How to Use Technical and Fundamental Analysis Together
Record business-value hypotheses separately from price-action observations. Learn what to check when the two agree or conflict, including timing differences around earnings announcements.
Company research examines the basis for value using business and financial information, while chart analysis examines market prices and trading behavior. When using both, assign them different questions rather than repeatedly confirming the same conclusion. If they conflict, check the timing of information and evidence against your hypothesis before dismissing either one.
Write the business hypothesis without referring to price moves
First set out the business hypothesis: for example, whether revenue growth comes from price increases or higher unit sales, and whether improving profits translate into cash. Do not include an argument that the business is good because the share price has risen. Adding the disclosure items that will test the hypothesis and a date for the next review reduces the influence of price swings. Recording valuation as a range based on key assumptions, rather than a single correct answer, also makes reassessment easier. Automatically raising revenue or margin assumptions because the chart is strong creates circular reasoning rather than combining distinct analyses.
Do not build financial conclusions into price observations
Keep observations such as whether price holds above a key zone or how volume changed around an event in a separate field. Claims that support must hold because the company is good are difficult to test. Even if both analyses agree, do not count them as two independent pieces of evidence if they respond to the same news. Conversely, if the business hypothesis holds but price is weak, look for missing questions about costs, competition, financing, or expectations. Price alone also cannot establish the existence of undisclosed bad news as a fact.
Align the dates of the information before updating your assessment
Share prices change during the session, while financial statements cover a particular period and are released later. Evaluating a past decision by combining pre-announcement prices with earnings learned afterward reverses the information sequence. Record the analysis date, disclosure release time, and reporting period separately. Also set separate review procedures for a failed price criterion and an invalidated business hypothesis. This helps prevent relabeling a falling share price as long-term investing or treating a small rebound as proof of a business recovery.
Worked example
Hypothetical example: Suppose your business hypothesis for a manufacturer is rising unit sales and better collection of accounts receivable. Price breaks above an observed resistance zone, but a new report shows receivables growing faster than revenue. Keep the breakout as a price observation and reassess the collection-improvement hypothesis. Conversely, if the share price falls while actual collection data improves, assess the value hypothesis and price risk separately. In neither case does the chart prove the financial figures.
What to check
- Write the business hypothesis independently of share-price direction.
- Separate the evidence for price observations from the evidence for estimated company value.
- Align the price reference date, disclosure date, and accounting period.
- Turn disagreements between the two analyses into questions for further research.
Sources and primary materials
This is educational material about research methods. For an actual company decision, verify the filings and primary sources for the relevant period.