Expert: Paul Henneman - 8/31/2010

Question
Do you think that using technical analysis is a viable way to learn short-term stock investing/trading holding onto stocks only several months to a year or so? If not, should one avoid it completely or might it be advisable only in conjunction with using fundamental analysis?

Thank you Paul.

Mark E.

Answer
Mark,
  Thank you for your question!
Yes, technical analysis is a very strong segment of financial research, with a large following of investors that use these principles.  It is definitely worth investigating.  Technical and fundamental analysis are completely different philosophies, and it is very difficult to mix the two.  Most investors, individuals and professionals, typically follow one of the two, but not both.
  The real answer is to do some research on both approaches, to see which you find truly more attractive for you. In very generalized terms, technical analysis is more actively traded, and fundamental analysis is geared towards longer holding time periods.  This has been changing over the years with the markets being so volatile, in that fundamental analysis is being applied to shorter holding times.
  I would suggest that the place to start for technical analysis would be William O'Neil's books. He is the founder of IBD (Investors Business Daily), and perhaps one of the best known technical analysts in the world. He does at times use some fundamentals (earnings data) in his initial screens, but incorporates alot of technical indicators as well. Websites and charting services like www.bigcharts.com are used by technical investors to run their analysis. Basic charting functions are often free, as you get more advanced you will likely have to subscribe to a service, but these are not expensive.

I hope this is helpful and gets you started. Please do not hesitate to follow up with me as you begin to look into it further if any questions come up,

Best Regards,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com