How Technical Analysis Reveals Fundamentals To Price Values

A large part of my work over the last 25 years has been to teach my students and show the CMT and members that technical analysis is not a separate entity from the fundamentals of a company. 

Relational Technical Analysis is the new way to use stock charts, candlesticks, support and resistance, and trend patterns to determine where and when you should trade or invest in a stock based on FUNDAMENTAL values.

Fundamental Values from the chart help you determine the relationship between the stock’s current price or value and the company’s fundamental value.

That may sound impossible but it is easy to learn how to identify where fundamentals are in relation to  a stock’s price. This is because the largest Buy-Side Institutions, which I call “the Dark Pools,” control over $100 trillion in assets worldwide and this number climbs as the US stock market rises in value.

The giant Buy-Side Institutions use Quantitative Analysis to determine the “best price” for accumulation of a stock over time based on the company’s fundamental value, growth potential, new technologies, reinvention or creation of a new product that will be broadly popular, along with the CEO/CFO and the strength of the management team.

Using a stock chart, fundamentals are revealed by the Dark Pool Buy Zones that are created any time a Giant Buy-Side Institution, or several, are accumulating stock of a specific company or a group of companies.

Dark Pools are not only Giant Mutual Fund companies but also the Giant Derivative Developers who create ETF units to sell on the public stock market exchanges.

ETF unit building is what is driving the major US indexes upward in the final quarter of 2023.  The indexes have been rising steadily and into speculative mode as the retail groups suddenly realize the stock market, which they think of in terms of the 3 major Indexes–Dow 30, NASDAQ 100 and S&P 500–is moving up strongly since late October 2023.

ETF demand has been very high late in 2023 as more retirement accounts offer ETFs based on the major indexes as an alternative to a standard index fund.

Dark Pools who manage Mutual Funds focus heavily on fundamentals. When their buying in accumulation mode occurs, the patterns on individual stock charts reveal the price range at which they decided the stock was a good buy.

The determining factor is fundamental analysis. Is the stock below its fundamentals in price based on Quantitative Analysis? Or is the stock at or near the current fundamentals of the company? Or is the stock higher than its current fundamentals.

The Dark Pools have more information and knowledge about the companies in which they invest than anyone else in the  market because they hold millions of shares of stock in each company. They visit and research the company far beyond just earnings reports. They usually accumulate a stock well ahead of the earnings season, which indicates that the company’s next earnings report will be above the rest of the market’s expectations–those infamous “analysts” who attempt to guess what the company will report based on previous statements by the CEO.  Dark Pools do not rely on earnings reports or CEO statements; they investigate thoroughly. And they are already well postured for the 4th quarter earnings season to close out 2023.

Thus, now is the time to study stock charts to find the companies who will be reporting stronger earnings than retail analysts are estimating. That information is embedded in the stock chart, where Dark Pools have been quietly acquiring stock within a set price range. 

The Dark Pools generally use time weighted average price order types, and there are many types of these professional orders.  With time and price, the accumulation trigger is based on the range of price that is determined to be at or below the current price. Entries are made slowly over time, with pings on price, NOT volume as retail and smaller fund managers who use VWAP order types believe.

To see the fundamental levels on a stock chart requires Relational technical analysis using Spatial Pattern Recognition Skills, which give you the ability to see the narrow price range in which Dark Pools are buying slowly over time.

Spatial Pattern Recognition is a skill that anyone who uses technical or fundamental analysis needs to learn. It is not hard to learn, and it opens up a huge hidden world: the professional side of the market, which constitutes over 80% of all the market activity every day.  300 billion dollars exchange hands in the US market every day.

Thus, learning to identify Quiet, Hidden or Rapid accumulation over time on a stock chart and being able to see that price is above or below or at the fundamental levels for the next earnings season is mandatory for all investors and traders to learn. When you have this skill, you can improve your ROI, and  your trading profits for monthly income go up even more.

Martha Stokes, CMT

https://www.technitrader.courses

This post was authored by an external contributor and does not represent Benzinga's opinions and has not been edited for content. This contains sponsored content and is for informational purposes only and not intended to be investing advice.