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Chapter 4. Confirmation: A Powerful Anal... > Confirmation Applied to Market Price...

Confirmation Applied to Market Price Trends

Even with the use of fundamentals in the confirmation process, we cannot ignore recent trends in market price. A final application using the confirmation technique is to test and explain trends in market price. While a technical indicator, the connection of price to the fundamentals is an important one; we can study a post-core-earnings adjustment to compare the fundamentals to market price. In this regard, it is possible to confirm (or contradict) an apparent fundamental trend. It is easy to draw a conclusion about a company simply by looking at what has taken place with its market price. A multiyear downward trend is a negative sign, and vice versa. But in fact, these trends are best subjected to confirmation tests; the results might contradict the apparent trend.

Key Point: Analysis of price trends can also be taken a step further, confirming apparent trends through other technical indicators and through a study of fundamental trends as well.



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