as shareholders’ equity). Shareholders’ equity is listed separately nearthe bottom of a company’s balance sheet. Return on assets (ROA) is computed bydividing net income by total assets. However, these ratios are calculated for you onmany different Internet web sites, such as Yahoo! Finance, so that you do not haveto go through the tedious computations yourself.Return on equity: Is computed by dividing net income by net worth (net worthis also known as shareholders’ equity). This is one of the ratios used to determine the effectiveness of a management team. The higher the ROE, the more efficiently the management team is using their resources.Return on assets: Is computed by dividing net income by total assets. This is another ratio used to determine how well a management team is using the overallresources they have available to produce returns for their shareholders. This ratiois best analyzed by comparing one company to its industry average and the overall market. The higher the ROA, the more efficiently a company is operating.
These numbers answer the simple question of how efficiently invested capital isbeing used to earn a return. ROA is the most critical number—it tells how well management is utilizing the resources of the firm. ROE simply adjusts the ROA for thefinancial leverage management has chosen to utilize. ROA is calculated as follows:ROA =
Net incomeTotal assets
=
$1,011$7,173
= 0.141 or 14.1%
This number tells you what kind of a return each dollar invested in the firm (borrowed or equity) is earning. If that number is very low (say, below Treasury billrates of return), then you can be assured that someone will come along to break upthe company, convert the assets to cash, and then reinvest the proceeds in more productive assets. As ROA increases, such a sale redistribution becomes much lesslikely. Return on equity is calculated as follows:
PRACTICAL APPLICATIONSROE =
Net incomeNet equity
237=
$1,011$4,952
= 0.204 or 20.4%
When using the ROE or ROA, company-to-company comparisons have to bemade carefully. One company might have an ROE of 25% with very little debt,while another might have the same 25% return on equity but with a much heavierdebt load. A familiar example might be the use of margin in a brokerage account. Ifyou made 1,000% on your Qualcomm (QCOM) stock in 1999, buying all the sharesyou could afford without borrowing any money, and I made 1,000% on Qualcommshares, but half of the shares were purchased with money I borrowed from the brokerage firm, my return on equity is going to be twice your return. However, if wewere around to watch Qualcomm’s dramatic decline in early 2000, my risk wasmuch higher than yours and I may have experienced margin calls on the way down.The same is true with these management effectiveness ratios. Borrowed moneycan help you to generate more earnings, but at a higher level of risk. As with anyfield of study, the deeper you get into it, the more important the subtle nuances become. When each of these important relationships is reduced to a single data pointor ratio, comparisons can be made quickly and easily. As you begin to work withthese ratios, you’ll be able to understand the performance of one company relativeto others in its industry with relative ease. It is important to note that the normalrange of a ratio for one industry may not be similar to that of another industry. Thediscussion about why you might buy shares in a company with a lower ROE is aportfolio management issue rather than a fundamental analysis question. However,since one industry might be more favorably positioned to benefit at one point in aneconomic or interest rate cycle than another, even though the companies in that industry have lower performance ratios, they might be more desirable investments.One example would be to buy consumer staples companies like Gillette (G) orJohnson & Johnson (JNJ) over technology companies like EMC Corporation in arising interest rate or otherwise difficult market environment.
PRACTICAL APPLICATIONSFigure 8.13 provides a quick snapshot of EMC Corporation’s fundamental data andratios compared to its industry group and the S&P 500.The most practical use of this information is to compare an individual companyto its industry. Market Guide (www.marketguide.com) has many free services available on the Internet that allow an individual investor to quickly access and manipulate fundamental and other market data.Starting at the top section—profitability ratios—you can quickly see that EMC’sprofitability exceeds that of its peers with profit margins of approximately 16% versus15.4% for the industry and less than 13% for the overall S&P 500. EMC is also enjoying faster growth of its earnings per share on both a quarterly basis and an annual basis.In terms of valuation, EMC’s P/E ratio is more than five times that of its industry,
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RatiosProfitabilityFive-year earnings % increaseQuarterly earnings % increaseProfit marginsValuationPrice/earningsPrice/salesSolvencyCurrent ratioDebt/equityManagement EffectivenessROEROA
ANALYZING COMPANY REPORTSEMCCorp.
