A Useful Tool for Long-Term Consideration!
Don’t worry, we won’t be discussing moving averages or any indicators. Please don’t be put off by the term “chart analysis.” A chart is nothing more than a graphical representation of a price trend.
There is no rivalry with fundamental analysis:
At numerous stock market roundtables, there have probably been more than a few discussions between proponents of chart analysis and fundamental analysis. Unjustly and without reason. What does fundamental analysis consider in the stock sector? The sector, competitors, balance sheets, management, the past, the future. And what does a proponent of chart analysis look at? The result of all these factors!
What can be identified in the chart?:
If we were to disregard risk-free interest rates, general sentiment, and all other factors, then the price of a stock company with a 6 percent annual profit growth should rise by these 6 percent annually. Profit is the sum that belongs to the shareholders, i.e., the shareholders, after deducting all costs. If the complete profit were distributed in the form of dividends, the stock price would theoretically remain stable on a line. In practice, there are obviously a variety of influences, but based on this example, you will realize that a chart is not a theoretical construct for nocturnal specialists, but rather a simplified reflection of reality.
There are no secrets:
The huge advantage of a chart: You cannot overlook any facts. All known news, rumors, and expectations at that time are reflected in the share price. Furthermore, the stock market usually trades the near future. You know the game or the headlines. If an interest rate hike is looming, prices fall immediately, not only when the interest rate step is taken. If a company presents a new product that will presumably boost sales, the stock immediately reacts in anticipation of higher profit, not only when the novelty hits the shelves.
This is how we proceed at VF Capital Management:
We use all methods of analysis and compare the results with each other. Especially for heavyweights of the asset classes, such as the Dow Jones, the US dollar, or the gold price, which have a long history and whose trading was not even discontinued during wartime, it is worthwhile to take a scrutinizing look into the past in order to create higher-quality forecasts for the future.
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