How do people analyze stocks to find out if it may be at a good price or not?
There are two schools of thought. One is fundamental analysis. Fundamentalists use many different measurements to gauge whether a stock is over or undervalued. They study a stocks price relative to its book value, earnings valuation, expectation of future earnings, etc. They tend to take a long-term look because it can take a while for a stock to reflect its fundamental value. This is why fundamental analysts typically have a time horizon of 5 years or more for each stock pick.
The other method of valuing a stock is known as technical analysis. Many view this as strictly a short-term tool but it works well on longer-term horizons as well. Technical analysis analyzes charts for areas of support/resistance (which well cover in detail later). It also determines if a stock is in a trend on a chart or a range. Formulas are used as technical indicators to analyze data in comparison to its price historically to see if its overbought or oversold. Several examples could be: Slow Stochastics, RSI, etc. Well be going over these in greater detail later as well.
