Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Investment management wikipedia , lookup
Mark-to-market accounting wikipedia , lookup
Price action trading wikipedia , lookup
Market (economics) wikipedia , lookup
High-frequency trading wikipedia , lookup
Trading room wikipedia , lookup
Algorithmic trading wikipedia , lookup
Securities fraud wikipedia , lookup
Hedge (finance) wikipedia , lookup
Short (finance) wikipedia , lookup
Stock exchange wikipedia , lookup
Stock market wikipedia , lookup
Security Analysis and Portfolio Management Case 2 Mohammed Al Naim 200700415 Ahmad al Dossary 200700669 1. What are the benefits of technical analysis over fundamental analysis? Security analysis can be done using technical analysis and fundamental analysis. Technical analysis determines the future price of a stock by focusing on the direction or trend of stock prices and the market by studying past data like prices and trade volume. Fundamental analysis determines the intrinsic value of a stock by focusing and analyzing the company’s published financial statements, business environment, industry, competitors and other economic factors that can influence the supply and demand of the stock. Fundamental analysis is used for long-term investment, while fundamental analysis is used for both short-term and long-term investment. Technical analysis predicts price changes earlier than fundamental analysis. They have good timing. Technical analysis is better than fundamental analysis because it is simple and straightforward, ideal timing and does not use financial statements which can be deceptive at times because of management’s control over its preparation. 1 2. Plot the stock price data and the return data for the last 60 months. Sears Historical Monthly Prices Monthly Prices 150 100 50 0 Apr-07 Nov-07 Jun-08 Dec-08 Jul-09 Jan-10 Aug-10 Feb-11 Sep-11 Apr-12 Oct-12 May-13 Date Monthly Percentage Returns Sears Monthly Percentage Returns 100.00% 50.00% 0.00% Apr-07 Nov-07 Jun-08 Dec-08 Jul-09 Jan-10 Aug-10 Feb-11 Sep-11 Apr-12 Oct-12 May-13 -50.00% -100.00% Date 2 3. Find the breadth of the market for the last 12 months. Breadth of a market measures the number of issues (trading volume) that have increased or decreased during a day. If a securities are trading below its previous close it has declines volume, advances volume when it is trading above its previous close. Advances volume, a bullish market for Sears, is indicated by the white bars. Sears stock is trading above its previous close on good volume on January, March, and September. Declines volume, a bearish market for Sears, is indicated by the dark blue bars. Sears stock is trading below its previous close on good volume on February and December. 3 4. 100-Day Moving Averages for Sears and S&P 500 Sears stock is outperforming the S&P 500 market index during March to April and October to November as shown in the figure above (the white line above the yellow line). During May to September, Sears’s stocks are either a little below or above the market index. The 100-day moving average is indicated by the light blue line, Sear’s stocks are trading above the 100-day moving average during the periods March to April and October to November, it means that Sears’s stock has an upward trend (bullish market) and are generally healthy, it is time to buy the shares (buy signal). Sears’s stocks are trading below the 100-day moving average during the periods May to August and December, it means that Sears’s stocks has a downward trend (bearish market) and are generally considered unhealthy. Thus it is time to sell the shares (sell signal). 4 5. Trends and Stock Price Movements A bullish market for Sears starts on January until March, at the start of the upward trend, investors should buy Sears Stock. A bearish market for Sears starts when the bull period ends, at this time investors should sell their shares to maximize gains, Sears’s bearish period starts at the end of March and continues until May. There is no significant long-term trend during the periods May to November. The S&P 500 market index is shown as a flat line all throughout the period showing less volatility. 