IndustryAverage
S&P500
27.40%46%15.90%
27.10%37.8%15.40%
21.90%20.70%12.90%
143.7123.11
28.120.90
34.78.4
3.200.0
3.200.00
1.80.9
24.60%18.38%
23.50%17.00%
23.10%10.70%
Figure 8.13 EMC Fundamentals versus Industry Group and S&P 500 as of July 20, 2000
and about four times that of the S&P 500. The company’s price/sales ratio is morethan 23, compared to less than 21 for the industry, which means that in the market,the company is more richly valued than the industry as a whole. In no more than afew minutes, you can get a firm grasp on the company’s valuation relative to its industry and to the market in general.Looking quickly at the financial strength ratios shows that EMC and the companies in the storage industry do not carry much debt, and that they have less than theoverall market. Additionally, it is apparent that EMC can meet all of its short-termobligations through the use of its current assets. Looking at the current ratio canhelp you to easily see this.If you’re not convinced by now that the company is well managed, the management effectiveness numbers (ROA and ROE) will make it clear. In every measure,the company has outperformed its peers and the overall market.Many times you will hear analysts speak about the dividends that are paid out toshareholders by the company. Some companies pay a dividend and others do not.Just because a company does not pay a dividend, it doesn’t mean it wouldn’t be agood investment. For example, EMC does not pay a dividend, and this is typical of acompany that is growing rapidly. The company management believes that the bestuse for the income produced is to reinvest it into the growth of the company. In moremature industries, and more mature companies, the growth rate slows; and with diminishing returns on the income reinvested in the company, the management will optto distribute a certain part of its income to shareholders in the form of a dividend.
LIMITATIONS OF RATIO ANALYSISRatio analysis is a quick and convenient method of getting a financial snapshot ofa business enterprise; however, it is important to realize that this is just one of
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239
many approaches that an investor should use before making an investment. Theratios are only as good as the data upon which they are based and the informationwith which they are compared. For example, a company may announce that theyare changing their accounting policies for recognizing revenue, and that they aregoing to restate earnings for the last five years. Any ratio calculated prior to theaccounting change will be worthless, since they do not reflect the new policiesthat are going to be implemented. Lastly, it must be recognized that a substantialamount of important information about a company is not included in its financialstatements. Events involving such things as industry changes, managementchanges, competitors’ actions, technological developments, government actions,and union activities are often critical to the successful operation of a company.These types of activities are not reflected in the financials and must be discoveredthrough additional investigation.Additionally, Wall Street is more concerned about the future growth prospects ofa company as opposed to past results. Ratio analysis can help you analyze past results but does not provide information on future performance. Your focus needs tobe on future performance. Ratio analysis just gives you a baseline against which estimates of the future actions of the firm can be calculated.
Statement of Cash FlowsThe statement of cash flows reports the cash receipts and cash payments of a company during a particular period. Like the income statement, the statement of cashflows looks at income and expenses, but from a different perspective—when andwhat money is coming in and what is going out. The statement of cash flows hasthree parts: operating activities, investing activities, and financing activities. Sincewe are mainly concerned with the operations of the company, “Cash Flows fromOperating Activity” is the focus of the first section of the statement. Figure 8.14shows the most recent annual statement of cash flows for EMC Corporation.Specifically, it is a summation of the “Cash Flows from Operating Activity” section of the statement.
Look for Positive Cash Flows from OperationsIn a nutshell, the cash flow from operations is cash that is generated by transactionsaffecting the sale and the purchase or production of goods and services, includingcollections from customers, payments to suppliers and employees, and paymentsfor items such as rent, taxes, and interest.What to Do: It is important that your potential investment has positiveoperating cash flow. Positive operational cash flow means that incomeis being generated, and it is not all being consumed to pay theobligations that it has to employees, creditors, and so on.
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Statement of Cash Flows (millions)
December 31, 1999 December 31, 1998
Cash Flows from Operating Activity:Net IncomeAdjustments to Reconcile Net Incometo Net Cash Provided/Used by OperatingActivities:Depreciation and AmortizationDeferred Income TaxesNet Gain/Loss on Disposal Prop. & Equip.Tax Benefit from Stock OptionsMinority InterestChanges in Assets and LiabilitiesNet Cash Provided by Operating Activity:Figure 8.14
$1,010
$654
447(123)1058.14(31)
366(.62)944(.5)(101)
1,371
971
EMC Statement of Cash Flows
The PEG RatioI will leave you with one last fundamental tool that is basically a combination oftwo others discussed earlier. It is known by different names, but in this book it iscalled the price-to-earnings-to-growth or PEG ratio. The first ingredient in computing the ratio is the company’s price-to-earnings or P/E ratio.Review: The price-to-earnings (P/E) ratio of a company equals the stock pricedivided by the company’s earnings per share over the past 12 months.
