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Why Use Fundamental Indicators for Technical Analysis?

Why Use Fundamental Indicators for Technical Analysis?
October 16, 2019 Martha Stokes CMT

Why Use Fundamental Indicators for Technical Analysis?

Find Giant Buy Side Institutions Investing

Technical Analysis is undergoing massive changes as the technologies that support this form of stock analytic continue to expand and become more sophisticated. Charting software is no longer just about price, time, quantity, and symbol. It is no longer merely candlesticks and stock indicators, but is becoming a far more useful tool for both Professional Traders and Individual Investors worldwide with fundamental indicators for Technical Analysis now available.

With the new more sophisticated capabilities of graphical software products, new analysis techniques must be explored and developed. These provide the Individual Investor and Retail Trader with more advanced analytical tools. As the pace of trading and the variety of instruments increases, it is important to streamline and simplify the entire stock selection process.

Below is a fine example of one of the many new fundamental indicators that can be used with Technical and Fundamental Analysis to improve the selection of stocks, indexes, and Exchange Traded Funds. This is a weekly chart view, with the Percent Shares Held by Institutions PSHI Indicator shown below price:

The fundamental Percent Shares Held by Institutions PSHI Indicator tracks where institutions are moving into or out of a stock with a line indicator. The early huge increase marked by the first green arrow on the left, shows that Giant Funds were using Dark Pools to acquire this stock in a Dark Pool Quiet Accumulation mode over many months. The stock climbed for a period of time but Smaller Funds entered only as the stock peaked, and as some Giant Funds started to reduce their held shares.

As the stock declined, High Frequency Traders entered driving price in big runs downward. This triggered panic in Smaller Funds which then started selling, causing losses. Retail Traders also bought this stock very late in the uptrend. The subsequent correction is now at the prior Dark Pool Buy Zone™. As the stock forms a bowl shape bottom which can be seen with Dark Pool Quiet Accumulation over time, the High Frequency Traders are suddenly aware of the Dark Pools and trigger long candlesticks to the upside.

Below is the same stock chart, this time showing the use of Volume in the middle chart window and the Balance of Power Indicator with a Shift of Sentiment™ in the bottom chart window. This is a daily chart view.

The use of fundamental indicators for Technical Analysis is one of the most exciting new areas of development for both the fundamental and technical Professional Traders and Individual Investors, with the ability now to integrate most of the essential fundamentals and even many financial aspects into a graphical chart form that is as easy to analyze as stock indicators. With fundamental data now part of the best charting software systems, Individual Investors and Retail Traders are no longer hampered by the lack of transparency for the fundamental side of the market, which constitutes more than 75% of all Market Participants.

Conversely, with technical data reaching new levels of sophistication a new approach is being adopted by many Fundamentalists.

Integrating both fundamental and some technical data into their stock selection process immediately provides greater transparency for Risk Analysis and assessment, as well as monitoring of the Market Participants active in that stock.

The combining of both Fundamental and Technical Analysis into the graphical form for stock charts is called Relational Technical Analysis™ and is the most exciting new approach to using the graphics of fundamental indicators for Technical Analysis. It is a faster and more reliable assessment of projected growth potential, Market Participant activity, and the overall trend of the stock, index, Exchange Traded Fund, or other stock derivative.

Technical Analysis Webinar

Learn the 6 primary Market Conditions, percentage of time each occurs, how each impacts trading and investing. Click HERE

Balance of Power Webinar

Learn leading indicator patterns for Dark Pool Buy Zones, bottom formations, and to get ahead of huge gaps or run up. Click HERE

Volume Indicator Webinar

Learn why volume is as important as price analysis, and why volume leads price. Learn MORE

The new fundamental indicators are line indicators and require some training to use properly but are easy to adapt to use for a greater understanding of the hidden aspects of the market, namely the Dark Pools. Dark Pools represent a massive global capital base of many trillions of dollars. Although there are tens of thousands of small Mutual Funds, with 30,000 Registered Investment Advisor firms, and approximately 400,000 Financial Planners in the US alone, there are less than 3 dozen giant Mutual and Pension Funds in the world and they are the giant Buy Side Institutions.

The giant Mutual and Pension Funds however, control a disproportionate amount of the investment monies from the Individual Investor in the US, Europe, and other countries trading US listed stocks. Without the ability to see where these Giant Funds are moving monies and whether the stock is in or out of favor, both Technical Traders and Fundamentalists are at an extreme disadvantage. Small Funds Managers in particular are at higher risk if they are unaware of where the Giant Funds are placing capital resources.

The Giant Funds control tops and bottoms which are the most critical areas for Individual Investors, Retail Traders, and Fundamentalists. Knowing where the Giant Funds are buying has become nearly impossible with standard Fundamental Analysis or traditional Technical Analysis methods due to the increased use of Dark Pools in the US, Canada, and Europe.

Many Individual Investors and Retail Traders have become frustrated about the increased lack of transparency in the markets, but it is unlikely that the US will close the Dark Pools that the Giant Funds prefer for placing orders. Instead of being frustrated by the increasing use of Dark Pools or Alternative Trading Systems, Individual Investors and Retail Traders as well as Fundamental Traders can turn to new charting software. This now includes special new fundamental indicators for Technical Analysis which reveal where giant lot activity is occurring at that time.

Summary

The new Relational Technical Analysis for stock charts incorporates both technical and fundamental indicators. Combining the two analytics of company financials and stock data is substantially more relevant and essential in the new Market Structure, and begins with the fundamental indicators for Technical Analysis.

Go to the TechniTrader Learning Center and watch a training webinar.

TechniTrader Relational Technical Analysis™ can be found in the Methodology Essentials Elite Course, for traders with more than 5 years of experience.

Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using TC2000 charts, courtesy of Worden Bros.

Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses

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Martha Stokes, CMT is co-founder and CEO of TechniTrader. She is a retired professional Buy-Side Analyst and was awarded the Chartered Market Technician designation for her thesis, "Cycle Evolution Theory." Martha is a passionate teacher of the financial markets and a prolific writer, having created over 40 stock, option, and financial market courses.

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