Solutions Manual for
Introduction to Statistics and Data
Analysis 7th Edition By Roxy Peck,
Chris Olsen
(All Chapters 1-16, 100% Original
Verified, A+ Grade)
All Chapters Arranged Reverse: 16-1
This is the Original Solutions Manual
for 7th Edition, All Other Files in the
Market are Wrong/Old Questions.
, Solution and Answer Guide: Adair/Nofsinger, Foundations of Investments, 1e, Chapter 17: Technical Analysis
Solution and Answer Guide
Adair/Nofsinger, Foundations of Investments, 1e, Chapter 17: Technical Analysis
Table of Contents
Questions .......................................................................................................................................... 2
Problems ........................................................................................................................................... 8
Case Study ....................................................................................................................................... 22
© 2024 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acc4essible 1
website, in whole or in part.
, Solution and Answer Guide: Adair/Nofsinger, Foundations of Investments, 1e, Chapter 17: Technical Analysis
Questions
1. Technical Analysis. What is the purpose of technical analysis? What are the
underlying forces it is trying to measure and assess? (LO 17-1)
Answer:
Technical analysis analyzes price and volume information to detect changes in the
short-run supply and demand for a stock and make buy/sell decisions based on
those changes. Technical analysis does not study the intrinsic or economic value of a
stock, as fundamental analysis does. Technical analysts try to understand, measure,
and predict the forces of supply and demand. Technical analysts use different types
of charts and graphs to detect patterns from the price and volume information to
make decisions about when to buy or sell a stock. Technical analysis is a trading tool
used to guide short-term buy and sell decisions.
Technical analysis is one of the most popular techniques, used in trading systems
design. While it is considered by many a simplified approach to trading on the
financial markets, based on identifying trends and looking for patterns on charts, it
has evolved to something much more than that. There has always been an opposing
camp of people who are skeptical about the predictive power of the technical
analysis. A lot of academic research suggests that price movements are close to a
random walk. Many analysts support the thesis that prices are formed by the
balance of supply and demand and are driven only by fundamental and economic
data. As prices move only in response to the latest available information or news
release and it is impossible to predict their move only by looking at a chart.
2. Moving Averages. Explain the importance of moving averages and moving average
crossovers in technical analysis. When is a moving average crossover bullish or
bearish? (LO 17-2)
Answer:
The 50-day price moving average (MA) is the average price over the previous 50
trading days (roughly two calendar months). The 200-day moving average is the
average price over the previous 200 trading days (roughly one year of trading
activity). Because moving averages calculate the average value of the price over past
several trading days, it has less volatility than the actual price graph.
Moving averages are used to detect trends in the price data and determine a
buy/sell decision. From a visual perspective, technical analysts see that the price
trend is reversing itself when the actual price line crosses over an important moving
average. When the actual price line crosses from below to above its moving average,
a bull trend has started, and a buy signal is generated. Similarly, when the actual
price crosses the moving average from above to below, the new trend is bearish,
and the signal is to sell.
© 2024 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acc4essible 2
website, in whole or in part.
, Solution and Answer Guide: Adair/Nofsinger, Foundations of Investments, 1e, Chapter 17: Technical Analysis
3. Charts. What are the different type of charts used by technicians, and what are they
used for? (LO 17-3)
Answer:
The two most widely used charts by technicians are the bar graph and the
candlestick graph.
A bar graph shows the high for the day, the low for the day, and the closing price. A
vertical line represents the range of the stock’s price (i.e., the high and the low
prices), and the horizontal line represents the closing price.
A candlestick graph requires one additional piece of data: the opening price. Like
the bar graph, a thin line connects the high and low prices. The body of the
candlestick connects the opening and closing prices. If the opening price exceeds
the closing price, indicating that the price fell, the body of the candlestick is filled in
with black or red. If the opening price is less than the closing price (the price rose),
the body is filled in as clear or with green. Dark or red candlesticks (especially long
sticks, which indicate a large decline from the opening to the closing price) are
bearish indicators, while light or green candlesticks are bullish.
4. Chart Patterns. In technical analysis terms, what is a head and shoulders trading
pattern? Is such a pattern bullish or bearish? (LO 17-4)
Answer:
A popular chart price pattern is known as the head and shoulders. Candlesticks can
be used to graph head and shoulder patterns. As its name implies, the head and
shoulders pattern is made up of a left shoulder, head, right shoulder, and neckline.
The following paragraph describes the head and shoulders pattern.
While still in an uptrend, the left shoulder forms a peak that marks the high point of
the current trend. After making this peak, a decline ensues to complete the
formation of the shoulder. The low of the decline usually remains above the trend
line, keeping the uptrend intact. From the low of the left shoulder, an advance
begins that exceeds the previous high and marks the top of the head. After peaking,
the low of the subsequent decline marks the second point of the neckline. The low
of the decline usually breaks the uptrend line, putting the uptrend in jeopardy. The
right shoulder peak is lower than the head (a lower high) and usually in line with the
high of the left shoulder. While symmetry is preferred, sometimes shoulders can be
out of whack. The decline from the peak of the right shoulder should break the
neckline. The neckline forms by connecting low points from the formation of each
shoulder prior to the formation of the head. Depending on the relationship between
the two low points, the neckline can slope up, slope down, or be horizontal. The
slope of the neckline will affect the pattern's degree of bearishness—a downward
© 2024 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acc4essible 3
website, in whole or in part.
