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The most volatile time for any stock are the few days before and after an earnings report. Earnings reports are released quaterly, a total of four times a year. A responsible company will give two weeks notice prior to the earnings report to allow time for investors to slim down or hulk up their position. Any literate person can read an earnings report but to diagnose it a positive or negative report is the task. To complete that task, you must do analysis on the fundamentals of the company. Fundamental Analysis, at it's core, is to study the numbers of a stock. By numbers, I mean revenue, operating expenses, cash etc. Fundamental analysis can be performed by comparing a company's earnings statistics with previous quarters and years to identify improvements or lack there of. The art of reading and studying an earnings report takes time to develop so be patient with the learning curve. There are no limitations to fundamental analysis. To gain an even deeper perspective, study fundamentals of other stock's in the same sector.
The act of reading a chart - technical analysis. It is often used to uncover unique characteristics such as:
Trends - A chart with a pattern moving higher is said to be in a uptrend. The opposite is a downtrend. Trends form tirelessly. Whether it be an intra-day hourly chart or a ten year chart, trends exist on all charts of any time frame.
Support Levels - A support level is a price a stock has historically not fallen below, or in other words the stock receives demand support at that price. Frequently, these levels will be at whole numbers such as one or two dollars per share. Support levels offer great accumulation opportunities. Beware of a failed support level, that is a tell tale sign to sell a stock as it is often foreshadowing a down trend.
Resistance levels - A maximum price a stock hits do to resistance in the form of supply. A resistance level is a great place to sell stock and lock in some profits. If the stock tends to have momentum approaching a resistance level it could rise above creating a break out. In this case, you would want to hold the stock as it often leads to enormous gains.
Formations - Technicians scope out particular formations or patterns on charts. Many of which actually look like something from our every day world. The cup-with-handle formation is one, the dove would be another. Those two formations can be very profitable for technicians as they tend to be break-out patterns achieveing very healthy gains.
Volume - The number of shares exchanged is referred to as volume. Stock's carry average daily trading volumes and when there is a spike in volume it is a great indicator that a stock is on the move. Pretend for a moment that a stock gives off an average daily noise level of 20 decibels, this being it's average daily volume. On one particular day it's volume is at to 80 decibels, which is four times it's average daily volume and is an indicator that something fishy is underway. You would be wise to check for a press release or some kind of major announcement to locate the cause of such an influx in volume.
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Section I - Stock Market Overview
Section II - Buying and Selling Stock
Section V - Diversification
Section VI - Federal Reserve Bank
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