How to Select Stocks Using Pure Technical Analysis (With Hidden Fundamentals)
Author: Finance Pulse (S. Karthik)
Introduction
Most people think fundamental analysis and technical analysis are separate. But the truth is — price already reflects fundamentals. Smart money (FIIs, DIIs, insiders) act based on fundamentals, and their actions reflect in charts.
So instead of reading balance sheets, we can capture fundamentals through technical filters. This article explains a step-by-step professional method that even beginners can follow.
Core Idea
"Strong fundamentals = Strong price action"
- Good earnings → Price goes up
- Bad results → Price falls
- Institutional buying → Volume increases
So instead of analyzing reports, we track:
- Trend
- Volume
- Breakouts
- Relative strength
Step-by-Step Technical Stock Selection Strategy
Step 1: Identify the Trend
Only select stocks in uptrend.
- Price above 50 DMA
- Price above 200 DMA
- Higher highs and higher lows
Example:
On Jan 2023, a stock moves from ₹100 → ₹120 → ₹140.
Each fall is small, each rise is strong → This shows accumulation.
Step 2: Volume Confirmation (Hidden Fundamentals)
Volume is where fundamentals hide.
- Price up + Volume high → Strong buying (good fundamentals)
- Price up + Low volume → Weak move
Real-Life Example:
On 15 March 2023, stock breaks resistance at ₹200 with 3x volume.
This means institutions are buying — not retailers.
Step 3: Breakout Strategy
Look for stocks breaking important levels:
- Previous high
- Consolidation zone
- Resistance level
Date Example:
From April–June 2023, stock stays between ₹180–₹200.
On 1 July 2023, it breaks ₹200 with volume → Entry signal.
Step 4: Relative Strength (Leader vs Laggard)
Always buy leaders, not weak stocks.
- If Nifty is flat but stock is rising → Strong stock
- If Nifty is rising but stock is not → Weak stock
Example:
On Aug 2023, Nifty gives 2% return.
Stock gives 10% return → This is leadership.
Step 5: Moving Average Setup
Use simple moving averages:
- 20 DMA → Short-term trend
- 50 DMA → Swing trend
- 200 DMA → Long-term strength
Golden Setup:
- 20 > 50 > 200
- Price above all averages
This shows strong fundamentals indirectly.
Step 6: Avoid Weak Structures
- Lower highs → Downtrend
- Breakdown with volume → Exit
- Sideways for long time → Avoid
Complete Real-Life Scenario
Let’s combine everything:
- Jan 2023: Stock at ₹100 (base formation)
- Feb 2023: Moves to ₹130 with volume
- March 2023: Consolidates ₹120–₹130
- April 2023: Breaks ₹130 with high volume
- May 2023: Moves to ₹160
This entire move shows:
- Accumulation → Breakout → Trend continuation
- Hidden strong fundamentals
Simple Checklist (Use Before Buying)
- ✔ Price above 50 & 200 DMA
- ✔ Breakout with volume
- ✔ Strong vs market
- ✔ Higher highs structure
- ✔ No recent breakdown
Common Mistakes to Avoid
- Buying falling stocks (cheap is not good)
- Ignoring volume
- Entering before breakout
- Holding losers too long
Final Conclusion
You don’t need to read financial statements to find good stocks.
Charts already reflect everything:
- Fundamentals
- Institutional activity
- Market sentiment
Master technicals properly, and you are indirectly mastering fundamentals.
"Price is the final truth in the market."
- Finance Pulse
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