Fundamentals and Technicals

I've been discussing the issue of when to use fundaments and and when to use technicals with a fellow trader on the Yahoo! message board for BBY.

This morning he wrote one of the better descriptions of when to use these tools:


"I believe fundamental analysis tells you a lot about the underlying company with which to make a decision on the worth of investing in the stock. Technical analysis seems to tell the moves that the 'big boy institutions' MAY take in the near future.

"So if I decided to invest in a stock due to the fundamentals the technicals may tell me if it is an appropriate time to start building a position or to hold off until a later time."

My friend's time horizon is six to 18 months, as compared with the 30-40 days that I generally trade. I think his method is spot on for longer-term positions, and I use it myself for dividend plays and covered calls (since with the latter I may end up owning the stock for longer than I thought).