Two type of analysis that are done are Fundamental or Technical Analysis.
Fundamental analysis is a method of evaluating a security in an attempt to assess its intrinsic value thus indicating whether the security is undervalued or overvalued
Fundamental analysis uses revenues, earnings, future growth, return on equity, profit margins, and other data to determine a company’s underlying value and potential for future growth. In stocks fundamental analysis focuses on the financial statements of the company being evaluated.
Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume. Unlike fundamental analysts where we evaluate a security’s intrinsic value, technical analysts focus on patterns of price movements, trading signals and various other analytical charting tools to evaluate a security’s strength or weakness
