How to Analyse Stocks? Fundamentals, Charts, and Market Trends

Stock picking, and the effort along with the thought you put into it, is what separates investing from gambling.

It’s not about chasing hype, copying what your friends or neighbours are buying, or going with the brands you see most often. Real investing is rooted in thoughtful stock analysis—an approach that helps you make decisions based on insight, not instinct.

Stock analysis is both an art and a science. It involves evaluating a company's financials, tracking stock charts, interpreting market sentiment, and sometimes even running mathematical models.

The goal? To build conviction before you commit capital.

In this guide, we break down the major stock analysis techniques: fundamental analysis, technical analysis, quantitative models, and sentiment and news analysis. We also walk you through the best tools, resources, and mistakes to watch out for so you can build a sharper, smarter top stock research strategy.

Fundamental Analysis: How to Evaluate a Company’s True Worth

Fundamental analysis dives into a company’s intrinsic value by examining what the business does, how it earns money, and whether it’s priced attractively.

Understanding the Business

Start by exploring core questions like:

• What products or services drive revenue?
• Who are the competitors and industry peers?
• What competitive advantages or moats exist?

A clear grasp of the business model helps in identifying sustainable, high-quality businesses.

Financial Analysis

Review the three pillars of company financials:

• Income Statement: Tracks profitability over time.

Balance Sheet: Provides the snapshot of assets and liabilities. Cash Flow Statement: Shows the sources where the company’s money is flowing to and from.

Key Financial Ratios

Financial ratios are a quick way to gain an understanding of the company’s financial strength:

• P/E Ratio: Price to earnings; compares stock price to earnings per share.
• PEG Ratio: Adjusts P/E for growth. Useful for high-growth stocks.
• Debt/Equity Ratio: Measures leverage.
• Return on Equity (ROE): Highlights efficiency in using shareholders’ funds.

These ratios inform whether a stock is undervalued, overleverage, or efficient.

Qualitative Factors

Numbers alone don’t tell the full story. Consider factors like:

• Leadership strength and ethical backbone.
• Corporate governance and ownership structure.
• Industry cycle, regulation, risk exposure.
• Product pipeline, innovation capacity, brand power.

Qualitative analysis complements the financial ratios and often separates winners from the lot.

Valuation Methods

Several approaches help estimate value; one isn’t enough. Look at:

• Discounted Cash Flow (DCF) for long-term cash projections.
• Relative valuation such as comparables (P/E, EV/EBITDA).
• Residual income models for firms not paying dividends.
• Sum-of-the-Parts (SOTP) for conglomerates with diverse businesses.

Technical Analysis: Reading Stock Charts and Trading Patterns

Unlike fundamental analysis, which looks at what a company does, technical analysis focuses on what the stock price is doing. It’s all about spotting patterns in price and volume to decide when to buy or sell.

Stock Charts and Patterns

At the heart of technical analysis are price charts. The most common one you'll come across is the candlestick chart, which shows how a stock’s price moves within a specific time period—its open, close, high, and low.

Over time, these charts form patterns, almost like footprints of investor behaviour. Some patterns suggest a trend is about to reverse (like the head and shoulders or double top), while others hint at a continuation (such as triangles or flags).

Learning to recognise trading chart patterns can help you spot potential entry and exit points with more confidence.

Technical Indicators

Charts tell one story, but technical indicators add another layer of insight. These are formulae that analyse price or volume data to help you spot trends, momentum, or volatility.

Here are the essential ones:

• Moving Averages (like SMA or EMA): These smooth out price data so you can see the overall direction (trend) more clearly.
• Relative Strength Index (RSI): Tells you if a stock might be overbought (too expensive) or oversold (potential bargain).
• Moving Average Convergence Divergence (MACD): A momentum indicator that shows changes in the strength of a trend.
• Bollinger Bands: Help you gauge volatility.

Support & Resistance

Some price levels act like invisible walls. Support is the level a stock tends to bounce up from. Resistance is the level it struggles to break above. These zones can help you set price targets or stop-losses when planning trades.

