Market makers act with increased conviction when the fundamentals and technicals work together in harmony. Both fundamental and technical analysis are of great value. There is no reason why you should not combine the two so you can act with increased conviction. From a strategic standpoint, a day trader should know what fundamental news has the strongest tendency to trigger a forceful street wide reaction.
When you are trading with fundamentals, always wait for the price action to confirm your opinion. Remember that your objective as a day trader is to make money, period. Do not get caught up with excessive thought or analysis. It is better to make money than to be right. Allow the market to interpret the fundamental information for you through price action. Remember that the market's opinion is what really matters, not yours.
Knowing why an institutional trader takes action can help you think and act with the pros. There are fundamental catalysts that cause large holders to act with ruthless speed. Although mutual funds classify themselves under broad categories such as value, growth, momentum and so forth, many act on fundamental information, especially when the news is negative. Portfolio managers have a low tolerance for certain chinks in the armor of the companies that they hold near and dear to their hearts.
Market-moving fundamental catalysts change from year to year, depending on the state of the market and on what approach has garnered the most attention through recent performance. During aggressive cyclical bull markets, an aggressive-oriented momentum approach is favored because investors are looking for capital appreciation instead of conservative income. During correctional phases or cyclical bear markets, investors are more nervous; the defensive-oriented approach that targets stocks with stronger book ratios and higher yields is the favorite.
A Barron's article pointed out a survey of institutional investors, asking them the main reasons they buy or sell stocks. Among the responses, earnings surprises, return on equity, and analyst revisions to earnings ranked as the top three.54"
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