How to analyse ETF charts: Technical and fundamental approaches


ETFs are a great way to get exposure to different asset classes, sectors and markets. These investment options can provide diversification and risk management benefits and the potential for higher returns. However, it is essential to understand how to read and analyse ETF charts so that you can make informed investing decisions.

There are two main approaches to analysing ETF charts; technical analysis and fundamental analysis. Both are valid methods of interpreting financial data, but they work differently.

Technical analysis

Technical analysis involves studying an asset’s or market index’s historical price movements to predict future behaviour. It uses indicators such as support and resistance levels, moving averages, candlestick patterns and trendlines to identify market trends and areas where buying or selling may be advantageous. Technical analysts look for repeating patterns on a chart. These could include head and shoulders, double tops and bottoms and other chart patterns.

Fundamental analysis

In contrast to technical analysis, fundamental analysis focuses on a company’s or ETF’s underlying economics. It looks at revenue growth, profitability, debt levels and management quality to evaluate an ETF’s potential for long-term growth. Fundamental analysts use financial statements, ratios and other economic data to identify whether a stock is undervalued or overvalued. They also consider macroeconomic factors such as inflation and interest rates, which can impact an ETF’s performance.

Both technical and fundamental analysis have their strengths and weaknesses; it is up to the individual investor to decide which approach best suits their needs. Combining both approaches may be the most effective way to analyse ETFs. By studying technical and fundamental indicators, investors can gain a more comprehensive view of an ETF’s prospects for future growth and determine when it is most appropriate to buy or sell.

When analysing ETF charts, there are some key things to keep in mind:

  • Consider your investment goal and what type of return you want from your ETF. Are you looking for short-term gains or long-term returns?
  • Use historical data and look at a chart’s past performance to identify potential buying and selling points.
  • Pay attention to the trend using trendlines and moving averages to monitor momentum over time.
  • Monitor risk levels, understand the risks associated with an ETF, and use technical indicators such as support and resistance levels to manage them.
  • Make informed decisions by using technical and fundamental analysis to make informed investing decisions.

Other types of analysis used in ETF trading

When trading ETFs, many investors employ various analytical techniques to make more informed decisions. Apart from technical and fundamental analysis, other forms used in ETF trading include sentiment, momentum, and portfolio analysis.

Sentiment analysis

Sentiment analysis uses the opinions of market participants to gauge the direction of asset prices. This can involve looking at news sources such as Twitter, stock message boards and financial press releases to identify potential buying or selling opportunities. By understanding investor sentiment, traders can be better informed when making trading decisions.

Momentum analysis

Momentum Analysis focuses on the price trend of an ETF over a specific period. This type of analysis looks for stocks moving in a particular direction and then uses that information to buy or sell. Momentum investors will use indicators such as the Relative Strength Index (RSI) to measure momentum and identify areas where buying or selling may be advantageous.

Portfolio analysis

Portfolio Analysis helps investors understand how their portfolio performs relative to other funds or markets. It examines risk, return and correlation between various investments to build a more diversified portfolio with higher and lower risk levels. Portfolio analysts look at data such as historical performance, sector exposure and individual stock allocations to construct an optimal portfolio that meets their investment goals.

How to find the best ETFs to invest in?

With so many options, knowing where to start when looking for the best ETFs to invest in can be complicated. A good rule is to look online for ETFs and evaluate a potential investment by studying its performance history and researching the underlying assets. Understanding the fund’s management approach and associated fees can help investors in Singapore determine whether an ETF is worth investing in.

The bottom line

ETFs are an excellent way for investors to diversify their portfolios and get access to a wide range of underlying assets. However, investors must understand how to read and analyse ETF charts before investing. By combining technical and fundamental analysis with other forms of research, such as sentiment analysis and portfolio analysis, traders can better assess each investment’s risk and potential return. With these considerations in mind, traders can make more informed decisions and generate greater returns over time.