Thursday, May 6, 2010

FIN630 Ass Sol

“Elliott Wave Theory”
“In the following graph at EACH HIGHLIGHTED POINT of the Elliott wave theory you are required to:
1. State the stock trend and
2. Suggest the possible decision of the investor regarding buying, selling or retaining of shares?


Answer 1:
The stock trend of following graph is as follows
In wave 1 the stock makes its initial move upwards.In wave 2 the stock to go down because At this point enough people who were in the original wave consider the stock overvalued and take profitsWave 3 is the longest and strongest wave this wave exceeds the high created at the end of wave 1. Due to The stock has caught the attention of the mass public. Wave 4 tends to be weak and downward because there are usually more people that are still bullish on the stock and are waiting to “buy on the dips” Wave 5 is the point that most people get on the stock, and is most driven by hysteria. This is when the stock becomes the most overpriced. : Wave five is the final leg in the direction of the dominant trend. The news is almost universally positive and everyone is bullish. Unfortunately, this is when many average investors finally buy in, right before the top.



ANSWER 2.
Suggestions about the possible decision of the investor regarding buying, selling or retaining of shares are as follows.
In wave 1 the price of the stock is cheap so it’s a perfect time to buy.In wave 2 because market is bearish and stock price become low so it is perfect time to buy.In wave 3 positive and fundamental analysts start to raise earnings estimates. Prices rise quickly, corrections are short-lived and shallow. Anyone looking to "get in on a pullback" will likely miss the boat. As wave three starts, the news is probably still bearish, and most market players remain negative.Wave 4 tends to be weak because there are usually more people that are still bullish on the stock and are waiting to “buy on the dips”. Volume is well below than that of wave three. This is a good place to buy a pull back.In wave 5 market become extremely bullish that’s why its time to sell stock or retain the stocks because stock is reached in its higher price. Volume is lower in wave five than in wave three that’s why many momentum indicators start to show differences.
 

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1 comment:

  1. For each of the following functions identify the corresponding layer from OSI model. a. Communicates directly with user’s application program b. Error correction and retransmission. c. Mechanical, electrical, and functional interface d. Responsibility for delivery between adjacent nodes e. Reassembly of data packets

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