SAPM Unit 3

1.**Differentiate fundamental analysis from technical analysis:**

Fundamental analysis involves evaluating a security's intrinsic value by examining related
economic, financial, and other qualitative and quantitative factors. Technical analysis, on the
other hand, focuses on studying past market data, primarily price and volume, to predict future
price movements.

2.**What is technical analysis:**

Technical analysis is a method of evaluating securities by analyzing statistical trends gathered
from trading activity, such as historical price and volume. It assumes that historical price
movements and trading volumes can be indicative of future price movements.

3.**Explain the three types of trends in stock prices:**

The three types of trends in stock prices are uptrend (rising prices), downtrend (falling prices),
and sideways or horizontal trend (prices moving within a range without a clear upward or
downward direction).

4. **Draw and Interpret a Line Chart:**

Draw chart also

A line chart connects data points with a line, showing the price movement over a specific time
period. Interpretation involves analyzing the overall trend, support and resistance levels, and
potential turning points.

5.**Define bar chart:**

A bar chart represents price movements using bars, where each bar typically shows the open,
high, low, and close prices for a specific time period. It provides more detailed information than
a line chart.

6.**How will you identify support and resistance levels of a stock:**

Support levels are where the price tends to stop falling, while resistance levels are where it
tends to stop rising. These are identified by observing areas where the price has historically
reversed or encountered obstacles.

*7.*What are price charts and short sale:**

Price charts visually represent the historical price movements of a security. Short sale is a
trading strategy where an investor sells a borrowed asset in anticipation of its price decreasing,
with the intention of buying it back later at a lower price.

**8.What are Oscillators:**

Oscillators are technical indicators that fluctuate between fixed levels, providing insights into
overbought or oversold conditions in the market. Examples include the Relative Strength Index
(RSI) and the Moving Average Convergence Divergence (MACD).

9.**Explain trend reversal:**

A trend reversal occurs when the prevailing direction of a security's price movement changes,
such as shifting from an uptrend to a downtrend or vice versa.

*10.*What is Dow Theory:**

Dow Theory is a set of principles that form the basis of technical analysis. It was developed by
Charles Dow and focuses on analyzing trends in stock prices to make predictions about the
broader market.

*11.*What is moving average:**

A moving average is a statistical calculation used to analyze data points by creating a series of
averages. In stock analysis, it is commonly used to smooth out price data and identify trends
over a specific period.

12.**Define RSI and its usage:**

The Relative Strength Index (RSI) is an oscillator that measures the speed and change of price
movements. It is used to identify overbought or oversold conditions in a market, helping traders
assess potential trend reversals.

13.**Explain MACD:**
The Moving Average Convergence Divergence (MACD) is a trend-following momentum
indicator that shows the relationship between two moving averages of a security's price. It helps
identify potential buy or sell signals.

14.**Analyse any two oscillators:**

Two common oscillators are RSI and Stochastic Oscillator. RSI measures the speed and
change of price movements, while Stochastic Oscillator compares a closing price to its price
range over a specific period, indicating overbought or oversold conditions.

15.**What is Beta? Is it a better measure of risk than the standard deviation:**

Beta is a measure of a stock's volatility in relation to the overall market. It is not necessarily a
better measure of risk than standard deviation but provides insight into how a stock may move
concerning market movements. Beta measures systematic risk, while standard deviation
reflects total risk. Both have their uses in assessing different aspects of risk.