Finance (Trading Strategies) 590 - Assignment David Luong - 12978652
Finance (Trading Strategies) 590Assignment ProjectPrepared ByDavid Luong (12978652)Table of contents2Introduction 3Alinta Limited 7US Dollar / Japanese Yen 10The Dow Jones Industrial Average 12Conclusion 13References IntroductionThis report aims to make a buy, sell or hold recommendation on Alinta Limited, a stock traded on the Australian stock market, the USD/JPY exchange rate, and the Dow Jones Industrial Average based on fundamental and technical analysis. This report largely focuses on technical analysis where the use of Chart Patterns such as Wedges, and Triangles are examined, trends such as the use of Moving Aver ...view middle of the document...
Two typical wedges are the ones seen about the start of June to the middle of June and throughout July. The one seen in June is defined as a rising wedge which is a bearish pattern that begins wide at the top and contracts as prices move lower. It is considered a rising wedge due to higher tops and higher bottoms. This rising wedge led to a small reversal as seen on the chart.There is another wedge seen which is a falling wedge seen in July which leads to a sharp rise in the month of August. This falling wedge is regarded as a bullish pattern that begins wide at the top and contracts as prices move lower. At the peak of this falling wedge is a high of $10.10 it falls to a low of $9.50, rises to a high of $9.90 and then falls to $9.40. After this final fall, the price then takes on a strong bullish resistance breakout and strongly uptrends on consecutive days to $12.00.From about mid August to the present a major reversal pattern called the double top. The double top is a major reversal pattern that forms after an extended uptrend. As its name implies, the pattern is made up of two consecutive peaks that are roughly equal with a moderate trough in between. After a strong rally there is generally a price retreat, after this reaction is over, buyers attempt to push the price onto new highs but meets the same resistance as before. Once the price falls through the level of the trough, it falls even further and the support that was, now becomes resistance. In this instance, it sharply rose from about $10.00 to $12.00, formed a trough for about a month at about $11.20, and then rose sharply to $12.20 and then fell to $10.00.Using Moving Averages and in particular dual moving averages to Alinta's chart gives some good indicators on where to sell and when to buy the stock. The moving average used in this analysis is a Simple or Arithmetic Moving Average which is calculated by adding the closing price of a security for a number of time periods and then dividing by the number of time periods. This results in an average price over the time period.In this instance the short term Moving Average chosen was 10 days, and the medium term was 30 days. The Moving Average line which follows the actual prices is the 10 day one and the one that drifts further away is the 30 day Moving Average Line. When the short term line crosses the long term line upward it is called a golden cross and it is a sign of ascending. On the other hand, for the medium term line to penetrate the short term line downward it is called a 'dead cross' and it is a sign of the stock price decreasing. There is an initial cross on the April 29 which is considered a golden cross when the stock was about $9.20 led to a correct signal which led to the price rising to a peak of $10.50 to the next dead cross of $9.90 which was a sell signal about two months later. This sell signal was correct as the price plateaued till August where a golden cross was seen about August 11 when the stock was $9...
