The Microcap Minute Classroom. Module 6, chapter 5: RRG plus fundamentals: rotation tells you when, filings tell you what <div class="learn" markdown="1"> **What you will learn** - Why a chart position alone is never enough to act on - What "fundamentals" means and where to find them - A simple two-step routine that pairs the RRG with SEC filings - Why a great chart and a weak business is a trap </div> Suppose you are picking a cricket player for your school team. A friend says: "This boy is in red-hot form, he scored heavily in his last three matches." Useful. But you would also ask: does he have a proper technique, or did he get lucky on easy pitches? Form tells you when someone is hot. Technique tells you what they are made of. Smart selectors want both. Investing research has the same two halves: - **The RRG (the "when")**: it reads the crowd's mood: which stocks the market is rewarding right now, and which way that reward is drifting. - **Fundamentals (the "what")**: the actual business. Revenue (total sales), profit, debt, cash, and the risks management admits to. In the US, companies must disclose all of this in filings to the SEC, the Securities and Exchange Commission, America's market regulator. Those filings are free on SEC.gov's EDGAR system. ## The two-step routine Here is a routine that combines them, using Apple as the running example. **Step 1: let the RRG raise the question.** Your weekly RRG shows Apple crossing from Improving toward Leading, tail pointing up and right. The crowd is warming to the stock. That is a question, not an answer: "is something genuinely going right at this company, or is this just excitement?" **Step 2: let the filings answer it.** Open Apple's filings on EDGAR and read its latest 10-K (the annual report every US public company must file) or the newest 10-Q (the quarterly update). You are checking: is revenue growing? Is the company buying back shares? What do the Risk Factors say? Earlier modules taught you how to read each of these. Notice the filing types column: the 10-K and 10-Q entries are where the real business story lives. If the filings show growing revenue, strong cash, and no alarming new risk, the rotation and the business agree, and you have a coherent story worth studying. If they show shrinking sales and rising debt, the RRG is showing you excitement without substance. Hot form, no technique. That mismatch is exactly when beginners get trapped, because a rising price feels like proof. It is not proof. It is a mood. This is also how our own newsletter works, with one extra test. It starts from the weekly sector map against the S&P 500 and keeps only the sectors heading north-east, up and right, into or toward Leading. Then it looks inside each surviving sector at its member stocks, keeping only those whose own heading is also north-east. If too few members confirm the sector's rotation, the whole sector is dropped. Breadth before business, then filings. ## The reverse case matters too Sometimes the RRG shows a fine company sinking into Lagging. Filings may reveal why: perhaps profits fell, or a big risk appeared. But sometimes the filings look solid and the crowd is simply distracted by shinier stories. That gap, good business plus cold crowd, is interesting too, though a Lagging stock can stay Lagging for a very long time, so interest is not a green light either. <p class="credit">Chart courtesy of <a href="https://www.stockcharts.com">StockCharts.com</a></p> Six megacaps against the S&P 500 on the weekly RRG; the panel shows the recipe: benchmark $SPX, weekly period, three year range. The habit is the same: treat any dot crossing into Leading as a prompt to research, never as a decision by itself. <div class="try" markdown="1"> **Try it yourself** Pick whichever megacap sits closest to the Leading border on today's RRG. Find that company on SEC.gov's EDGAR (search its name), open its latest 10-Q, and read only two things: the revenue line in the income statement and the first two Risk Factors. Write one sentence: does the business evidence support the crowd's warming mood, or contradict it? </div> <div class="takeaways" markdown="1"> **Key takeaways** - RRG tells you when the crowd is warming or cooling; filings tell you what the business is actually doing. - A rotation into Leading is a research prompt, never a conclusion. - Excitement without business evidence is the classic beginner's trap. - A solid company can sit in Lagging for months; a weak company can ride Leading for weeks. Map and filings often disagree, and that disagreement is where the learning is. </div>. I am Ritu, a synthetic voice, and the words I am reading are Ayush Agrawal's.

