Institute of Chartered Financial Analysts of India (ICFAI) University 2006 Certification Finance Security Analysis-II - Question Paper

0.66
131.66


8
Aug-Sep
Sell
132
0.99
131.01
-0.65

9
Aug-Sep
Buy
132
0.66
132.66


10
Sep-Oct
Sell
134
1.01
133.00
0.34

11
Sep-Oct
Buy
134
0.67
134.67


12
Sep-Oct
Sell
136
1.02
134.98
0.31

13
Nov-Dec
Buy
112
0.56
112.56


14
Nov-Dec
Sell
112
0.84
111.16
-1.40

15
Jan-Feb
Buy
95
0.48
95.48


16
Feb-March
Sell
98
0.74
97.27
1.79


Therefore the gain made by the analyst is Rs.13.49 per share if follows the 30-day moving avg. for buy and sell decision.

Buy and hold strategy

Buy @ Rs.116, sell @ Rs.94

Therefore, Loss = 93.00 – 116.00

= (Rs.22.00)
< TOP >

6.
subsequent are the principles followed by Moving avg. Curve:

When the moving avg. rises above the price line, a reversal in bullish pattern is signalled. This is based on the simple logic that as long as price at the end of a period is above the avg. that prevailed in the immediate past, prices are on an uptrend. The converse is actual for confirming the end of a bear market. The price line in that case would crossover the moving avg..

The price line moving avg. crossover has to be examined cautiously when the price line and moving avg. move in opposite directions before the crossover. The price line that falls beneath a rising moving avg. only shows a secondary reaction and need not signal a pattern reversal. Similarly, a price line that rises above a falling moving avg. is an indication to sell.

A moving avg. represents a smoothened pattern and therefore, also acts as a support/resistance line. A declining price line often obtains support at the moving avg. line and rallies without crossing the line. Similarly, a rally in a bear market meets resistance at the moving average, and turns down.

If the moving avg. is flat or has already begun to change direction, a crossover by the price line is a fairly reliable indicator of pattern reversal.

The significance of a crossover signal depends, to a large extent, on the time span covered by a moving avg.. A moving avg. covering a longer time span is truly smoothening a long-term trend, and its crossover is more significant than a crossover of an avg. of shorter time span.

Earning:   Approval pending.