Investing 09: Stock Screening and Picking: Why I Start with Technical Analysis

One of the longest-running debates in investing is whether technical analysis or fundamental analysis is better.

Personally, I don't think there is a universal answer.

Both approaches work.

The real question is whether your process is consistent and fits your investment style.

For me, I start with technical analysis first, followed by fundamental analysis.

I consider myself a trend-following (right-side) investor.

I am not trying to buy stocks at their lowest prices.

Instead, I prefer buying stocks that have already demonstrated strength.

My philosophy is simple: Strong stocks often become stronger.

Price represents the collective opinion of millions of market participants. If institutional investors are accumulating shares, that buying pressure will eventually be reflected in price and volume.

Rather than predicting where money will flow next, I prefer to observe where money is already flowing.

The stock market contains thousands of listed companies.

Analyzing every company individually is impossible.

Therefore, I first narrow my universe using quantitative filters.

My screening criteria include:

These filters help remove illiquid stocks and reduce market noise.

More importantly, they increase the probability that institutional investors are participating.

Liquidity matters because it often reflects where capital is flowing.

I follow a top-down approach.

After determining that the overall market is healthy, I identify which sectors are outperforming.

Capital rarely flows equally across every industry.

Instead, it usually concentrates in a few leading sectors.

For example:

If a sector consistently outperforms the broader market, it deserves further attention.

The goal is to invest where institutional money is already moving.

Not every company within a strong sector performs equally well.

Once I identify a leading sector, I look for the strongest stocks inside that group.

Market leaders often attract more institutional capital, stronger momentum, and greater investor confidence.

Rather than buying the average company, I prefer buying the companies that are leading the trend.

Finally, I verify that the stock itself is in a strong uptrend.

As one example, I use the relationship between the 20-day EMA and the 250-day EMA.

My definition of a strong trend is:

20 EMA > 250 EMA by more than 5%

This indicates that short-term momentum is significantly stronger than the long-term trend.

Again, the exact indicator is not the important part.

Consistency is.

The objective is to ensure that I am investing alongside an established trend instead of fighting against it.

Once a stock passes my technical filters, I begin fundamental analysis.

This is where I ask questions such as:

Technical analysis helps me identify where to look.

Fundamental analysis helps me decide whether the company deserves my capital.

The two approaches complement each other rather than compete.

Many investors start with company fundamentals and then look at the chart.

I simply reverse the order.

I first let the market tell me which companies deserve attention.

Then I study whether those companies have the business quality to support the trend.

By combining:

I increase the probability of finding high-quality investment opportunities.

No screening method guarantees success.

But having a disciplined, repeatable process allows me to focus my time on the stocks that are most likely to matter.

Because investing is not about analyzing every stock.

It is about efficiently finding the few opportunities that deserve your attention.