The P/E ratio is relatively easy to find. It is often listed in the quote tables of financial newspapers. The ratio accompanies stock quotes on some of the more popular sites. However, it is always changing. Obviously, the stock price changes everyday. Meanwhile, earnings change every quarter, when a company files its 10-Q.Therefore, P/E ratios vary across time and between companies. Why will the samecompany sport a very high P/E ratio at certain times and a lower one at others? Andhow is it that two companies within the same industry can have vastly different priceto-earnings ratios? Often, the P/E ratio will correspond to the market’s expectations regarding the company’s future growth. That is, a company with an exceptionally stronggrowth rate will command a higher ratio than a slower-growing company. Why?Well, as an investor, if you are confronted with a choice between two stocks—both with $1 of earnings over the next 12 months—but one is growing earnings at5% annually and the other at 35%, which would you prefer? Obviously, the fastergrowing company will deliver greater earnings in the near future. Stock market investors consider growth when making investment decisions and price stocksaccordingly. Therefore, as an investor, you might have to pay 40 times earnings (ora P/E ratio of 40) for the company growing at 35% annually and only 10 times earnings for the one growing by only 5%.
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The PEG ratio is a way to gauge the value of a company by considering both theP/E ratio and the company’s growth rate. To compute the company’s true growthrate, we take the average annual growth rate over a period of years—for example, thepast five years or the past three years plus the next two based on analyst estimates.One place to turn to for reliable information concerning earnings growth ratesis www.bloomberg.com. At the home page, enter the company’s name in theStock Quotes box, click Go, and you will see a stock quote. Then, click on thecompany’s symbol and you will see a stock chart and fundamental data—including earnings estimates. Click on earnings estimates. Both earningsestimates and long-term growth rates are found on this area of the site.
The PEG ratio is then computed as the P/E ratio divided by the growth rate. Forinstance, if a company has a P/E ratio of 40 and an expected annual growth rate of20%, the price/earnings-to-growth ratio is 2.00 (40 / 20 = 2).• .50 or less: A price-to-earnings-to-growth ratio of less than .50 is extremely attractive, and the stock definitely merits consideration.• Between .50 and 1.0: The PEG ratio alone is not enough to determine whetherthe stock is a viable investment. The lower the better, but in this case the futureappreciation of the stock will be dependent on the company’s ability to deliverearnings growth in line with or above market expectations.• Over 1.00: A PEG ratio over 1.00 indicates that the stock is probably overvalued and not an attractive investment. Until the stock price falls or the companydelivers superior earnings growth, it is better to look elsewhere.One last caveat: The PEG ratio is best used when comparing a stock within thesame industry group. For example, it makes little sense to compare the PEG ratio ofan automaker with that of a biotechnology firm. Here is a quote from a Barron’s article to illustrate: “Alpharma also is one of the cheapest generic drug stocks on aprice/earnings-to-growth (PEG) basis. Its PEG ratio of 1.3x is lower than its peers’1.6x average. Some pros have set price targets in the 75 to 77 range” (Barron’s, August 17, 2000, “Alpharma Is Hardly a Generic Stock”).What to Do: The PEG ratio will tell you the relativeattractiveness of a stock given its current share price andexpected growth rate (PEG ratio = P/E ratio / EPS growth rate).
