Chapter 7 The Art of Research

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Technical Indicator Wisdom 7

The best time to sell a share is near resistance levels.

Investors and traders need information before they trade. Not only information on companies, local trends, market changes, corporate finance, and governance, but also on international key value drivers.

There are numerous books on how to operate the Internet and it is not my intention to provide even a guideline here. However, I do provide a basic structure for research in the form of a breakdown of Internet sites. These will change over time and investors will find many more links to other sites from the ones recommended in the following text.

The Only Way to Conduct Research

The methodology of research differs between analysts worldwide. However, the basis is always a logical progression:

• Macro research: Background research on a specific subject and the environment it operates in (globally, regionally, and locally).

• Micro research: In-depth analysis of specific subject.

Example: An Investor wishes to buy shares in the NYSE-listed oil company XXX Ltd.

• MACRO: Search the archives of media companies and scholastic sites for general background on:

A specific company, i.e., XXX Ltd

The sector that a specific company operates in, i.e., XXX Ltd. operates in the chemical and oil sector.

Competitors, i.e., Shell, Caltex, BP, Total, and others.

Get the graph of the share and the investor should ask his stockbroker (or advisor) for an explanation of major share movements.

Global oil trends: Information could be obtained from international petroleum magazines, the OECD, World Bank, or IMF.

If the investor intends to undertake a serious investment in a specific share, he or she must undertake research in the holding company and obtain the annual report of the specific companies.

• MICRO: Obtain specific information, which includes:

Financial year-end reports.

Corporate changes.

Risk-to-return profiles.

Before investing in a share, investors should understand fundamental factors that affect a particular business for at least the past 18 months.

Searching for information

There are two basic ways of searching for a subject:

• Using a search engine. Each engine has its own prerequisites and the investor must first read the instructions. For instance, engines like Yahoo, AltaVista, InfoSeek, and Lycos have different prerequisites for searching, i.e., some engines permit multiword search, while others do not. There are many search engines available and many more will become available in the future.

• Using a web address. This is a direct link to a website and the following text highlights some important addresses. Note that all Internet systems enable users to save a site address in a “bookmark.” So, if you are surfing the Internet and come across a site that you would like to return to at some later stage, click on “add to bookmark.”

The number and variations of online resources can frazzle the mind and everyday more and more sites are uploaded to the Internet. Resources range from informational websites, online magazines, online educational sites, to interactive trading markets. That doesn’t include online publishers where you can purchase stock investment books from sites such as barnesnoble.com or amazon.com or financial and media business sites.

Traditionally, floor-based trading occurred between the hours of 9 a.m. and 4 p.m.; however, online markets are changing all that. Many speculate that 24-hour trading is not far away.

Many online trader sites offer stock picks and specific recommendations for people who register on their site and subscribe to e-mail newsletters. You can find online chat rooms and active bulletin boards where you can post messages and follow-up responses. The idea is to provide a market of communication where you can post messages and follow-up responses. The idea is to provide a market of communication for firm experts, experienced individuals, and even amateurs just getting started.

You will need to surf through these online trading sites, read as much as possible until you feel comfortable returning to a select few and following the suggestions and advice they provide on their sites.

Please realize that not all the information on these sites can be taken as absolute. Many people will offer information based on their opinions, experience, and education. The opinions may or may not be helpful, but the experiences and education could be of assistance to you while in the process of learning.

Listening and heeding advice can sometimes help you to avoid mistakes that others have made, however, it can also mislead you into making bad decisions. You have to do your own research, self-education, take classes, and weigh advice based on other cross-references and your instincts. You will make mistakes. No experience can be error free or it wouldn’t be experience. Use your mistakes wisely, learn from them so that you don’t repeat them.

The following lists are current online websites organized by appropriate categories.

Media Websites

• ABC News: www.abcnews.com

• CNBC: www.cnbc.com

• CBS Marketwatch: www.marketwatch.com

• CNN Financial: www.cnnfn.com

• MSN MoneyCentral: www.moneycentral.com

• The New York Times: www.nytimes.com

• News Alert: www.newsalert.com

• TheStreet.com: www.thestreet.com

• Dow Jones Newswires: www.dowjonesnews.com

• Standard & Poor’s: www.spcomstock.com