5 6. Relative Strength of Sears No. Date Historical Monthly Prices Price Relative Percentage Change Sears (Sears/S&P 500) Relative Price S&P 500 1 Nov-12 42.01 1416.18 2.97% -40.28% 2 Oct-12 62.67 1412.16 4.44% 14.17% 3 Sep-12 55.49 1440.67 3.85% 2.67% 4 Aug-12 52.75 1406.58 3.75% 4.42% 5 Jul-12 49.49 1379.32 3.59% -20.01% 6 Jun-12 59.7 1362.16 4.38% 15.06% 7 May-12 49.4 1310.33 3.77% -2.03% 8 Apr-12 53.78 1397.91 3.85% -20.10% 9 Mar-12 66.25 1408.47 4.70% -8.10% 10 Feb-12 69.66 1365.68 5.10% 46.28% 11 Jan-12 42.14 1312.41 3.21% 23.95% 12 Dec-11 31.78 1257.6 2.53% -64.95% 13 Nov-11 60.33 1246.96 4.84% -25.41% 14 Oct-11 78.18 1253.3 6.24% 20.46% 15 Sep-11 57.52 1131.42 5.08% 3.41% 16 Aug-11 59.89 1218.89 4.91% -9.28% 17 Jul-11 69.67 1292.28 5.39% -0.34% 18 Jun-11 71.44 1320.64 5.41% 2.46% 19 May-11 71 1345.2 5.28% -17.77% 20 Apr-11 85.97 1363.61 6.30% 1.13% 21 Mar-11 82.65 1325.83 6.23% -0.69% 22 Feb-11 83.31 1327.22 6.28% 6.87% 23 Jan-11 75.37 1286.12 5.86% -0.07% 24 Dec-10 73.75 1257.64 5.86% 5.54% 25 Nov-10 65.5 1180.55 5.55% -9.20% 26 Oct-10 71.98 1183.26 6.08% -3.84% 27 Sep-10 72.14 1141.2 6.32% 6.82% 28 Aug-10 61.96 1049.33 5.90% -8.76% 29 Jul-10 71 1101.6 6.45% 2.72% 30 Jun-10 64.65 1030.71 6.27% -25.64% 31 May-10 88.3 1089.41 8.11% -22.91% 32 Apr-10 120.95 1186.69 10.19% 9.46% 33 Mar-10 108.43 1169.43 9.27% 6.81% 34 Feb-10 95.67 1104.49 8.66% -0.28% 35 Jan-10 93.28 1073.87 8.69% 14.90% 36 Dec-09 83.45 1115.1 7.48% 14.47% 37 Nov-09 70.95 1095.63 6.48% -1.13% 6 38 Oct-09 67.86 1036.19 6.55% 5.83% 39 Sep-09 65.31 1057.08 6.18% -0.62% 40 Aug-09 63.45 1020.62 6.22% -7.76% 41 Jul-09 66.34 987.48 6.72% -7.42% 42 Jun-09 66.52 919.32 7.24% 15.69% 43 May-09 56.85 919.14 6.19% -14.60% 44 Apr-09 62.47 872.81 7.16% 22.26% 45 Mar-09 45.71 797.87 5.73% 13.60% 46 Feb-09 36.76 735.09 5.00% 0.92% 47 Jan-09 40.92 825.88 4.95% 14.09% 48 Dec-08 38.87 903.25 4.30% 6.20% 49 Nov-08 36.25 896.24 4.04% -38.77% 50 Oct-08 57.74 968.75 5.96% -29.64% 51 Sep-08 93.5 1166.36 8.02% 11.19% 52 Aug-08 91.95 1282.83 7.17% 11.47% 53 Jul-08 81 1267.38 6.39% 10.49% 54 Jun-08 73.66 1280 5.75% -5.00% 55 May-08 84.72 1400.38 6.05% -16.24% 56 Apr-08 98.61 1385.59 7.12% -8.11% 57 Mar-08 102.09 1322.7 7.72% 7.15% 58 Feb-08 95.62 1330.63 7.19% -10.92% 59 Jan-08 110.49 1378.55 8.01% 14.26% 60 Dec-07 102.05 1468.36 6.95% Relative strength compares the performance of a security relative to benchmark (S&P 500). The stock has relative strength if a stock has displayed significant positive relative strength against the market. Sears stock is outperforming the S&P 500 market index during March to April and October to November as shown in the rising price relative, thus relative strength, Sears stocks are outperforming the market. During this period investors has to accumulate shares of stocks of Sears (buy signal). The Price Relative falls when a stock shows relative weakness and is underperforming its benchmark. Most of the time Sears stock outperforms the market and is showing relative strength. 7 7. Final Comments Sears Stock shows more volatility than the S&P 500 market index. Sears’s stock outperforms the market during the first quarter; has approximately the same returns during the second and third quarters but underperforms in December 2012 as shown in the stocks trading below the market index and the 100-day moving average. The trend is downward a bearish signal, thus it is time to sell the shares of Sears stocks. 8 References www.financeyahoo.com www.msnmoney.com www.morningstar.com http://stockcharts.com Brigham, E., Ehrhardt, M. “Financial Management: Theory and Practice” Thomson South-Western 2005 Bodie, Z.,Kane, A.,Marcus, A. “Essentials of Investment” 8th edition. McGraw Hill Companies Inc. 2010. Keown, A., Martin, J.,William Petty, J., et al. “Financial Management: Principles and Applications” 10th Edition, Pearson Education International Prentice Hall 2005 Moyer, C., McGuigan, J., Kretlow, W. “Contemporary Financial Management” 8th Edition, South-Western College Publishing 2001 9