FIN630 - Investment Analysis & Portfolio Management Assignment No. 01 Solution Fall 2015 Due Date November 23, 2015
Assignmnet
Following are the four independent situations. In each of the situation you are require to analyze the
situation and advise what an investor should do to maximize profit or minimize risk.
Case 1:
Consider a price pattern that forms a soccer formation. What would you suggest to investors either
enter into the market or not. Support your answer with logical reasoning.
Case 2:
Two investor s A & B were discussing technical analysis. Mr. A said that when you see a breakout in
Head & Shoulders Bottom, it shows a bearish market and investor should take a sell position after
watching this type of trend. Whether Mr. A is right or not? Justify your answer with logics.
Case 3:
Consider stock of ABC Company which is trading between the support and resistance level. As an
investor what should be your basic strategy (buy or sell) at support and resistance. Support your
answer with logical reasoning.
Case 4:
Relative Strength Index (RSI) for stock Z is 26 and stock has closed below the upper Bollinger band.
What an investor should do in this situation either to buy or sell the stock, and why?
DEADLINE:
· Make sure to upload the solution file before the due date on VULMS.
· Any submission made via email after the due date will not be accepted.
Following are the four independent situations. In each of the situation you are require to analyze the
situation and advise what an investor should do to maximize profit or minimize risk.
Case 1:
Consider a price pattern that forms a soccer formation. What would you suggest to investors either
enter into the market or not. Support your answer with logical reasoning.
Case 2:
Two investor s A & B were discussing technical analysis. Mr. A said that when you see a breakout in
Head & Shoulders Bottom, it shows a bearish market and investor should take a sell position after
watching this type of trend. Whether Mr. A is right or not? Justify your answer with logics.
Case 3:
Consider stock of ABC Company which is trading between the support and resistance level. As an
investor what should be your basic strategy (buy or sell) at support and resistance. Support your
answer with logical reasoning.
Case 4:
Relative Strength Index (RSI) for stock Z is 26 and stock has closed below the upper Bollinger band.
What an investor should do in this situation either to buy or sell the stock, and why?
DEADLINE:
· Make sure to upload the solution file before the due date on VULMS.
· Any submission made via email after the due date will not be accepted.
Solution
Case 1:
Saucer formation has a price rise in the end indicating high demand as well so buy the stock
Case 2:
Breach or breakout on the neckline (bottom) of Head & Shoulders indicates that the trend will continue to deteriorate from there and due to this downside breakout and investor should sell as suggested by Mr. A.
Case 3:
Support indicates that the stock price will not fall from previous highs while resistance means the the price will not go above previous lows. Investors look to buy during support while they want to sell in resistance.
Case 4:
Stock Z has RSI < 30 which means it is oversold which indicates that investor should buy the shares. The stock also closes near upper Bollinger Band which also supports the idea of buying the stock. If Stock Z would have closed above upper Bollinger Band then a technical analyst would have advised to sell the stock as soon as possible.