This is the type of strategy Warren Buffet have applied while investing, which is buying a stock lower than its intrinsic value or simply value investing for short.
Once it is below its intrinsic(actual) value the stock is considered to be undervalued. I read a lot of traders from forums always making hypes for their stock picks encouraging other traders or investors to buy since it is undervalued.
When I made my own research, actually it really didn't sink in. I had a hard time understanding to when will we consider a stock to be undervalued? So through research I run through again a website explaining to check its PE ratio, Price to book ratio, Return of equity and so on.
Again these kind of ratios are just jargon that I really can't cope up with but somehow at least when I hear the word undervalued I can already grasp the idea behind it.
The best sample that I read that I can share is like buying a $100 at a price of $80. Simple right? Same goes with stocks, when you are buying undervalued stocks you simply get a particular stock lower than its actual value.
In other words it's like a stock being sold at a bargain price. Since I really have no time to make these kind of calculations on the PE, Book ratios etc. I just based my own speculations from using charts with the help of indicators and oscillators.
Good thing some of these indicators or oscillators were discussed from investopedia which you may observe if a stock is overbought or oversold.
If you happen to just rely on your broker's technical analysis, I suggests you to learn it yourself, they may be experts with long years of experience analyzing the market but believe me, they can not really predict the outcome of the market.
They themselves are basing from tools like charts and data which is also readily accessible within your reach so it won't hurt if you try to practice and scout for undervalued stocks. Take a look here to get you started making your own technical analysis (here).
The reason why no ever living human can be able to predict the movement of the market because it is controlled by human behavior towards every factors affecting each decision on how he handles his/her own position/shares in the market.
If I remember it right the title of the movie "Sully" with Tom Hanks as a pilot where in he made a quick decision on landing the plane on waters than looking for nearest runway after being hit by birds, as the panels conducted their own investigation and run through simulation with the computer trying to put pressure on and insisting that it was a pilot's error .
Good thing Capt Sully (Tom Hanks) was able to retaliate and said, you are looking for human error then make it human, so they indeed adjusted the time which was taken out during the simulation and truly Capt. Sally was vindicated that even with the simulation it will not make it in time if it will look out for runways.
Lesson would be the same with stocks even with the use of sophisticated machines, complete data stored from computers and archives, the thing is it will never predict if a trader/investor will sell/buy shares on the following trading day.
Let these be tools just be our own guide as they are not 100% guaranty, at least somehow it's giving as a wider perspective how each trader/investor reacting to every news, catalyst etc.
More or less when we say undervalued stocks would always be spotted when they are oversold (below 20) when using the stochastic oscillator and RSI below the 30 level mark.
Disclaimer: Sample charts provided are for educational purposes only.
If you happen to just rely on your broker's technical analysis, I suggests you to learn it yourself, they may be experts with long years of experience analyzing the market but believe me, they can not really predict the outcome of the market.
They themselves are basing from tools like charts and data which is also readily accessible within your reach so it won't hurt if you try to practice and scout for undervalued stocks. Take a look here to get you started making your own technical analysis (here).
The reason why no ever living human can be able to predict the movement of the market because it is controlled by human behavior towards every factors affecting each decision on how he handles his/her own position/shares in the market.
If I remember it right the title of the movie "Sully" with Tom Hanks as a pilot where in he made a quick decision on landing the plane on waters than looking for nearest runway after being hit by birds, as the panels conducted their own investigation and run through simulation with the computer trying to put pressure on and insisting that it was a pilot's error .
Good thing Capt Sully (Tom Hanks) was able to retaliate and said, you are looking for human error then make it human, so they indeed adjusted the time which was taken out during the simulation and truly Capt. Sally was vindicated that even with the simulation it will not make it in time if it will look out for runways.
Lesson would be the same with stocks even with the use of sophisticated machines, complete data stored from computers and archives, the thing is it will never predict if a trader/investor will sell/buy shares on the following trading day.
Let these be tools just be our own guide as they are not 100% guaranty, at least somehow it's giving as a wider perspective how each trader/investor reacting to every news, catalyst etc.
More or less when we say undervalued stocks would always be spotted when they are oversold (below 20) when using the stochastic oscillator and RSI below the 30 level mark.
Disclaimer: Sample charts provided are for educational purposes only.
STOCK: JFC
➤at normal RSI (14), where it bounced along the 30 level having its low at 108.70 before price went up.
➤again opportunity arises from 126 to 130 when it went near the oversold thresholds.
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Just take note that these data were based from books, try to supplement with the current market situation and try to back test as over experience sometimes stocks from oversold areas does not necessarily gives you signs of reversals but some even go beyond these levels further making a deep dive.
If you need to back up your chart readings, then at least go over for the fundamentals as mentioned above on the metrics like PE ratios and annual earning reports from pse edge on company disclosures and financial reports etc.
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