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8-4 Trends in Stock Closing Prices
8-4 Trends in Stock Closing Prices
4 Trends in Stock Closing Prices (HW #4, 8, 10, 13) Name: __________________________
Vocabulary
smoothing Statistical tools that allow an investor to reduce the impact of price
techniques fluctuations and to focus on patterns and trends
lagging
indicators
fast-moving
average
slow-moving
average
crossover
Method: Suppose you want to determine a 3-day simple moving average for six trading
days. Let the trading prices for each day be represented by A, B, C, D, E, and F. The
trading prices for the days 1-3 are A, B, and C. The average of those prices is:
To find the average of days 2-4, subtract price A and add price D:
Use “-” and “+” to determine the averages for days 2-5
121 124
Use previous average, 4
and 4
120 126
Use previous average, 4
and 4
The simple moving averages are ________, ________, ________ and ________
8.4 Trends in Stock Closing Prices (HW #4, 8, 10, 13) Name: __________________________
Crossovers
Sometimes, investors construct stock charts that depict moving averages for two
different intervals. The graph with the shorter time interval is known as the fast-moving
average, and the graph with the longer time interval is known as the slow-moving
average.
A crossover occurs when one time interval moving average graph overtakes another.
Some say that:
● An investor might consider buying when the fast-moving graph overtakes (rises
above) the slow-moving average graph.
● An investor might consider selling when the fast-moving average graph crosses
below the slow-moving average graph.
Regression Analysis
Regression analysis can be used to see if there is a correlation between two sets of
data. Financial analysts use regression techniques to look for trends in stock prices.
They might decide to buy or sell a stock based on the information from the regression
lines and curves.
8.4 Trends in Stock Closing Prices (HW #4, 8, 10, 13) Name: __________________________