Millions upon millions of people invest in stocks around the world…
And many of them are doing it wrong.
You see, most investors don’t use technical analysis.
The American Association of Individual Investors (“AAII”) surveyed roughly 1,500 folks on this topic in 2019…
Only 5% of respondents told the AAII that they use technical analysis to time their buy and sell decisions. And 45% said they don’t use technical analysis at all.
To be fair, technical analysis can be intimidating at first.
Many investors instead focus on a company’s fundamentals because they’re tangible…
They can see the company’s sales and other reported numbers. And they can use these numbers to calculate everything else.
But what if the company’s numbers are wrong? What if everything “fundamental” about the company wasn’t reported correctly?
Investors in an iconic American company are facing that problem right now…
As a food-processing leader, it plays an essential role in our daily lives. And this company’s stock has traded on the New York Stock Exchange for 99 years.
On Monday, the company’s stock plunged 24% because of an “accounting investigation.” It turns out that a lot of the reported fundamentals of the business might be wrong.
But as you’ll see, technical analysis could’ve saved investors from a lot of the pain…
Folks, this is why we combine the fundamentals and the technicals at Chaikin Analytics…
Marc Chaikin created the Power Gauge system more than a decade ago to help us do that. The system includes 20 factors that most investors and analysts use to study businesses…
Most of these factors relate to a company’s fundamentals. But to make sure the system offers a comprehensive look, some of the factors also involve the technicals – like the Chaikin Money Flow indicator and the stock’s relative strength against the overall market.
The Power Gauge weighs each of these 20 factors in a proprietary way to produce an overall rating for each stock. The ratings range from “very bullish” to “very bearish.”
It’s a powerful tool if you don’t know where to start with stock analysis.
Notably, Marc also realizes that price action is important. That’s why he added in an “alert system” that downgrades even the most fundamentally sound stocks to “neutral+” ratings.
That’s the current Power Gauge rating for Archer-Daniels-Midland (ADM)…
The food-processing giant has reported strong fundamentals for more than a year. But over most of that span, the stock has remained “neutral+” in the Power Gauge.
That tells us Marc’s alert system is working…
You see, when a stock with good fundamentals drops below its long-term trend, the Power Gauge automatically downgrades it to “neutral+.” Specifically, this rating warns us that…
This stock should be strong based on the fundamentals. But it’s not for some reason.
In other words, it tells investors like us to be careful.
Sometimes, this alert system triggers because of short-term market behavior. If a stock bounces back and continues higher, its “bullish” or better rating will return.
But that wasn’t the case with Archer-Daniels-Midland. And as it turns out, the fundamentals might not be what they appear…
On Monday, news broke about an investigation into Archer-Daniels-Midland’s financials. The company is cooperating with authorities, but it postponed its scheduled earnings release.
Here’s the thing…
The Power Gauge has held a “neutral+” rating on the stock for much of the past year. We didn’t know the “why” behind this alert. Technical analysis simply told us something was off.
Meanwhile, when did some of Wall Street’s biggest investment banks downgrade it?
This week.
That’s right. They waited till the bad news came out and the stock’s price collapsed.
To that, I say “thanks for nothing” to the Wall Street analysts…
The technicals were crystal clear. And yet, they waited for the “why” to show itself.
That’s why I rely on technical analysis in combination with the fundamentals.
It’s important to get the full picture. And the Power Gauge makes that easy to do.
Good investing,
Pete Carmasino