CONCLUSIONChapters 7 and 8 have offered what I consider to be the 15 most important tools offundamental analysis. Some are qualitative in nature and more subjective. For example, “Do you understand the company?” is the basic question that you should ask
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yourself. But many other tools, like the ones covered in this chapter, are quantitative in nature (financial statements, earnings forecasts, important ratios, etc.).Through time, these fundamental analysis tools can become an important part ofyour investment plan. With little more than about 15 minutes of time, you can take aserious look at a company from a fundamental standpoint. The process will eitherserve to reinforce or cause you to rethink your decision to invest in the company. Asyou gain familiarity with these numbers and what they mean, you can use them toscreen for companies that fit your criteria. For example, you might screen for companies in a favorable industry, with return on equity (ROE) higher than their peers,earnings growth rates higher than their peers, and lower debt-to-equity ratios.The boom in technology has opened up massive amounts of information to individual investors and at the same time has given them the means to manipulate iteasily. The first technology innovation to have a meaningful impact on financialanalysis was the personal computer loaded with spreadsheet software. The Internetand its widespread and immediate distribution of financial data promise to eclipsethese advances. The result is a more educated investing public, and greater financialaccountability to shareholders. The tyranny of technology, though, is that with theeasy access to real-time charting, individual investors are tempted to rely only oninformation that is visual and quick. Technical analysis has become predominantamong individual investors and recently contributed to a certain amount of detachment from realistic valuation levels, as seen in the dramatically bullish market action of the late 1990s. As stocks with no earnings or hope of producing any for yearsinto the future were trading at stratospheric levels, momentum investing became thenorm. An environment developed where stock prices were commoditized (tradinglike commodities, with price the only concern); and investors gave little thought towhat the company produced, to its profitability, or to the company’s ability to stayin business for the long term. Just a few months later, many investors saw their unrealistic gains evaporate as economic and fundamental realities forced a repricingof financial assets.So, the next time you hear an enticing story about a stock in the financial media,or a friend mentions a company to you, or you uncover a potential investment whilescanning your stock charts, take a few minutes to incorporate the fundamental datainto your decision before you pull the trigger.1. Go to Yahoo! Finance, Multex.com, or some similar service and pull up thefundamental data for a quick review.2. Compare the company to its peers. How does its profitability ratios compareto those of other companies in the same industry? Is it growing its sales fasterthan the industry? Is it carrying more debt than its peers?3. Compare the company to the market in general. Typically, the S&P 500 isused as a proxy for the broad market.4. Consider what impact the current economic environment will have on theprospective company. Will rising interest rates affect its customers’ ability to
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purchase its products? Will tight labor markets make it difficult to staff itsmanufacturing or engineering facilities? Are its raw materials increasing inprice? Will international relations developments such as China’s trade statushave a positive or negative impact on the company?5. Consider the company’s industry. Is it in favor or out of favor with the analysts?If you don’t have a particular investment in mind and you want to start from afundamental perspective, there are many screening services available that will allow you to screen, or search from among the universe of companies, to find attractive investments that fit your criteria. You can screen for companies with highgrowth rates, with high management effectiveness ratios, such as return on equity,or if value is more your style, screen for companies with low price-to-earnings orprice-to-book ratios. You’re going to need to just roll up your sleeves and learn touse these screening tools. Many of them will generate, as a product of your search,a fundamental data sheet that you can then review in order to make judgments aboutthe fundamental strength or quality of the company, compared to its industry or themarket, as we did for the EMC data earlier in this chapter.Armed with a little bit of knowledge of fundamental analysis and ready access tofinancial information and news delivered via the Internet, individual investors caneasily be grounded in sound investment decisions without having to spend an inordinate amount of time to do it. At the very least, you can have a little more understanding of how an analyst arrives at those earnings estimates we all base ourtrading and investing decisions on. Understanding the fundamentals will enable youto comprehend the financial terms that are tossed around in the financial media andpress, and make you a more informed and successful investor.
ROADMAP TO SUCCESSObjective
Course of Action
IncomeStatement
Definition: A financial statement that lists revenues, expenses,and profits over a period of time. It is filed quarterly andannually.What to Look For• Sales or revenues: Healthy year-over-year and quarter-overquarter increases.• Research and development: Is it being shortchanged? R&Dexpenditures, ideally, will be increasing from one year to thenext.• Earnings and earnings per share (EPS): The total after-taxprofits of the company.• Accelerating earnings growth. Quarterly earnings should begrowing 15% to 30%.• Annual earnings should be experiencing at least 15% to 20%growth.
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ANALYZING COMPANY REPORTS• Earnings surprises: Look for companies that consistently beatWall Street expectations and the whisper number. Avoidcompanies that consistently disappoint with poor earningsresults. Zacks spells this out clearly(my.zacks.com/index.php3).• Profit margin: Divide net income by revenues to arrive atprofit margin. Net profit margins should be increasing or atleast remaining constant from one year to the next.• Price to earnings (P/E): The most widely followed barometerof a stock price. P/E = Price divided by earnings per share (12months). Stocks with higher P/E ratios must deliver higherfuture earnings growth. Avoid stocks with high P/E ratios andlackluster earnings growth.
