You screen stocks first for rock-solid fundamentals: target 20%+ earnings growth, debt-to-equity below 0.5, and moats like patents or network effects. Layer on technicals – spot green candles smashing resistance with volume spikes and RSI over 50. This combo lifts win rates, yet earnings timing reveals the real edge.
Building a Foundation in Technical Analysis Basics
You kick off technical analysis by scrutinizing price charts, which plot a stock’s historical highs, lows, opens, and closes over days, weeks, or months. Candlestick charts shine here; each “candle” shows open-to-close range in green for gains or red for losses, with wicks marking extremes. You quickly spot momentum shifts.
Next, you hunt trends. Draw trendlines connecting three or more highs in downtrends or lows in uptrends; a stock climbing from $50 to $75 over 30 days screams bullish. Breakouts confirm them.
Pinpoint support and resistance too. Support holds at $60 where buyers pile in repeatedly; resistance caps rallies at $80. Volume spikes validate these levels, surging 50% above average on breakouts. Command this base, and trades sharpen.
Mastering Core Elements of Fundamental Analysis
Price charts spot momentum, but fundamental analysis gauges a company’s underlying strength to predict sustained moves.
You start with financial statements: income statement, balance sheet, and cash flow.
Scrutinize revenue growth; a firm lifting sales 25% annually crushes competitors.
Net earnings matter more.
Calculate earnings per share (EPS) by dividing profits by outstanding shares.
EPS jumping from $2 to $3.50 over two quarters screams profitability.
Balance sheet exposes debt risks.
Keep debt-to-equity below 0.5 for safety.
Cash flow statement verifies operations generate $100 million freely.
Master ratios like price-to-earnings (P/E) under 15 for undervalued gems.
Pair these findings with charts; you’ll spot trades that last.
Screening Stocks With Strong Fundamentals First
Before charts reveal entry points, screen stocks to isolate those with bulletproof fundamentals.
You start by filtering thousands of names down to quality picks using free scanners like Finviz or Stock Rover.
Focus on metrics proving a company thrives long-term, like steady earnings beats and low debt loads that survive downturns.
Apply these four key screens to spot standouts:
– ROE exceeding 15% for five straight years signals efficient profit machines.
– Revenue growth topping 10% annually for three years shows scalable demand.
– Debt-to-equity ratio below 0.5 keeps balance sheets rock-solid.
– Positive free cash flow over $100 million funds dividends and buybacks.
Your shortlist of 20 stocks now boasts resilient businesses.
Plunge deeper into their stories next.
Overlaying Technical Indicators on Fundamental Picks
You’ve screened stocks for strong fundamentals first, grabbing those with 20% earnings growth and debt below 40% of equity.
Now overlay technical indicators like RSI and 50-day moving averages for confirmation.
You’ll spot winners when RSI climbs above 50 alongside price action hugging that moving average.
Fundamental Screening First
Start by screening stocks for rock-solid fundamentals, such as earnings growth topping 15% yearly and debt-to-equity ratios below 0.5, which signal sustainable business health.
You ignore flashy stories and focus on numbers that prove a company generates cash without drowning in debt.
Pick firms with profit margins above 10% over three years.
Use these core filters to narrow thousands of stocks to a tight watchlist:
– Revenue growth exceeding 12% annually for five years straight.
– Return on equity surpassing 20%, showing efficient capital use.
– Current ratio over 1.5, ensuring liquidity covers short-term bills.
– Positive free cash flow growing 10% yearly, fueling dividends or buybacks.
Scan 50 candidates weekly.
Refine your list.
Fundamentals anchor your trades.
Technical Confirmation Next
With your fundamental watchlist locked in, overlay technical indicators to confirm momentum and pinpoint entries that align with strong business health.
Scan for stocks trading above their 50-day moving average, a line that smooths price over 50 trading days to show the trend.
That’s your first filter.
Next, check the Relative Strength Index (RSI), which measures speed and change of price moves on a 0-100 scale; aim for readings above 50 signaling building strength without overbought spikes past 70.
Volume spikes confirm conviction.
Spot pullbacks to the 20-day exponential moving average for low-risk buys, like when a fundamentally solid tech stock dips there on light volume before rebounding 5% in a week.
Enter there.
You’ll catch winners early.
Syncing Earnings Reports With Price Momentum
You sync earnings reports with price momentum by entering positions two weeks before release if the stock climbs 8-12% on rising volume, amplifying post-earnings surges up to 20%.
Confirm the setup with signals like a MACD bullish crossover or RSI holding above 60, avoiding false breakouts.
Nail trade entries by buying the dip to the 20-day moving average with stops 5% below.
Earnings Timing Impact
When a stock builds momentum with higher highs and surging volume right before earnings, that timing sets up explosive moves.
You ride the wave as strong reports push prices 15% to 30% higher in days, far outpacing quiet periods.
Ignore laggards; chase these setups for outsized gains.
