we combine our analyzes and value estimates with what the market considers to be a fair value for the company.

OTB Global Investments

15 October 2021





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