The fundamental analyst believes that an asset has an underlying value, an intrinsic value that, in the long term, is the same as its price. Thus, the fundamental analyst analyzes all the fundamentals about a company he can find, trying to estimate the ‘intrinsic value’ of the company. He forms his investment decisions by comparing the intrinsic value to the actual price of the asset.

The technical analyst believes in an efficient market where assets cannot be mis-priced, and where the intrinsic value is equal to the price. He believes price discloses all relevant information. That is to say, all relevant information is incorporated in the price. Thus, the technical analyst only analyzes price, as this is the only way to profit according to him.

Technical analysis tends to get more criticism than fundamental analysis. The common arguments are depicted in this joke among fundamental analysts:

A technical analyst and his friend are walking down the street. His friend sees a one hundred dollar bill on the ground and is about to pick it up. The technical analyst stops him saying, “Don’t bother, if it were real someone else would already have picked it up.”

But technical and fundamental analysis both have their good, and not so good sides. Fundamental analysis is good at finding stocks that have profit potential. Actually, all fundamental analysis does is try to find stocks that have profit potential. A huge shortcoming of fundamental analysis is that it only tells you about the long term. It can tell you little to nothing about the short-term movements of a stock, an area where technical analysis excels. Technical analysis is all about timing. The only way to profit as a pure technical analyst is to get the timing right. This is also the shortcoming of technical analysis, as it doesn’t have an opinion on the potential value of a stock. Technical analysis aims at profits in the short term, but the long term is a big unknown.

Even though their basic theories may differ, technical analysis and fundamental analysis both have something to offer, and when combined can lead to more informed and profitable investment decisions.

A technical analysis puritan who misinterprets a chart pattern could make a bad investment. Whereas a hybrid analyst would know that the underlying fundamentals are good, and even if the timing were wrong, he would eventually still make a profit, but perhaps less than if had done the technical analysis correctly.

The same goes for fundamental analysis. If the analysis is faulty and the company turns out not to be a good investment, technical analysis can help stepping out at the right moment to minimize losses.

Essentially it all boils down to this: fundamental analysis answers the question, what? What stocks do I invest in, what stocks do I avoid, what stocks do I sell? Technical analysis answers the question, when? When do I buy this stock, when do I sell this stock? 

For many fundamental analysts it is hard to embrace technical analysis and visa versa. But to me it seems obvious that the combination of the two is more powerful and that every well-rounded investor should know at least a little of the other conviction to make well informed investment decisions.

Various analysis techniques, both technical and fundamental, are further explained in this site. 

And periodically, a stock will be analyzed from both a technical and a fundamental point of view.