# RRG plus fundamentals: rotation tells you when, filings tell you what <div class="learn" markdown="1"> **What you will learn** - Why a chart position alone is never enough to act on - What "fundamentals" means and where to find them - A simple two-step routine that pairs the RRG with SEC filings - Why a great chart and a weak business is a trap </div> Suppose you are picking a cricket player for your school team. A friend says: "This boy is in red-hot form, he scored heavily in his last three matches." Useful. But you would also ask: does he have a proper technique, or did he get lucky on easy pitches? Form tells you when someone is hot. Technique tells you what they are made of. Smart selectors want both. Investing research has the same two halves: - **The RRG (the "when")**: it reads the crowd's mood: which stocks the market is rewarding right now, and which way that reward is drifting. - **Fundamentals (the "what")**: the actual business. Revenue (total sales), profit, debt, cash, and the risks management admits to. In the US, companies must disclose all of this in filings to the SEC, the Securities and Exchange Commission, America's market regulator. Those filings are free on SEC.gov's EDGAR system. ## The two-step routine Here is a routine that combines them, using Apple as the running example. **Step 1: let the RRG raise the question.** Your weekly RRG shows Apple crossing from Improving toward Leading, tail pointing up and right. The crowd is warming to the stock. That is a question, not an answer: "is something genuinely going right at this company, or is this just excitement?" **Step 2: let the filings answer it.** Open Apple's filings on EDGAR and read its latest 10-K (the annual report every US public company must file) or the newest 10-Q (the quarterly update). You are checking: is revenue growing? Is the company buying back shares? What do the Risk Factors say? Earlier modules taught you how to read each of these. Notice the filing types column: the 10-K and 10-Q entries are where the real business story lives. If the filings show growing revenue, strong cash, and no alarming new risk, the rotation and the business agree, and you have a coherent story worth studying. If they show shrinking sales and rising debt, the RRG is showing you excitement without substance. Hot form, no technique. That mismatch is exactly when beginners get trapped, because a rising price feels like proof. It is not proof. It is a mood. This is also how our own newsletter works, with one extra test. It starts from the weekly sector map against the S&P 500 and keeps only the sectors heading north-east, up and right, into or toward Leading. Then it looks inside each surviving sector at its member stocks, keeping only those whose own heading is also north-east. If too few members confirm the sector's rotation, the whole sector is dropped. Breadth before business, then filings. ## The reverse case matters too Sometimes the RRG shows a fine company sinking into Lagging. Filings may reveal why: perhaps profits fell, or a big risk appeared. But sometimes the filings look solid and the crowd is simply distracted by shinier stories. That gap, good business plus cold crowd, is interesting too, though a Lagging stock can stay Lagging for a very long time, so interest is not a green light either. <p class="credit">Chart courtesy of <a href="https://www.stockcharts.com">StockCharts.com</a></p> Six megacaps against the S&P 500 on the weekly RRG; the panel shows the recipe: benchmark $SPX, weekly period, three year range. The habit is the same: treat any dot crossing into Leading as a prompt to research, never as a decision by itself. <div class="try" markdown="1"> **Try it yourself** Pick whichever megacap sits closest to the Leading border on today's RRG. Find that company on SEC.gov's EDGAR (search its name), open its latest 10-Q, and read only two things: the revenue line in the income statement and the first two Risk Factors. Write one sentence: does the business evidence support the crowd's warming mood, or contradict it? </div> <div class="takeaways" markdown="1"> **Key takeaways** - RRG tells you when the crowd is warming or cooling; filings tell you what the business is actually doing. - A rotation into Leading is a research prompt, never a conclusion. - Excitement without business evidence is the classic beginner's trap. - A solid company can sit in Lagging for months; a weak company can ride Leading for weeks. Map and filings often disagree, and that disagreement is where the learning is. </div>

That was chapter 5 of module 6. The text, the pictures and the exercise are on the lesson page. Thank you for listening.