Share Synthesis

My first step in devising a new strategy is to think through what are the factors that caused a stock to surge and what are the factors that caused a stock to plunge.. Intuitive it sounds but all these are some points which I missed out previously.


As far as I know, there are currently 2 school of well known thoughts - Fundamental analysis and technical analysis... Is it possible to fuse these 2  together to determine the buying and selling price even when they are contradicting in nature usually? To start off, I am thinking of segregating the fundamental factors into Short Term and  Long term. Short Term factors are like - Latest quarter result posted by the company, macro economic sentiment, industry trend. This list is not exhaustive as I am still in the process of researching.. Long Term factors are like 5 year company financial results, macro trend, potential to be a market leader and etc..


For technical analysis, I will also segregate the factors into short term and long term.. I am still a greenhorn in this area and I know that by mixing technical and fundamentals will definitely invite criticisms but in today's volatile market, I believe by having the knowledge to apprehend charts will let me know more on other investors' psychology. Some short term factors I can think of are  momentum indicators like MACD, moving average to determine the support and resistant and long term factors are like the 5 years trend of the stock.


The reason why I think mixing these 2 school of thoughts is important because I used to overlook a point in fundamental analysis. I used to think that only fundamentals affect stock price but stock price actually affect the fundamentals too because a low stock price will affect the company's ability to raise equity resulting in taking more debt and also might affect the company's reputation too as a company with low stock price may deemed to be "lower quality". I also hope by combining the both strategies, I can avoid the mistakes of behavioral finance pitfalls


So how can I actually determine the entry price and exit price using the mentioned strategies. Also how can I determine the position sizing to manage risk?


Reproduced with permission from http://melynn-lynch.blogspot.com