Fundamentals for What, Technicals for When
Select sound assets fundamentally, then time decisions technically
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 4
- Confidence
- 96%
Use fundamental analysis to establish whether an asset is credible enough to own, then use technical evidence to decide when its supply-and-demand picture supports buying, holding, reducing, or exiting. Shaw describes recommending stocks mainly for their technical potential while checking an S&P summary to ensure that earnings existed. The mechanism prevents either discipline from carrying an inappropriate burden: fundamentals need not predict near-term price behavior, while charts need not prove that the underlying business is sound. Each recommendation should remain under observation through the exit, with the full transaction history recorded. The result is a two-stage decision process that distinguishes business quality from market timing and makes both the initial thesis and subsequent outcome reviewable.
Origin
Extracted from Masters in Business, where Alan Shaw explained how Harris Upham combined technically selected recommendations with basic fundamental verification.
Core principles
- 01Fundamentals and price behavior answer different questions
- 02A strong company can still have an unattractive stock
- 03Confirm technical candidates with basic business quality checks
- 04Track each recommendation through its exit
How to run it
- 1
Establish fundamental eligibility
Check whether the company has credible earnings and a comprehensible business case. This is a quality gate, not an attempt to time the market.
Pro tip Use a concise research summary rather than forcing a full valuation model onto every candidate.
Watch out Do not assume a good company automatically has an attractive stock.
- 2
Read the technical setup
Evaluate the chart for evidence of accumulation, distribution, trend continuation, or reversal. Let observed supply and demand determine whether the timing is favorable.
Pro tip Describe what buyers and sellers are doing rather than relying only on pattern labels.
Watch out Do not retrofit technical evidence to justify a favorite company.
- 3
Define the action
Translate the setup into a specific decision such as buy, hold, lighten up, or exit. State what evidence would invalidate that action.
Pro tip Use partial reductions when evidence is deteriorating but major downside is not yet confirmed.
Watch out Avoid vague recommendations that cannot later be evaluated.
- 4
Follow through to exit
Continue tracking the recommendation until the technical evidence calls for closure. Record the entry, adjustments, exit, and final result.
Pro tip Keep performance records beside the recommendations themselves.
Watch out Do not count an open recommendation as a success before its exit is known.
In the wild
Shaw's food companies were still delivering expected earnings, but their point-and-figure charts began forming tops after major advances. He sent branches a message saying clients could lighten up rather than letting favorable business news override deteriorating price behavior.
→ The reduction preceded the 1962 collapse in those stocks.
Common mistakes
Confusing the company with its stock
A healthy business can already be fully valued or under distribution, so favorable earnings alone do not establish good timing.
Using fundamentals as decoration
Fundamental checks should test business credibility, not provide ornaments for a decision already made without discipline.
Is it for you?
Best for
It is best for investors who want to combine business research with disciplined entries and exits.
Not ideal for
It is not ideal for purely passive investors who do not make security-level timing decisions.
From the transcript
“fundamentals tell you what to buy technicals tell you when”
“We would recommend stocks based mostly on their technical potentials. And I would indeed at least get a yellow sheet in front of me to…”
From the episode
Alan Shaw Says the Days of Charting Stocks By Hand Are Over
Alan Shaw