Introduction to Statistics and Data
Analysis 7th Edition By Roxy Peck,
Chris Olsen
(All Chapters 1-16, 100% Original
Verified, A+ Grade)
All Chapters Arranged Reverse: 16-1
This is the Original Solutions Manual
for 7th Edition, All Other Files in the
Market are Wrong/Old Questions.
, Solution and Answer Guide: Adair/Nofsinger, Foundations of Investments, 1e, Chapter 17: Technical Analysis
Solution and Answer Guide
Adair/Nofsinger, Foundations of Investments, 1e, Chapter 17: Technical Analysis
Table of Contents
Questions .......................................................................................................................................... 2
Problems ........................................................................................................................................... 8
Case Study ....................................................................................................................................... 22
© 2024 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acc4essible 1
website, in whole or in part.
, Solution and Answer Guide: Adair/Nofsinger, Foundations of Investments, 1e, Chapter 17: Technical Analysis
Questions
1. Technical Analysis. What is the purpose of technical analysis? What are the
underlying forces it is trying to measure and assess? (LO 17-1)
Answer:
Technical analysis analyzes price and volume information to detect changes in the
short-run supply and demand for a stock and make buy/sell decisions based on
those changes. Technical analysis does not study the intrinsic or economic value of a
stock, as fundamental analysis does. Technical analysts try to understand, measure,
and predict the forces of supply and demand. Technical analysts use different types
of charts and graphs to detect patterns from the price and volume information to
make decisions about when to buy or sell a stock. Technical analysis is a trading tool
used to guide short-term buy and sell decisions.
Technical analysis is one of the most popular techniques, used in trading systems
design. While it is considered by many a simplified approach to trading on the
financial markets, based on identifying trends and looking for patterns on charts, it
has evolved to something much more than that. There has always been an opposing
camp of people who are skeptical about the predictive power of the technical
analysis. A lot of academic research suggests that price movements are close to a
random walk. Many analysts support the thesis that prices are formed by the
balance of supply and demand and are driven only by fundamental and economic
data. As prices move only in response to the latest available information or news
release and it is impossible to predict their move only by looking at a chart.
2. Moving Averages. Explain the importance of moving averages and moving average
crossovers in technical analysis. When is a moving average crossover bullish or
bearish? (LO 17-2)
Answer:
The 50-day price moving average (MA) is the average price over the previous 50
trading days (roughly two calendar months). The 200-day moving average is the
average price over the previous 200 trading days (roughly one year of trading
activity). Because moving averages calculate the average value of the price over past
several trading days, it has less volatility than the actual price graph.
Moving averages are used to detect trends in the price data and determine a
buy/sell decision. From a visual perspective, technical analysts see that the price
trend is reversing itself when the actual price line crosses over an important moving
average. When the actual price line crosses from below to above its moving average,
a bull trend has started, and a buy signal is generated. Similarly, when the actual
price crosses the moving average from above to below, the new trend is bearish,
and the signal is to sell.
© 2024 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acc4essible 2
website, in whole or in part.
, Solution and Answer Guide: Adair/Nofsinger, Foundations of Investments, 1e, Chapter 17: Technical Analysis
3. Charts. What are the different type of charts used by technicians, and what are they
used for? (LO 17-3)
Answer:
The two most widely used charts by technicians are the bar graph and the
candlestick graph.
A bar graph shows the high for the day, the low for the day, and the closing price. A
vertical line represents the range of the stock’s price (i.e., the high and the low
prices), and the horizontal line represents the closing price.
A candlestick graph requires one additional piece of data: the opening price. Like
the bar graph, a thin line connects the high and low prices. The body of the
candlestick connects the opening and closing prices. If the opening price exceeds
the closing price, indicating that the price fell, the body of the candlestick is filled in
with black or red. If the opening price is less than the closing price (the price rose),
the body is filled in as clear or with green. Dark or red candlesticks (especially long
sticks, which indicate a large decline from the opening to the closing price) are
bearish indicators, while light or green candlesticks are bullish.
4. Chart Patterns. In technical analysis terms, what is a head and shoulders trading
pattern? Is such a pattern bullish or bearish? (LO 17-4)
Answer:
A popular chart price pattern is known as the head and shoulders. Candlesticks can
be used to graph head and shoulder patterns. As its name implies, the head and
shoulders pattern is made up of a left shoulder, head, right shoulder, and neckline.
The following paragraph describes the head and shoulders pattern.
While still in an uptrend, the left shoulder forms a peak that marks the high point of
the current trend. After making this peak, a decline ensues to complete the
formation of the shoulder. The low of the decline usually remains above the trend
line, keeping the uptrend intact. From the low of the left shoulder, an advance
begins that exceeds the previous high and marks the top of the head. After peaking,
the low of the subsequent decline marks the second point of the neckline. The low
of the decline usually breaks the uptrend line, putting the uptrend in jeopardy. The
right shoulder peak is lower than the head (a lower high) and usually in line with the
high of the left shoulder. While symmetry is preferred, sometimes shoulders can be
out of whack. The decline from the peak of the right shoulder should break the
neckline. The neckline forms by connecting low points from the formation of each
shoulder prior to the formation of the head. Depending on the relationship between
the two low points, the neckline can slope up, slope down, or be horizontal. The
slope of the neckline will affect the pattern's degree of bearishness—a downward
© 2024 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acc4essible 3
website, in whole or in part.
