TEST SET 1 FIN562 Technical Analysis

Michael is analyzing a company that has just reported significant profit growth, yet its stock price has been steadily declining over the past few months. Discuss how technical analysts and fundamental analysts would interpret this situation. Define both analysis approaches, explain their differing views on price movement Imagine you are a technical analyst looking at a technology company, "Innovate Corp." The company has recently announced a groundbreaking new product, leading to positive news articles and a surge in public interest. However, you observe from the stock chart that Innovate Corp.'s stock price has been in a steady downtrend for the past six months, and the trading volume has been declining.

Based on the core principles of technical analysis, how would you interpret this situation? Apply the key assumptions of technical analysis to explain the divergence between the positive news and the stock's price action.

intrinsic value, and suggest the likely investment actions Michael might consider from each perspective.

Suppose a new ride-sharing company, "GoFast," has just completed its Initial Public Offering (IPO). As a financial advisor, a new investor who has just purchased shares in GoFast asks you to explain what their ownership means and how the value of their shares will be determined in the market from this point forward.

Applying the concepts from Chapter 1 regarding what a stock is and how the stock market works, provide a clear explanation to this investor. Illustrate your points by describing how supply and demand dynamics will influence GoFast's stock price in the near future

The statement "history repeats itself" is a fundamental assumption of technical analysis. Consider a stock that has, for the past three years, experienced a significant price rally during the holiday season (October-December) and a subsequent decline in the first quarter of the new year.

Apply your understanding from Chapter 1 to explain how a technical analyst would use this historical price behavior to inform their trading strategy for the upcoming year. Discuss what kind of chart patterns or indicators they might look for to confirm this seasonal trend

Below is a description of a stock's price movement over several weeks:

The price of "BuildCo" stock rises to RM50, then pulls back. It attempts to rise to RM0 again twice over the next month but fails to break above it each time. During this period, the price also falls to around RM42 multiple times but never goes below it. You notice that trading volume is highest whenever the price approaches RM50.

Apply your knowledge from Chapter 2 to identify and describe the key price levels that have formed. Explain how you would use these levels, along with the trading volume, to make a decision about a potential entry point and to set a stop-loss for a trade

A stock has been in a strong uptrend for several months. Recently, its price action has formed a pattern where there is a clear horizontal resistance level at RM75, and the lows of the price pullbacks are becoming progressively higher, starting from RM68, then RM70, and most recently RM72 The trading volume is diminishing as the price range narrows.

Based on the material in Chapter 3, identify this specific price pattern. Apply your analysis of the pattern to forecast the likely future price direction and calculate a potential price target if a breakout occurs