Spot ideal timing with this checklist:
– Volume doubles average in the final week before reports.
– Stock clears 50-day moving average on rising bars.
– Price pulls back 5% to 8% mid-momentum, then rebounds.
– Earnings beat estimates by 10% or more historically.
You enter long above recent highs post-earnings.
Profits compound fast.
Risks drop when fundamentals align technically.
Momentum Confirmation Signals
Momentum surges before earnings demand confirmation signals that sync reports with price action for reliable breakouts.
You spot these when RSI climbs above 60 on the daily chart, signaling building bullish force ahead of quarterly reports.
Volume doubles the 20-day average. That confirms buyers pile in.
Pair RSI with MACD line crossing its signal line upward, especially if the stock trades 5% above its 50-day moving average.
You’ve seen this setup in tech names like NVDA before blowout earnings, where price gaps 8% on report day.
Ignore weak surges under 50 RSI.
You filter for stocks with analyst upgrades in the prior week.
This syncs fundamental whispers with technical thrust.
Breakouts stick 70% of the time in backtests.
Trade Entry Strategies
Enter trades at the breakout above the prior day’s high when earnings land within 48 hours and volume hits twice the 20-day average.
This timing captures earnings momentum before it fades, blending a 10% EPS surprise with surging price action.
You buy on the first 5-minute candle close above resistance, setting a tight stop below the breakout low.
Target setups with these filters:
– RSI climbs past 60, signaling buyers dominate without overbought exhaustion.
– Stock gaps 4% or more on news, drawing institutional flows.
– Relative volume exceeds 2x average, confirming conviction.
– Avoid if prior high resists three times in five days.
You’ve stacked odds: fundamentals fuel the breakout.
Ride it to the next resistance or 20% gain.
Exit half at 10% profit.
Leveraging RSI and MACD for Earnings Confirmation
Before you trade on earnings beats, scan RSI and MACD for signals that back the fundamental surge with technical momentum.
RSI, a 0-to-100 oscillator, flags oversold conditions below 30; post-earnings, you want it surging past 50 to confirm buyers piling in.
MACD tracks two moving averages via its line, signal line, and histogram; a bullish crossover happens when the MACD line vaults above the signal.
Picture Tesla crushing estimates by 25%.
RSI climbs from 28 to 62 in days.
MACD’s histogram bars grow taller above zero.
You’ve got alignment.
Enter long with a stop below recent lows.
Momentum fuels the ride higher.
Detecting Bullish Chart Patterns Backed by Growth Metrics
Build on confirmed momentum by spotting bull flags or cup-and-handle formations when quarterly revenue growth hits 25% or more.
Bull flags form tight consolidations after a 30% surge, signaling pause before continuation.
Cup-and-handles carve smooth U-shapes over 3-6 months, with handles under 15% pullback.
You enter only if growth metrics align, like EPS jumping 20% year-over-year.
Verify patterns with this checklist:
– Revenue surges 25%+ quarterly, beating analyst forecasts by 5%.
– Net income doubles from prior year on cost controls.
– Free cash flow turns positive at $50 million quarterly.
– ROE climbs above 15% amid sector tailwinds.
These combos yield 40% average gains in six months. You stack the odds.
Optimizing Trade Entries Using Volume and Valuation
You sharpen trade entries on those bullish patterns by insisting on volume surges and grounded valuations.
Wait for trading volume to jump at least 50% above the 20-day average right as the pattern breaks out; that flood of shares confirms institutional buyers piling in with conviction.
Skip the trade otherwise.
Layer in valuation checks next.
Scan for forward P/E ratios hugging or dipping below the industry median, like 14 for a tech stock when peers average 20 after strong earnings beats.
This roots your entry in sustainable growth, not bubble froth.
Test this combo on a cup-and-handle in XYZ Corp: volume doubled on breakout, P/E at 11 amid 25% revenue growth.
You nail the entry, riding the surge confidently.
Exiting Trades With Trailing Stops and Fundamental Shifts
Profits from your volume-surge entries demand trailing stops to lock them in.
You enter long on a $100 stock after volume doubles on earnings beats, then trail your initial 5% stop upward by 10% as it climbs to $130.
Pullbacks hit the trail? You’re out with 20% locked.
Fundamentals must align too.
Spot shifts that kill your thesis fast.
– Earnings miss 15%? Demand’s crumbling; exit before volume dries.
– Key supplier bankruptcy? Costs spike 30%; trail tighter.
– Management scandals surface? Trust evaporates; sell on first red candle.
– Sector rotation hits rivals? Your P/E jumps to 25x; bail.
Trail aggressively, but cut on fundies.
Profits compound this way.
Conclusion
You blend 25% earnings growth stocks with debt ratios under 0.4 and technical setups like RSI under 30 plus MACD bullish crossovers on 2x volume surges. Enter when green candles shatter 50-day moving averages. Trail stops 10% from highs, exit on reversals or earnings misses. This fusion crushes solo analysis. Stack profits confidently.
