Understanding Equities - Question 86

What is the difference between “technical analysis” and “fundamental analysis” in evaluating stocks?

Fundamental analysis studies the basics of a company’s finances and its economic prospects before making a decision to buy, hold, or sell its stock. Fundamental analysis studies a company's prime earnings ratios, dividend history, rate of return, sales, and profitability history and trends.

Technical analysis uses past and current stock price movements to predict future prices of a company's stock. It relies heavily on charts to plot the price movement of stocks. No consideration is given to any of the components used in fundamental analysis.