Balance Sheet
Definition: The financial statement of a company that lists theassets and liabilities at a certain date. Assets are listed as currentor noncurrent based on how quickly they are converted to cash.Liabilities are also grouped by their payment status; whichindicates how soon they have to be paid.What to Look For• Cash: Cash is good. When cash is increasing from one yearto the next, it suggests that the company’s operations aregenerating significant cash flows.• Avoid companies with too much debt. Most companies havesome debt in one form or another. Make sure it isn’t toomuch! See debt-to-equity ratio below.• Accounts receivable should be growing along with sales andrevenues.• Compute the current ratio: Current assets/current liabilities. Itis an indicator of the company’s ability to meet short-termdebt obligations. The higher the ratio, the more liquid thecompany. Ideally, the company will have a current ratio of 2or greater. Although it is not essential, a number less thanthat may raise a red flag.• Examine the debt-to-equity ratio: Total long-termliabilities/stockholder equity.
ManagementManagement effectiveness ratios help to determine howEffectiveness Ratios efficiently the company has used its assets and how successfulthe company is in executing their business strategy.What to Look For• Return on equity (ROE): Net income/stockholder equity.• Compare one company’s ROE to another within the samesector or industry group.• Look at the company’s overall debt level when consideringROE: Borrowed money can help generate larger return onequity, but more risk is involved. In some ways, it’s likebuying stock on margin: The returns can be great, but so canthe losses. The higher the debt, the greater the leverage.
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•
•
•
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More debt indicates more cash is spent to service the debt(principal and interest).Look at companies with higher ROE than peers, but not asmuch debt. When you see this situation, it indicates savvymanagement that is fiscally conservative, which leads togreater profitability. With more profits, the company canafford to attract top talent and invest more in R&D, a processthat helps ensure it’ll retain their dominant position withintheir industry.Return on assets (ROA): Net income/total assets. Acompany that’s efficient with a high ROA indicates lesswaste and more productivity, and is a promising situation.As with ROE, comparisons between companies using ROAmust also consider overall debt levels. How much leveragedid it take to achieve its respective ROA? More debtindicates a less stable financial condition, which makes thecompany more vulnerable when economic slowdownsoccur. (And they always do!)Look for companies with above average ROA and ROE, butnot saddled with large levels of debt. These corporations willdo well in good times and can stay afloat in bad times. Fiscalstrength is the hallmark of a sound investment.
Statement of CashFlows
Definition: A financial statement that measures a company’sincome and expenses. There are three sections in the statementof cash flows.• Cash Flows from Operating Activities• Cash Flows from Investment Activities• Cash Flows from Financing ActivitiesWhat to Look For• Positive operating cash flow. (They’re taking more in thanthey’re spending.)• Increasing net income from one year to the next.• Examine the sources of cash flow—where is it comingfrom?
AnalyzingFundamentals
Things You Can Do• The PEG ratio = P/E ratio divided by earnings per sharegrowth rate.–P/E equals the share price divided by earnings per share.–Earnings per share growth rate can be found by doing asearch of a company’s fundamentals onwww.bloomberg.com, www.zacks.com, and otherinvestment-related sites.–Consider a PEG ratio of a company relative to its peers(i.e., same sector or industry group).–PEG ratio rules of thumb:If the PEG ratio is below .50, the stock definitely meets thecriteria; it can be considered a purchase candidate.
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ANALYZING COMPANY REPORTS–A PEG ratio between .50 and 1.00 does not give enoughinformation to make a decision. Whether to buy or sellthe stock will depend on further fundamental analysis.–A PEG ratio above 1.00 should eliminate the stock fromconsideration.–In addition to the PEG ratio, go towww.siliconinvestor.com, Yahoo! Finance (finance.yahoo.com), www.multex.com, www.personal-wealth,or similar services and pull up a fundamental data quickview.Determine which is fundamental and which is technicalinformation. See Chapter 7 for a recap.• Compare one company to its peers.–How do the profitability ratios compare?–Is a company growing sales faster than the industryaverage?–Does it carry more debt than its peers?–EquityTrader.com has an easy-to-use grouping of stocks ina sector, and even uses its own criteria for ranking themaccording to strength (www.equitytrader.com).• Compare the company’s fundamentals (P/E ratio, dividend,earnings growth rate, etc.) to the market as a whole—forinstance, the S&P 500, the Dow Jones Industrial Average, orthe S&P 100.
