Investment Club 2007-2008 09.12.07

1. Investment Club2007-200809.12.07 y.s

2. Resistance/support • Resistance: • Arbitrary line that a stock will attempt to, but cannot exceed for a period of time. • Support: • Arbitrary line that a stock will have difficulties falling below.

3. 1. Moving Average • Shows the average value of a security's price over a set period. • Generally shows momentum of the stock for that period. • Two types: SMA and EMA • SMA: simple moving average: • ∑closing price of past n number of days / n • EMA: exponential moving average • Heavier weight on recent price movement • Reacts faster to recent price movements • MACD • Black line = diff. between 24 & 12 day EMA • Red line = 9day EMA of the MACD • Momentum indicator that shows the amount of divergence between the moving averages. • When black line is above 0, ST Avg is less than LT Avg. Vice versa.

4. Relative Strength Index (RSI) • RSI is a momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. • RSI = 100 - [ 100 / (1 + RS) ]RS = Average of U for n days / Average of D for n days • U = closetoday- closeyesterday [[on a Upday]] • D = closeyesterday - closetoday[[on a Downday]] • A stock is considered to be overbought and underbought when the RSI is above 70 and 30, respectively.

5. Bollinger Band • A band plotted two standard deviations away from the MA • Because Std. Deviation is a measure of volatility, the Bollinger band will automatically adjust itself to the volatility of the stock. • More volatile, wider the band.

6. Candlestick • Chart style, developed in Japan, that displays the high, low, open, and close for a security each day over a specified period of time. • Upside: you can see 5 information at once (four from above and up/down day)