There are two main ways people decide what to buy and when. Fundamental analysis asks, "What is this business worth?" Technical analysis asks, "What is the price chart telling me about buyers and sellers?" Many investors use a bit of both. This lesson explains each, with a real KSE-100 example from 2026.
Fundamental analysis: studying the business
Fundamental analysis looks at the company and the economy behind the share price. The idea is simple: over the long run, share prices follow profits and dividends. If you can buy a good business for less than it is worth, you should do well over time.
What fundamental analysts look at
The company:
- Revenue and profit growth over several years
- Earnings per share (EPS) and dividends
- Return on equity (ROE) and debt levels
- Management quality and how they treat minority shareholders
- Competitive position: is the company a market leader?
Valuation:
- P/E ratio, P/B ratio and dividend yield, compared with the company's own history and its sector
The economy and sector:
- Interest rates (the SBP policy rate was 11.5% in September 2026)
- Inflation, the rupee, oil prices and the IMF programme
- Sector-specific issues, such as circular debt for energy companies or gas prices for fertiliser makers
Lesson 7 explains how to read results and calculate these ratios.
A fundamental example
At the end of September 2026, large oil and gas producers like OGDC traded at a P/E of about 5.6 with a dividend yield of about 5.4%, while oil prices were high. A fundamental investor might see that as cheap, but would also weigh the risk of circular debt, where the company is not paid in full for the gas it sells. The decision comes from weighing value against risk, not from the chart.
Strengths and weaknesses
- Strengths: focuses on real value; suits long-term investors; helps you hold through falls because you know what you own.
- Weaknesses: takes time to learn; cheap stocks can stay cheap for years; does not tell you much about short-term timing.
Technical analysis: studying the price chart
Technical analysis studies price and volume history to judge the trend and the balance between buyers and sellers. Technical analysts believe that patterns of crowd behaviour repeat, and that the chart already reflects known news.
Moving averages
A moving average smooths out daily noise by averaging the closing price over a set number of days.
- 50-day moving average: the medium-term trend.
- 200-day moving average: the long-term trend.
There are simple averages (every day counts equally) and exponential averages (recent days count more, often written EMA). Both are used the same way.
Common rules of thumb:
- Price above the 200-day average: the long-term trend is up.
- Price below the 200-day average: the long-term trend is weakening or down.
- 50-day crossing above the 200-day: often called a "golden cross", seen as a bullish sign.
- 50-day crossing below the 200-day: a "death cross", seen as a bearish sign.
These signals are often late, and they give false alarms in sideways markets. Treat them as context, not commands.
Support and resistance
- Support is a price level where buying has tended to stop a fall, often a previous low.
- Resistance is a level where selling has tended to stop a rise, often a previous high.
When a support level breaks, it often becomes resistance later, and the other way round. Round numbers (like 170,000) also attract attention because many people watch them.
Volume
Volume shows how many shares traded. A price move on high volume is usually seen as more convincing than one on low volume.
A real example: the KSE-100 in 2026
Here is how a technical analyst might have read the KSE-100 at the close on 30 September 2026. This describes the chart at that moment. It is not a forecast.
| Level | What it is |
|---|---|
| 189,167 | All-time high (23 January 2026) |
| about 182,200 | Highest level of the previous 60 days |
| about 173,300 | 50-day exponential moving average |
| about 171,500 | Intraday high on 30 September, where the rally faded |
| 169,969 | Close on 30 September 2026 |
| about 168,600 | 200-day exponential moving average |
| about 168,000 | Support: the 60-day low (167,970) close to the 200-day average |
| about 160,000 | Next support (round number) |
| about 152,000 | Support near the March and April 2026 lows |
How to read this:
- Trend: the index was below its 50-day average but sitting on its 200-day average. That pattern usually describes a correction inside a longer uptrend, rather than a confirmed downtrend.
- Resistance: on 30 September, the index jumped about 950 points at the open to around 171,500 on IMF hopes, then faded as people took profits. That level acted as short-term resistance, with the 50-day average near 173,300 above it.
- Support: the 168,000 area combined a recent low with the 200-day average, so many traders watched it closely. A clear break below would point technical traders to the 160,000 and 152,000 areas.
The next day, 1 October 2026, the index fell 1,332 points (0.78%) to close at 168,637, right on that support zone. Technical traders then watch whether it holds on a daily closing basis or breaks.
Notice that the technical levels and the news were linked. The fade at 171,500 came on the same day as IMF headlines, and the earlier fall came with the oil shock. Charts reflect news; they do not replace it.
Which approach should beginners use?
| Fundamental | Technical | |
|---|---|---|
| Main question | What is it worth? | Where is the price likely to find buyers or sellers? |
| Time horizon | Months to years | Days to months |
| Main tools | Results, ratios, economy | Charts, moving averages, volume |
| Good for | Choosing what to own | Timing entries and exits |
| Common trap | Buying something cheap that keeps getting cheaper | Overtrading and reading patterns into noise |
For most beginners investing for the long term:
- Use fundamentals to choose what to buy. Focus on solid, profitable companies with sensible valuations.
- Use simple technical tools as a sanity check. For example, knowing whether a stock is far above its 200-day average can stop you buying at a peak in excitement.
- Avoid frequent trading. Each trade costs commission and taxes, and studies across many markets show most frequent traders underperform.
Be very wary of anyone selling "sure-shot" technical signals. Lesson 12 explains why.
Key points
- Fundamental analysis studies the business and its value; technical analysis studies the price chart and crowd behaviour.
- The 50-day and 200-day moving averages show medium and long-term trends. Price above the 200-day suggests a long-term uptrend.
- Support is where buyers have stepped in before; resistance is where sellers have.
- On 30 September 2026 the KSE-100 sat on its 200-day average near 168,600, below its 50-day near 173,300, with support around 168,000.
- Beginners do best choosing stocks on fundamentals and using charts only as a check, not as a reason to trade often.
Next lesson: Mutual funds vs buying stocks directly. See the live KSE-100 chart on our market page.