Investment Analysis Explanation

Introduction

Company industrial analysis fills the gap between the known and the unknown. In the present global market competition, industrial analysis is a key pillar to bridging gap between the business environment and the information technology. According to Kraft & Starkweather (2010), industrial company analysis comprises of two methods; technical analysis and fundamental analysis. Fundamental analysis focuses on analyzing the company and industrial characteristics. This is in order to evaluate the company’s value and competition level. Technical analysis involves a different approach where the interest lays on the price movements or the stock indexes in the stock markets (Kraft & Starkweather, 2010). The indexes are used as benchmarks by companies trading in a particular industrial spectrum. They measure performance of their portfolios.  Dow Jones Industrial Average (DJIA), S&P 500, and the NASDAQ are common indexes used when carrying out technical analysis. Technical analysis employs the supply-demand philosophy in estimating the value and the competitiveness of a company in a particular industry. Generally, Dow Jones Industrial Average (DJIA), S&P 500, and the NASDAQ do not provide same indexes in price directions. One can be up, the other unchanged and the other down depending on different markets factors. Usually, stock indexes refer to the highness or lowness of stocks traded on a certain markets or group of companies. A particular stock index can be limited to a particular group of companies serving a particular economic sector. For example Dow Jones Industrial Average (DJIA) index may refer to a certain industry which is different from S&P 500 index.

Dow Jones Industrial Average (DJIA)

This is the oldest stock index known in the United States. Also referred to as industrial average, it indicates an index of how thirty large public corporations in the United States have traded their stocks in a particular standard stock exchange session in a securities market (Standard & Poor’s, 2005). The index is calculated by adding up all adjusted stock price of the Dow registered and listed companies (Teenvestor, 2008). When the industrial average goes up 100 points, this means that the average security prices in the DJIA went up by 100 dollars.

S&P 500

Industrial company technical analysis can take standard and poor’s 500 indexes to tell the movements of share prices in the market. This index involves companies listed by DJIA and more than 470 other companies (Teenvestor, 2008). Since the S&P 500 covers more companies than DJIA, it comprises of more businesses from all sectors than Dow.  This means not only large public companies but also small companies. The index is presented in terms of points and percentages.

NASDAQ

NASDAQ Composite index comprises of thousands of securities traded on NASDAQ stock exchange (Teenvestor, 2008). Particularly, it is stock exchange where smaller and not publicly known business securities are traded. Again, like the above indexes it is provided as percentages change or in terms of points change. For example, today NASDAQ is at 3000 points which is a 5% increase from the last year time like this.

Relationship between the three financial markets

            The relationship between Dow Jones Industrial Average (DJIA), S&P 500, and the NASDAQ is much exhibited due to the composition of their markets. In most cases, when one index moves up, the other market moves up as well. In general, because Dow market comprise of large companies in the America, it incline not to respond to ups and downs as S&P 500 and the NASDAQ tend to (Standard & Poor’s, 2005). Essentially, though the three financial markets move up and down together, in some trading session the NASDAQ differ largely from S&P 500, and the Dow. Technology markets are volatile and NASDAQ composite comprises the technology sector companies that tend to influence its financial markets.

Conclusion

Most importantly, is to determine when to sell or buy securities. Technical analysis involving the three financial markets can be used to predict the movement of stock prices and the viable company’s stocks. Essentially, companies that seem to make huge profits in a particular financial period are likely to be trading on high stock prices and their field may exhibit different indexes based on Dow Jones Industrial Average (DJIA), S&P 500, and the NASDAQ indexes.

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