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Aim: What are “Technical” Factors That Affect Stocks?

Aim: What are “Technical” Factors That Affect Stocks? . Think About it: List some reasons that you buy something other than getting a good value or quality for the amount of money spent. Reasons We Buy. ___________________________________________ ___________________________________________

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Aim: What are “Technical” Factors That Affect Stocks?

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  1. Aim: What are “Technical” Factors That Affect Stocks? Think About it: List some reasons that you buy something other than getting a good value or quality for the amount of money spent.

  2. Reasons We Buy • ___________________________________________ • ___________________________________________ • ___________________________________________ • ____________________________________________ • ____________________________________________

  3. Technical Factors • Technical Analysis – Analyzes the mix of external conditions that alter supply and demand of stocks(equities). • Opposite of fundamental • Technical Factors: • Inflation – The overall strength of US currency • Economic Strength of Peers – Companies tend to move up and down with their sector/industry peers. • “Guilt by association” • Individual performance of company often overlooked

  4. Technical Factors • Other Types of Investments– The market shifts to bonds, foreign stocks and other types of investments. • Bonds investment will rise during times of high interest rates • Foreign stocks investment will rise due to value of US & foreign currency • Demographics (population age/investment goal)– 2 Dynamics: • 1 – Young and middle ages investors tend to invest in the stock market and take on higher risk stocks (equities) • 2 – Older investors move from market to bonds or low risk stocks for greater security of investment. • Liquidity – Refers to how much investor interest a stock has • Higher Market Cap = higher interest • Trading Volume will show level of liquidity • “Liquidity discount” – Term used for high quality small cap stocks that are fundamentally strong but gets little attention from the investment community. • Example: “A talented person who is overlooked because they are quiet”

  5. Technical Factors • Market Sentiment– The psychology of the market participants • Sentiment can be beneficial in predicting long term success of a company or industry. Ex: Amazon & Ebay • Sentiment based trading can hurt investors when investors dwell on a single piece of company news which never proves to occur resulting in depreciation of stock value. • Trends – A stock, sector, or industry may be the popular and trendy investment but the fundamentals do not necessarily back it up. • Examples: • Tech bubble of 1999-2000 • Facebook IPO of May 2012

  6. Technical Analysis - Charts • Charts will often be used to show the psychology of the market. • Bullish - Buyers dominate the market driving up prices • Bearish - sellers dominate the market bringing prices down • The type of market is often revealed by the prices a security seldom moves above (resistance) or below (support). • Support – the level at which a price is considered to not fall below otherwise it is on a downward trend • Resistance – the level at which a price needs to surpass to be considered to be on an upward trend. • Support and resistance analysis is an important part of trends because it can be used to make trading decisions and identify when a trend is reversing

  7. The chart below shows a support level of 30.4 and a resistance of 32. What price needs to be reached for investors to be considered bullish or bearish?

  8. What is the resistance and support of the following stocks?

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