Episode 3 — Technical vs Fundamental Analysis
Learn how these two approaches look at a company from different angles.
Two Ways to Study a Share
When Australians research a company, there are two major approaches they may encounter: fundamental analysis and technical analysis.
📊 Fundamental
Studies the business and its financial health.
📈 Technical
Studies price, volume and market behaviour.
What Is Fundamental Analysis?
Fundamental analysis attempts to understand the underlying business. Investors may examine revenue, profit, cash flow, debt, assets, competitive position and future prospects.
What Is Technical Analysis?
Technical analysis focuses mainly on market data. Traders study price movements, trading volume, trends, support, resistance, patterns and indicators.
Fundamental Analysis Asks...
The focus is on the company itself and the factors that could influence its long-term value.
Technical Analysis Asks...
The focus is on the behaviour of price and volume and what the chart may be communicating.
Look at the Same Company
The same ASX-listed company can be analysed using both approaches.
Fundamental Analysts Look Inside
Business
Products, customers and competitive position.
Financials
Revenue, earnings, debt and cash flow.
Management
Leadership and business strategy.
Valuation
Whether the share price appears attractive relative to estimated value.
Technical Analysts Look at the Chart
Is the share trending? Where are support and resistance? Is volume confirming the move?
Time Horizon Can Be Different
Fundamental
Often useful for understanding longer-term investment decisions.
Technical
Often used for shorter-term timing, swing trading and trend analysis.
Important: these are tendencies, not strict rules.
Fundamentals Can Explain “Why”
A company might report strong revenue growth, improve profitability or reduce debt. Fundamental analysis helps investors investigate these business developments.
Technical Analysis Can Study “When”
A trader may use a chart to study when momentum is increasing, when a trend changes or when price breaks an important level.
Neither Approach Predicts the Future
This is one of the most important lessons.
Fundamental analysis does not guarantee a rising share price.
Technical analysis does not guarantee a successful trade.
Both are tools for making decisions under uncertainty.
Can You Use Both?
Yes. Some investors combine fundamental research with technical analysis to understand both the company and its market behaviour.
🇦🇺 Australian Market Example
Imagine you are researching an ASX-listed mining company.
Fundamental Questions
What are its earnings? What is its debt? How are commodity prices affecting the business?
Technical Questions
Is the share trending? Where is support? Is volume increasing?
🕵️ Chart Detective
A company's financial results look strong, but its chart is falling.
What should you conclude?
🧠 Quick Quiz
Which item is most closely associated with technical analysis?
Key Takeaways
🟢 Fundamental analysis studies the business and financial health.
🔵 Technical analysis studies price, volume and market behaviour.
🟢 Fundamental analysis often focuses on value and business prospects.
🔵 Technical analysis often focuses on trends, timing and price behaviour.
🇦🇺 Australian investors can use either approach — or combine both.
Lesson Complete!
You've learned the difference between technical and fundamental analysis.
Next: What Is a Stock Price?
Technical analysis and fundamental analysis are two different ways of studying financial markets.
Fundamental analysis focuses on the business behind a share. An investor might examine a company’s revenue, profit, cash flow, debt, assets, management, competitive position and future growth prospects. The aim is to develop an understanding of the underlying business and its potential value.
Technical analysis takes a different approach. Instead of starting with the company’s financial statements, a technical analyst primarily studies price and market data. Charts, trading volume, trends, support, resistance, patterns and technical indicators can all form part of the analysis.
A simple way to remember the difference is:
Fundamental analysis asks: “What is this business worth?”
Technical analysis asks: “What is the market doing?”
Imagine you are researching an ASX-listed mining company. A fundamental analyst might investigate commodity prices, production levels, revenue, operating costs, debt and earnings. A technical analyst might examine whether the share is in an uptrend, where support and resistance are located, and whether trading volume is confirming a price movement.
Neither approach provides certainty.
A company can have strong financial results while its share price falls. Likewise, a share can have a strong-looking chart even when the underlying business faces significant challenges. Markets are influenced by many factors, including expectations, economic conditions, investor sentiment and new information.
Some Australian investors therefore combine both approaches. They may use fundamental analysis to understand what they want to own and technical analysis to help study market behaviour and potential entry or exit points.
There is no universal rule saying that one approach is always better. The appropriate method depends on the investor’s objectives, timeframe, risk tolerance and strategy.
The most important lesson is that technical analysis should be treated as a decision-making tool, not a prediction machine.