INTRODUCTION The prices of securities fluctuate daily in the market on the basis of continuous trading i.e. buying and selling. The prices of the stock move in specific trends and are never steady. The investors in the market are interested in buying securities at lower rates and selling them at higher rates in Expectation of getting excellent returns on their Investments. They therefore make an attempt to analyze the share price movement in the market. There are two approaches which are commonly used for this reason. One of the two approaches is fundamental analysis where analyses are based on current and future earning capacity of a firm. The shares are bought when the market price is less than the intrinsic value of the stock. The second approach is called technical analysis. it is an alternative approach of studying the stock behavior in the market. The technical analysis approach may seem to be Complex on the exterior, but it comes down to an analysis of supply and demand in the market which determines where the trend of prices headed. In simple words, technical analysis tries to understand the market trend rather than using a securities fundamental attributes. If one can understand the limitations and the benefits of Technical Analysis, it can give a new set of …show more content…
These supply and demand forces in return are manipulated by a number of fundamental factors and emotional or psychological factors. Many of these factors are such which cannot be quantified. The collective impact of all such factors is seen in the share price movement. Technical analysts therefore focus on the movement of share prices. They claim that by explaining historic share price movements future share prices can be precisely predicted. Forecasting techniques that make the most of historical share price data is given a name as technical
The first financial ratio of the analysis is the Price to Earnings ratio (“P/E ratio”). The ratio is computed by dividing the price of one share of common stock, by the earnings per share of common stock. This analysis uses diluted earnings per share which assumes the issuance of new stock for all existing stock options. Also, the price of the stock was computed as an average of the fourth quarter high and low stock prices published in the 10K report of each company, because the year end stock prices were not listed for all the companies. Because the P/E ratio measures the relative costliness of different stocks, in relation to their income, it provides a useful place to begin the analysis.
In the recent week, the Chevron Corp. stock can be easily categorized into one that has been oversold trading as low as $111.25 per share. A technical analyst defines an oversold position using the RSI, Relative Strength Index, to measure the momentum on a 0 to 100 scale. A stock will be called oversold, if the RSI falls below 30, and in the case of CVX Stock Analysis, it has already hit 28.1, which by comparison to other in the energy stock is low, the others averaging just above 50. Investor can always assume that the trend is one that will exhaust itself soon, but the analysts see the heavy selling as one that will continue for a few months, unless the Chevron stocks show a positive financial sign such as an increase in revenue, resumption of Gulf of Mexico operations, or some stretch in the margins of fuel products.
Horizontal analysis, also known as trend analysis, shows the changes of the financial data over a period of time. The data is used to determine increases or decrease that have taken place. The data is expressed in dollar and percentage
Markets can be efficient even if stock prices exhibit greater volatility than it can be explained by fundamentals such as earnings and dividends. Chapter 11: Potshots at the Efficient –Market Theory and Why They Miss, presents an argument of stock market fluctuations that stock prices show far too much variability to be explained by an efficient-market theory of pricing. It also talks about how one must look to behavioral considerations and to crowd psychology to explain the actual process of price determination in the stock market. I agree with Malkiel’s proclaim about the demise of the efficient-market theory and how it reasons to show that market prices are indeed predictable. Such arguments are exaggerated and the extent to which the stock market is predictable is greatly overstated because market valuation rests on both logical and psychological
To sum up, it is clear that the 2016 full year results of Woolworths Limited brings a peak of its share price from past three weeks of the announcement date. But after that, its share price starts to show a downward trend, even though it has start to slowly go up after two weeks of announcement date, its still very low, but close to the all ordinaries. Therefore, this investigation shows that all the available information is showing on the share price, but different investors have different views of the information and share price will not always follow a clear path
Stock is one of the greatest tools ever invented for building wealth. But parallel to the possibility of gaining, there is a great possibility of loosing. The only thing that can protect one from loosing is knowledge about movements in stock prices. Unfortunately, there is no clean equation that can tell us exactly how a stock price will behave, but we can try to find some factors that cause stock prices go up or down.
Return predictability means that investor can estimate only the mean time and stock return with small significance in predicting time or exact stocks’ name most likely to change.
Burton states that “qualitative analysis is a detailed, focused and deep process that seeks to find meaning in social experience (Burton 2007/2010)”. Sarantakos claims “qualitative analysis adds emphasis to questions that stress ‘how’ or ‘what meaning’ is created and given to certain situations. This is done using ethnographic style, first person accounts, and biographical and autobiographical materials (Sarantakos, 2005)”.
