JUSTIFICATION OF INVESTMENT DECISIONS USING TECHNICAL AND FUNDAMENTAL ANALYSIS – A CASE STUDY APPROACH
JUSTIFICATION OF INVESTMENT DECISIONS USING TECHNICAL AND FUNDAMENTAL ANALYSIS – A CASE STUDY APPROACH

Author(s): Dan-Pavel Matei, Constantin-Marius Apostoaie
Subject(s): Economy
Published by: Editura Universităţii »Alexandru Ioan Cuza« din Iaşi
Keywords: financial analysis; technical indicators; fundamental analysis; stock market; risk; investment behaviour;
Summary/Abstract: Financial analysis represents a powerful tool which, in the hands of the investors, can reduce the risks they are exposed to and, at the same time, increase the return on their investments. The analyst can opt between the two main pillars of financial analysis, technical and fundamental analysis, ore use them both (harnessing their full potential as complements rather than substitutes). In this context, the current paper aims to determine an investment opportunity in the stock market, using, as case studies, the stocks of two companies that are well known giants in the financial industry: JPM (JPMorgan Chase & Co.) and HSBC (HSBC Holdings plc.). After performing the technical and fundamental analysis, we concluded that both stocks are currently worth to invest in. The study revealed that the stocks are undervalued and that there is a good opportunity to take a buy position in the immediate future. Indicators, such as Bollinger Bands and Relative Strength Index, together with the identified chart formations, confirm that both stocks are oversold, and respectively, undervalued. The results generated by the technical analysis are confirmed by some fundamental analysis indicators, which reveal a good financial condition of the companies. Thus, considering the average investor’s risk profile, the decision to buy should be taken consciously, within a margin of 10% of his/her available funds. The current paper contributes to the existing literature on technical and fundamental analysis with a sound case study and a critical perspective.

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