Why It’s Essential to Blend Technical and Fundamental Analysis
“Opportunity is missed by most people because it is dressed in overalls and looks like work."
Unfortunately, those very words of Thomas Edison are often lost on investors.
Instead, investors miss opportunity because a stock appears to be boring, or because the “herd” has convinced them not to buy.
Earlier this year, we spoke about Himax Technologies (HIMX), a pure play on augmented reality trading around $5.50 a share. It was left for dead, ignored in a downtrend.
But what others missed, we began to wake up to.
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In February 2017, the stock was miserably oversold after plunging from a high of $10.50. Momentum markers also told us it was far too oversold. Relative strength, MACD and Money Flow were all in oversold territory. Even that was ignored, though, even the fact that there were fundamental reasons to get bullish.
We were already hearing that augmented reality would be big.
And what better way to play it than with a pure play on the story?
The International Data Corporation forecasts "worldwide revenues for the augmented reality and virtual reality (AR/VR) market to reach $13.9 billion in 2017, an increase of 130.5% over the $6.1 billion spent in 2016. AR/VR spending is expected to accelerate over the next several years…totaling $143.3 billion in 2020."
Even Apple CEO Tim Cook was excited about augmented reality, telling Bloomberg:
“I think it is profound. I am so excited about it, I just want to yell out and scream. The first step in making it a mainstream kind of experience is to put it in the operating system. We’re building it into iOS 11, opening it to developers—and unleashing the creativity of millions of people. Even we can’t predict what’s going to come out. There's some things that you can already get a vision of. We've talked to IKEA, and they have 3D images of their furniture line. You’re talking about changing the whole experience of how you shop for, in this case, furniture and other objects that you can place around the home. You can take that idea and begin to think this is something that stretches from enterprise to consumer. There’s not a lot of things that do that.
You'll see things happening in enterprises where AR is fundamental to what they’re doing. You're going to see some consumer things that are unbelievably cool. Can we do everything we want to do now? No. The technology's not complete yet. But that’s the beauty to a certain degree. This has a runway. And it's an incredible runway. It's time to put the seat belt on and go. When people begin to see what's possible, it’s going to get them very excited -- like we are, like we've been.”
Even better, shares of HIMX were higher in September 2017 on rumors that the company’s 3D sensing components will be in the next iPhone. Investors were even excited the stock could race higher as we neared Apple’s new product unveil on September 12, 2017. Better yet, HIMX inked a deal with Qualcomm to make a 3D camera.
The key to understanding the potential with HIMX wasn’t just technical, nor was it just fundamental. By understanding both sides, though, we had a 360-degree view of the stock.
We can sit and argue which school of thought is right until we’re blue in the face.
But here’s what folks don’t understand. What technical analysis may miss, fundamental analysis may pick up on. And what fundamental analysis may miss, technical analysis may pick up on.
Combine the two and the results can be great.
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