Acknowledgments ix
Element Key xi
Introduction xiii
Part I Fundamental Analysis
Chapter 1: Financial Statements in Overview 3
The GAAP System 5
Auditing of the Books: Purpose and Process 7
Stockholder Reliance on the Audit 11
Methods of Hiding or Distorting Data 12
The Regulatory Environment 16
Types of Financial Statements 20
Annual Reports 21
Analysis: The Importance of Trends 23
Simplifying the Financial Statement 26
Chapter 2: How Reliable Are the Financial Reports? 31
Publicly Traded Company Reporting 31
The Need for Financial Reporting 33
The Value and Purpose of Fundamental Analysis 35
Long-Term Trends and Ratios 38
Fundamental Risks 41
Contrarian Investing from a Fundamental Perspective 47
Is Buy and Hold Dead? 49
Chapter 3: Balance Sheet Ratios Testing Working Capital57
The Balance Sheet in Review 58
Flaws in the Balance Sheet 60
The Importance of Footnotes 63
The Key Balance Sheet Ratios 65
Chapter 4: Income Statement Ratios Trends and Profits73
The Income Statement in Review 74
Flaws in the Income Statement 78
The Importance of Footnotes and Management s Commentary82
The Key Income Statement Ratios 84
Chapter 5: Five Key Trends Every Investor Needs 93
Trend #1: The Price/Earnings Ratio (P/E) 96
Trend #2: Dividend Yield and Trend #3: Dividend History 100
Trend #4: Revenue and Earnings 106
Trend #5: Debt Ratio 111
Chapter 6: The Annual Report and What It Reveals 121
Sections of the Annual Report 124
The Annual Report as a Marketing Document 130
How to Use the Annual Report 131
Chapter 7: Fundamentals Not on the Statement 137
Dividend Yield, Payout Ratio, and History 138
Market Cap 147
Contingent Liabilities and Other Liabilities 150
Market Value of Long-Term Assets 151
Insider Trading 153
The Value of Good Management 154
Part II Technical Analysis
Chapter 8: Theories and What They Mean 161
The Dow Theory 162
Efficient Market Hypothesis (EMH) 171
Random Walk Hypothesis (RWH) 176
Other Theories 178
Chapter 9: Charting and Its Value 185
Types of Charts 186
Scaling of Chart Values 191
Candlestick Basics 194
Single-Session Indicators 196
Two-Session Indicators 201
Three-Session Indicators 206
Reversal and Continuation 212
Chapter 10: Trends and How to Study Them 217
Trends as Indicators of Risk 219
Trendlines 222
Channel Lines 224
Triangles and Wedges 227
Chapter 11: Moving Averages and Their Value 237
Simple and Exponential Averages 238
Duration of the Moving Average (MA) 241
Double Crossover between MA Lines 242
Price Crossover Signals 245
Support and Resistance and MA Trends 248
Bollinger Bands for Short-Term Trend Monitoring 250
Chapter 12: Price Indicators 257
Support and Resistance 258
Double Tops and Bottoms 264
Head and Shoulders 266
Flags and Pennants 269
Chapter 13: Volume Indicators 275
Accumulation/Distribution (A/D) 275
Chaikin Money Flow (CMF) 279
Money Flow Index (MFI) 283
On-Balance Volume (OBV) 285
Chapter 14: Momentum Oscillators 293
The Nature of Momentum 294
Relative Strength Index (RSI) 298
Moving Average Convergence Divergence (MACD) 302
Stochastic Oscillator 306
Chapter 15: Confirmation, the Key to Timing 315
What Confirmation Is Not 316
Proximity and Strength of the Signal 317
Setting Rules for Yourself 321
Glossary 329
About the Author 349
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