Fundamental Analysis vs. Technical Analysis: Which Should You Choose to Invest?

The Analysis: Two Religions for Reading Markets

If you've spent five minutes on a trading forum or investment group, you've inevitably encountered the debate: *"Technical analysis is just fortune-telling"* versus *"Fundamental analysis takes too long, markets change too fast."* Two camps. Two methods. One question: which actually works?

The reality, of course, is more nuanced. And understanding it radically changes how you approach investing.

Fundamental analysis starts from a simple idea: a stock represents a share in a real business. Its long-term value is therefore determined by its earnings, debt, growth, and competitive position. For a fundamentalist, if you buy a stock for less than the company is intrinsically worth, you're getting a good deal, regardless of what the chart says today. Benjamin Graham, the father of this school, put it this way: *"In the short run, the market is a voting machine. In the long run, it's a weighing machine."* Warren Buffett, his most famous student, built one of the world's greatest fortunes applying this principle.

Technical analysis starts from a different premise: all available information, earnings, news, expectations, is already reflected in the price. What matters, then, is the dynamics of the price itself. Chartists look for repeating patterns: support levels, resistance, moving averages, Japanese candlesticks. Their argument: markets are made by human beings, and humans always react in roughly the same way to fear, greed, and euphoria. These reactions leave visible traces on charts.

The Anecdote: The War of 1987

In 1987, on "Black Monday" when the Dow Jones lost 22% in a single session, a revealing anecdote circulated through trading rooms. A major New York investment bank had two parallel teams: the fundamentalists had analyzed the balance sheets of major companies and concluded that valuations, though elevated, remained justifiable. No strong sell signal. The chartists, however, had noticed something troubling since September: distribution patterns, abnormal volume, a loss of momentum on the indices. They had begun to reduce positions.

On October 19, 1987, the fundamentalists were still fully invested. The chartists had reduced their exposure by 40%. Both teams had analyzed the *same* markets with different tools and reached opposite conclusions.

This story isn't meant to say one method always wins. It illustrates that the two approaches capture different information, and sometimes complementary information.

The Historical Fact: Dow Theory, the Origin of Everything

Modern technical analysis was born from the work of Charles Dow, founder of the *Wall Street Journal* and inventor of the Dow Jones Industrial Average. In the late 19th century, Dow published a series of editorial observations about market behavior: prices move in trends, markets anticipate news, volume confirms movements.

These principles, known as "Dow Theory", are still taught in trading courses 130 years later. They influenced generations of analysts, from Richard Wyckoff to Ralph Elliott (Elliott Waves) to today's algorithms.

In parallel, Benjamin Graham published *Security Analysis* in 1934, laying the foundations of modern fundamental analysis. These two books, published less than 40 years apart, founded the two great traditions that still dominate today.

What history says: both methods have survived a century of markets, crises, bubbles, and crashes. Neither has eliminated the other. That's no coincidence.

The Concept: The Macro Filter, the Technical Trigger

The question "fundamental or technical?" is actually a false dilemma. The best managers and traders use both, not simultaneously on the same signal, but in layers.

Fundamental analysis gives you a conviction: this company is high quality, it's undervalued, it deserves a place in the portfolio. Technical analysis gives you timing: *now*, the price is breaking above its resistance, volume confirms, the trend is there. Entering now rather than six months ago reduces drawdown and improves risk-adjusted returns.

Investors who only use fundamentals often buy too early, and hold through long periods of decline. Those who only use technicals often miss the macro context that invalidates a chart signal.

The real risk is believing that one method alone is enough. Fundamental analysis doesn't tell you *when* the market will recognize value. Technical analysis doesn't tell you whether the company behind the chart is solid or collapsing.

The Axone Lesson

At Axone Capital, the method comes down to three words: Macro · Technical · Mindset.

Macro first: what is the economic context? Is liquidity increasing or contracting? What types of assets do current rates favor? That's the framework. Then technical: within that framework, which assets and at what precise moment? Charts provide the levels, structure, and momentum. Finally mindset: maintaining the discipline of your method when the environment gets noisy.

Fundamental analysis and technical analysis are not enemies. They're tools. A good investor knows which one to reach for, and when.