Trend Analysis

One key question to always ask: Is this stock trending or moving sideways?

• Use trendlines to draw connections between rising lows or falling highs.
• Look for channels—parallel lines that help define whether a stock is in an uptrend, downtrend, or just going sideways.

Spotting trends early, and knowing when they’re weakening, is one of the core skills technical traders rely on.

Quantitative Analysis: Using Data and Numbers to Filter Stocks

If fundamental analysis looks at what a company is worth, and technical analysis looks at price patterns, quantitative analysis is all about the numbers. It uses data, statistics, and sometimes algorithms to find patterns, build strategies, or test ideas.

Think of it as using a checklist made of numbers. For example, let’s say you want to find companies with:

• A price-to-earnings ratio below 20,
• A return on equity (ROE) above 15%, and
• Strong momentum over the past 6 months.

Using a stock screener, you can filter hundreds of companies based on these criteria in seconds. That’s a basic form of quant.

How it Helps

Quantitative tools help you:

• Shortlist stocks faster by screening for certain traits.
• Test strategies using past data (called backtesting) to see how your approach would’ve performed.
• Build rules-based models that reduce guesswork and emotion from the decision-making process.

It’s like setting up your own system. And once you get the hang of it, it can help you stay consistent and objective, especially in a market that’s full of noise.

Sentiment and News Analysis: Reading the Market’s Mood

Stock prices aren’t just driven by data—they’re influenced by emotions, headlines, and hype. Here’s how to make sense of it:

• News Flow: Corporate earnings announcements, macroeconomic data, regulation changes.
• Social Media: Twitter chatter, Reddit, influencer sentiment.
• Options Flow: Unusual puts/calls indicating institutional expectation.
• Analyst Calls & Guidance: Often move short-term prices.

Tools such as sentiment-scoring platforms or real-time news aggregators help you stay ahead. When it comes to sentiment and news analysis, don’t just follow the crowd—understand what’s fuelling it.

Top Resources and Tools for Stock Research and Analysis

Fundamental Analysis Tools

• Company earnings reports and investor presentations
• Access to annual reports, balance sheets, and cash flow statements
• Ratio calculators and valuation models (e.g., P/E, ROE, DCF)

Technical Analysis Tools

• Interactive stock charts with candlestick and line views
• Built-in indicators like RSI, MACD, moving averages
• Drawing tools to identify trends, support, and resistance
• Pattern recognition features for flag, wedge, and triangle formations

Quantitative Analysis Tools

• Stock screeners with filters for valuation, momentum, and quality
• Backtesting tools to test trading strategies using historical data
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• Portfolio risk management and performance dashboards

Sentiment & News Tracking

• Real-time news aggregators and headline trackers
• Social sentiment analysis from platforms like Twitter, forums, etc.
• Analyst ratings, forecast changes, and options flow monitoring

Integration & Customisation

• Exportable data, watchlists, price alerts
• API access for building your own research models or dashboards

Common Mistakes to Avoid

• Confirmation Bias  
  Only seeing information that supports your thesis.
• Overfitting in Backtesting  
  Creating strategies that only work on past data.
• Chasing Hot Stocks  
  Buying after big run-ups at lofty P/E levels.
• Relying Solely on One Method  
  The market is complex; mixing analysis styles works best.
• Ignoring Risk Management   
  Always know your stop-loss, position sizing, and contingency plan.
• Trading Emotionally   
  Fear and greed destroy discipline.
• Neglecting Macro Context  
  Even great stocks can plummet in a bear market.

Putting it All Together: How to Research Stocks the Smart Way

There’s no single way to analyse stocks; each method offers a different lens. Some look at company fundamentals, some read charts, others follow market sentiment or run data models.

The key is to mix what works for you. Use a balance of tools and insights: check financials, spot patterns, read the mood, and avoid common traps. That’s how you turn research into real confidence.

Whether you’re just starting out or levelling up your investing game, the right approach and resources can make all the difference.