Chapter #1: Market Analysis Basics

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Thanks for joining me for the first chapter of the new CNA Finance “Trader in Training” course! Our goal here is to help even beginners become profitable in the market. With that said, the first thing you’ll need to learn when it comes to trading is how to analyze market movements. After all, your job as a trader will be to capitalize on these movements; making money every step of the way. With that said, in this chapter, we’ll touch on the first things you need to know about market analysis in order to become a successful trader. Let’s get right to it…

There Are Two Basic Types Of Market Analysis

In the world of trading, there are several different data points that you’ll analyze in an attempt to predict market movements. However, all of these data points will fall into one of two basic analysis categories. The data will either be technical, or it will be fundamental. Here’s the difference…

  • Technical Market Analysis – The technical analyst looks at charts, graphs, and other quantifiable data in an attempt to predict future market movements. For example, one of the favorite tools in the technical analysts toolbox is the candlestick chart; a chart that makes identifying and capitalizing off of trends a more simple process.
  • Fundamental Market Analysis – Instead of focusing on charts, graphs, and trends, the fundamental market analyst pays close attention to the overall health of the asset; taking non-technical factors into account. Fundamental data points include CEO changes, product launches, new drug applications in biotech and more!

Technical Analysis Example

PTIE Stock ChartOne of the examples of what looks to be an upcoming opportunity based on very basic technical analysis comes from Pain Therapeutics, Inc. (NASDAQ: PTIE). Looking at the chart to the left, you can see that PTIE recently had a breakout. As we tend to see following breakouts, the market corrected and gave up some of the gains. As a result, we’re starting to see a clear triangle in the market. This happens when highs (market resistance) and lows (market support) start to move closer together. At some point, the stock value will either break the support or the resistance points in the market; generally leading to either big gains or big declines known as a breakout. So, traders will be watching this stock closely to see where it goes and whether or not they’ll be able to profit from the breakout.

Fundamental Market Analysis Example

When it comes to a great example of how fundamental analysis can help you make predictions with regard to market movement, Biocept, Inc. (NASDAQ: BIOC) takes the cake! Biocept is a biotechnology company that’s been making big moves lately. While the company is operating at a loss currently, that is all likely to change in the long run. The company has found a way to detect cancer through the biopsy of a simple blood sample; rather than a tissue sample gathered through an invasive procedure. In the long run, this technology has the potential to change the cancer diagnostics industry and become incredibly profitable. So smart traders are looking into BIOC for a good time to buy; giving them the maximum opportunity to gain from future increases in the stocks value!

Final Thoughts

Now you know what fundamental and technical market analysis are! The next two chapters of this training course will cover these topics in depth. So, join us tomorrow to learn more about technical analysis!

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