Chapter Three Flashcards
Define Technical Analysis:
Study of market movements, following a philosophy that says trends repeat themselves
Name 5 uses of Share Price Indexes:
Forecasting economic cycles Timing of purchases and sales Evaluating portfolio performance Quantifying risk Determining speculative activities
Name 3 ways to calculate Share Price Indexes:
Price weighting
Equal weighting
Market capitalisation
Name the main disadvantage of the Price Weighting technique:
High-price shares carry a greater weight than low-price shares
How is the Market Capitalisation determined?
number of ordinary shares x current market price
Name 2 Point-and-Figure formations that act as buying signals:
Double-top formation
Quadruple-top formation
Name 2 Point-and-Figure formations that act as selling signals:
Double-bottom formation
Quadruple-bottom formation
Name 4 other types of Point-and-Figure formations:
Bullish signal formation
Bearish signal formation
Bullish symmetrical formation
Bearish symmetrical formation
What is the main purpose of a Moving Average?
To see if a trend has reversed
Define Market Breadth:
Measures the direction of the overall market by analysing the number of companies advancing relative to the number of companies declining each day
What is the main purpose of a Relative Strength Index?
Used to identify buying/selling signals
When is a share oversold?
When it reaches an RSI of 30
When is a share overbought?
When it reaches an RSI of 70
How is the RSI calculated?
100-100/((1+RS))
How is a Subsequent Average Gain calculated?
((previous average gain×13)+current gain)/14