One positive approach is life skills training, which focuses on developing resistance skills for individuals. Evaluations show that this approach can be effective at curbing drug use.
The efficient market hypothesis has been one of the main topics of academic finance research. The efficient market hypotheses also know as the joint hypothesis problem, asserts that financial markets lack solid hard information in making decisions. Efficient market hypothesis claims it is impossible to beat the market because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information . According to efficient market hypothesis stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments . In reality once cannot always achieve returns in excess of average market return on a risk-adjusted basis. They have been numerous arguments against the efficient market hypothesis. Some researches point out the fact financial theories are subjective, in other words they are ideas that try to explain how markets work and behave.
Another approach for stock selection is technical analysis. Levy (1966) stated concepts of foundation of this analysis. This is determination of market value by supply and demand while those are defined by numerous factors. The second concept is that stock prices tend to move in trends that persist for certain period. Thirdly, trends result of shifts in supply and demand and these shifts can be detected in analysis of market action. Also, trends of prices can be revealed on charts that are the core of technical analysis. Concepts of support and resistance are used in order to determine if the market is trading or trending. That is, prices usually move within the support-resistance range. Support line is the price level through which the stock seldom declines. Resistance is the price level that a stock rarely beats. Moreover, traders buy
Stock market prediction is the method of predicting the price of a company’s stock. It is believed that stock price is lead by random walk hypothesis. Random walk hypothesis states that stock market price matures randomly and hence can’t be predicted. Pesaran (2003) states that it is often argued that if stock markets are efficient then it should not be possible to predict stock returns. In fact, it is easily seen that stock market returns will be non-predictable only if market efficiency is combined with risk neutrality. On the other hand it is also been concluded that using variance ratio tests long horizon stock market returns can be predicted....
In Psychological Research various methods are used to acquire information to prove a specific hypothesis or forecast. One of these methods which necessitates special care and consideration is a case study approach. This particular approach to research allows for the researcher to use skilled procedures to extensively examine a single unit or anomaly. History displays, this strategy as a nonexperimental qualitative approach but in research today, a mixed method of qualitative and quantitative is used. According to Crawford (2016), a case study is defined as “A research methodology that is an in-depth observation of an individual, animal, event, or treatment method” (p.73). However, this definition is modified across disciplines, consequently, creating a variance in the quality of the technique. Today the case study approach is one of the most frequently used methods of research. Although the case study approach provides many advantages, one being a critical investigation into the subject, it also has its disadvantages, some of which jeopardize the effectiveness of the analysis.
There is a sense of complexity today that has led many to believe the individual investor has little chance of competing with professional brokers and investment firms. However, Malkiel states this is a major misconception as he explains in his book “A Random Walk Down Wall Street”. What does a random walk mean? The random walk means in terms of the stock market that, “short term changes in stock prices cannot be predicted”. So how does a rational investor determine which stocks to purchase to maximize returns? Chapter 1 begins by defining and determining the difference in investing and speculating. Investing defined by Malkiel is the method of “purchasing assets to gain profit in the form of reasonably predictable income or appreciation over the long term”. Speculating in a sense is predicting, but without sufficient data to support any kind of conclusion. What is investing? Investing in its simplest form is the expectation to receive greater value in the future than you have today by saving income rather than spending. For example a savings account will earn a particular interest rate as will a corporate bond. Investment returns therefore depend on the allocation of funds and future events. Traditionally there have been two approaches used by the investment community to determine asset valuation: “the firm-foundation theory” and the “castle in the air theory”. The firm foundation theory argues that each investment instrument has something called intrinsic value, which can be determined analyzing securities present conditions and future growth. The basis of this theory is to buy securities when they are temporarily undervalued and sell them when they are temporarily overvalued in comparison to there intrinsic value One of the main variables used in this theory is dividend income. A stocks intrinsic value is said to be “equal to the present value of all its future dividends”. This is done using a method called discounting. Another variable to consider is the growth rate of the dividends. The greater the growth rate the more valuable the stock. However it is difficult to determine how long growth rates will last. Other factors are risk and interest rates, which will be discussed later. Warren Buffet, the great investor of our time, used this technique in making his fortune.
An insight into CCA’s latest fluctuations and position of share prices in most recent 2013 terms. This will include the trends over the previous six months as well as any significant trends in share price f...