Screening
Screening: The process of scanning and sorting through auniverse of stocks based on certain variables. The goal is tosearch among a universe of companies to find investments thatmeet your criteria.• Find a web site that offers stock screening capabilities:–my.zacks.com/index.php3–www.nasdaq-amex.com–www.personalwealth.com• Zacks has predefined screens that help you see how a screenworks. Click on Screen Tab to begin.• The screen allows you to progressively narrow your search.Since earnings are what you’re after, specifically fast earningsgrowth, begin your search by screening for earningssurprises.• Then select the sector and industry.• Select Broker Ratings and Zacks Rating as well.• This will assemble a list that’s a great place to begin deeperinvestigations.• Take each stock the screen identifies and go back to the startpage; after typing in the ticker symbol, request “The WholeEnchilada.” Now you’ll be able to delve into the variousfinancials of one company versus another.
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• Use EquityTrader.com to find other closely related companiesand make a note of them; then return to Zacks to assembleyour fundamental comparisons of items we’ve covered inChapters 7 and 8.• Screen for stocks with certain characteristics. Start withsomething simple. For instance, stocks with P/E ratios under10 (notice how quickly the list is narrowed down using thatscreen!).• Look for companies with high growth rates.• Screen for stocks with effective management ratios.• Screen, screen, screen! Be creative and use your own ratios!• Through time, you’ll discover the stocks you considerworthwhile have a specific theme or share a certain attribute.Maybe you prefer high-growth stocks, value (low P/E ratios)companies, or those within a specific sector.• As a final note, once you have identified the stocks for yourportfolio, the work isn’t over. An important element ininvestment success is monitoring them through time. Use the15 fundamental tools outlined in the last chapter and thisone as a guide. If a company begins to stumble, you want tobe the first to know and get rid of the stock before othershareholders rush for the exit.
9Technical Analysis Unveiled
Technical analysis could be described as looking into the rearview mirror to seewhere you’re going next. It sounds silly but in a way, it’s true. Technical analysisis built on the theory that market prices display repetitive patterns that can betracked and used to forecast future price movement. It evaluates price movementby analyzing statistics generated by market activity—such as past prices andvolume—to study market performance. Since price is the bottom line, technicalanalysts primarily look at price movement to determine price patterns. The nature of future price movements is forecasted from these patterns. This is a vastsubject of Amazonian proportion. One chapter will only scratch the surface, buthopefully will motivate you to learn more, and tell you what you need to learnmore about!There exist three kinds of analysis techniques: fundamental, sentiment, and technical. To state it succinctly, fundamental analysis looks at financial data; sentimentlooks at the mind-set of the market or individual stock; and technical analysis caresnot one iota about news, earnings, sentiment, or what you had for breakfast. Technical analysis looks at data displayed in chart form, and seeks to determine the recurring patterns in order to elicit a signal to buy or sell. In essence, we are lookingbackward to see where we’re headed. Let’s start scratching this surface by learningabout charts and chart types.
Technical analysis: The evaluation of price movement through chart analysisand statistics generated by market activity—such as past prices and volume.Market prices often display repetitive patterns that can be tracked and used toforecast optimal trading entries and exits.
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CHART SMARTSCharts graphically display time and price action. At a glance, even the most inexperienced investor can see how a stock or index has performed over a given period. The intervals or time units indicate what time frame you’re looking at. A daily chart looks athow a stock performed each day, generally indicating the price range it experienced inone day’s time. The chart will show a sequence of days, going back perhaps as much asa year or more. By viewing this big picture of price action and time, an investor ortrader interested in the future price action can get a better feel for what’s to come.The main objective in investing is of course to make money. Simple. Everyonehas probably heard the old saying, “Buy low; sell high.” Figuring out current pricesand their value in relation to past prices is determined by looking at a chart. Youhave to find out where a stock has been?The chart in Figure 9.1 displays the Dow Jones Industrial Average on a daily basis from July 1999 to July 2000. Traders and investors will look at this and see a variety of things including support and resistance levels, trends, and channels. Don’tworry; we’ll discuss these terms later in the chapter.The chart in Figure 9.1 is called a candlestick chart, one of several charting types.Candl