This is specialized in those of you who would like to purchase individual stocks. I want to share together with you the techniques I have used in the past to pick out stocks that I have realized to get consistently profitable in actual trading. I prefer to make use of a mixture of fundamental and technical analysis for selecting stocks. My experience has shown that successful stock selection involves two steps:

1. Select a regular with all the fundamental analysis presented then
2. Confirm that the stock is surely an uptrend as indicated by the 50-Day Exponential Moving Average Line (EMA) being across the 100-Day EMA

This two-step process enhances the odds that the stock you choose will probably be profitable. It also provides an indication to offer Chuck Hughes containing not performed as you expected if it’s 50-Day EMA drops below its 100-Day EMA. It is another useful method for selecting stocks for covered call writing, a different sort of strategy.

Fundamental Analysis

Fundamental analysis may be the study of financial data such as earnings, dividends and funds flow, which influence the pricing of securities. I use fundamental analysis to aid select securities for future price appreciation. Over recent years I have used many options for measuring a company’s rate of growth so that they can predict its stock’s future price performance. I have used methods such as earnings growth and return on equity. I have realized these methods aren’t always reliable or predictive.

Earning Growth
By way of example, corporate net earnings are at the mercy of vague bookkeeping practices such as depreciation, cash flow, inventory adjustment and reserves. These are typical at the mercy of interpretation by accountants. Today as part of your, corporations are under increasing pressure to conquer analyst’s earnings estimates which ends up in more aggressive accounting interpretations. Some corporations take special “one time” write-offs on his or her balance sheet for such things as failed mergers or acquisitions, restructuring, unprofitable divisions, failed website, etc. Many times these write-offs aren’t reflected as being a drag on earnings growth but instead make an appearance as being a footnote on a financial report. These “one time” write-offs occur with an increase of frequency than you could expect. Many companies that from the Dow Jones Industrial Average have got such write-offs.

Return on Equity
One other indicator, which I have found isn’t necessarily predictive of stock price appreciation, is return on equity (ROE). Conventional wisdom correlates a high return on equity with successful corporate management which is maximizing shareholder value (the better the ROE the higher).

Recognise the business is much more successful?
Coca-Cola (KO) having a Return on Equity of 46% or
Merrill Lynch (MER) having a Return on Equity of 18%

The reply is Merrill Lynch by measure. But Coca-Cola features a much higher ROE. How is possible?

Return on equity is calculated by dividing a company’s net profit by stockholder’s equity. Coca-Cola is really over valued that its stockholder’s equity is simply corresponding to about 5% with the total rate with the company. The stockholder equity is really small that just about any amount of net profit will make a favorable ROE.

Merrill Lynch on the other hand, has stockholder’s equity corresponding to 42% with the rate with the company and requirements a greater net profit figure to generate a comparable ROE. My point is the fact that ROE doesn’t compare apples to apples therefore is very little good relative indicator in comparing company performance.
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