Financial Analysis
This section of my website showcases what I’ve learned and accomplished in financial analysis. Here, I highlight key concepts, techniques, and projects I’ve worked on, demonstrating my understanding of areas like risk management, investment strategies, and portfolio analysis
1
Uptrend Market: Higher Highs (HH), Higher Lows (HL), Impulsive Moves, and Pullbacks
This chart shows an uptrend in Walmart's stock, marked by Higher Highs (HH) and Higher Lows (HL). Each impulsive move pushes the price higher, followed by pullbacks that form higher lows, indicating strong bullish momentum. The break above the previous high of the impulsive move signals continued buying pressure, making it a classic upward trend where investors often buy on pullbacks to capitalize on the rally.
2
Downtrend Market: Lower Highs, Lower Lows, and Managing Risk with Support and Resistance
This chart shows a downtrend market for Boeing, marked by Lower Highs (LH) and Lower Lows (LL), confirming strong bearish momentum. Each impulsive move drives the price lower, while pullbacks result in lower highs, reinforcing the trend. Support and resistance levels are key for identifying potential reversals, setting stops, and determining target prices, helping traders manage risks and make informed decisions during the downtrend.
3
Resistance Becomes Support: Trading the Breakout
This chart highlights a breakout where a previous level of resistance turns into support after being breached. The price initially struggles to break above resistance but eventually succeeds, pulling back to retest the same level, which now acts as support. This creates a solid entry point, as shown in the chart. The target is set at the next level of resistance, making this a classic support and resistance trading strategy where traders capitalize on key price levels to determine entries, stops, and targets.
4
Average True Range (ATR) Indicator: Measuring Volatility
This chart showcases the Average True Range (ATR), a key tool for measuring volatility. The ATR line at the bottom tracks the stock’s price movements, with higher ATR values indicating increased volatility, as seen during the sharp price spike. Traders use ATR to assess market conditions, helping to identify potential breakouts and adjust stop-losses based on volatility levels.
5
Moving Averages: Identifying Key Entry Points
This chart highlights how the moving average (blue line) can act as support and help identify potential entry points when the price crosses above it. Moving averages can be adjusted to different lengths, such as 20, 50, or 200, to reflect shorter or longer-term trends. For example, a 20-period moving average captures more immediate price action, while a 200-period moving average is used to track long-term trends. Traders use these moving averages to spot potential reversals or breakouts and refine their entries, stops, and targets accordingly.
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Key Trading Patterns: Candlestick, Fibonacci, and Trend Signals
I also learned that candlestick patterns, such as the engulfing candle, are powerful tools for identifying potential reversals in market trends. Fibonacci retracement levels help spot key support and resistance zones, making it easier to predict where price might bounce or reverse. The close above/below candle confirms the strength of a trend, while double tops and bottoms signal potential reversals. Lastly, flag patterns show brief consolidations, often indicating a continuation of the current trend. These patterns have helped me refine my trading strategies, particularly in timing entries and exits in volatile markets.
7
Project: Dynamic 4-Statement Financial Model for a Lemonade Stand
In this project, I delved into financial analysis by working with a dynamic 4-statement financial model for a fictitious lemonade stand using Excel. This model integrates the income statement, balance sheet, cash flow statement, and fixed assets to provide a comprehensive view of the business's financial health.
This project not only enhanced my Excel skills but also deepened my understanding of financial modeling and analysis, providing valuable insights into the interconnectedness of financial statements.
The financial statements for the fictitious lemonade stand provide a comprehensive view of its financial health and performance. The balance sheet reveals a growing trend in total assets, increasing from $13,150 in December 2023 to an estimated $45,386 in December 2028, driven by rising current assets and fixed assets. While total liabilities also increase from $10,300 to $12,659, the retained earnings reflect increasing profitability, meaning that the business is generating net income that enhances shareholder value. The income statement shows significant revenue growth, with net revenue going from $23,750 in 2024 to $57,598 in 2028, along with an improving gross profit margin, suggesting better operational efficiency. Net income grows from $1,685 to $12,651, highlighting effective cost management alongside revenue expansion. The cash flow statement tracks positive operating cash flows, indicating that the lemonade stand generates enough cash from its operations to cover expenses and fund growth. A notable capital expenditure of $14,000 in 2024 demonstrates a commitment to scaling operations, while debt repayments reflect a strategy to manage liabilities effectively. Overall, these financial statements underscore the lemonade stand's strong position for growth, balancing investment in assets with prudent risk management.