Introduction

Welcome to Fundamental and Technical Analysis, one of the most practical units on the Series 7, covering the two main approaches professionals use to evaluate securities and make investment recommendations.

Exam Weight: Part of Function 3 (~15 questions est. for chapter)

What You'll Learn

In this unit, you'll cover:

• Fundamental Analysis Overview: How analysts evaluate a company's intrinsic value using financial statements and qualitative factors
• The Balance Sheet: Assets, liabilities, shareholders' equity, depreciation, and inventory valuation (FIFO vs. LIFO)
• The Income Statement: Revenue, expenses, EBITDA, and earnings per share calculations
• Financial Ratios: Liquidity, solvency, efficiency, profitability, and valuation ratios: the core toolkit for measuring financial health
• Material Nonpublic Information: SEC rules on insider trading and tender offer prohibitions (Rules 14e-3 and 14e-4)
• Market Analysis and Sentiment Indicators: Put/call ratio, short interest, VIX, and other contrarian and confirming signals
• Bond Buyer Municipal Indexes: The four key municipal bond indexes and what they track
• Technical Analysis Fundamentals: Price trends, support/resistance, and the core assumptions behind chart-based analysis
• Chart Patterns: Head and shoulders, saucers, continuation patterns, and stabilization
• Technical Indicators: Moving averages, golden/death crosses, overbought/oversold conditions, and volume analysis
• Fundamental vs. Technical Comparison: When and why to use each approach

Why This Matters

Registered representatives must understand both fundamental and technical analysis to evaluate securities and make suitable recommendations. The exam tests your ability to read financial statements, calculate key ratios, interpret chart patterns, and apply market sentiment indicators. This unit connects the analytical skills from earlier chapters into a complete framework for security selection.

Let's start with the foundations of fundamental analysis.