Financial Markets Book Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
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by Robert Hashemian

Page 242

pattern. By some accounts a trend also reveals the market psychology, which is of course based on human emotions. Once a trend has been established, and using the notion that history repeats itself, the future performance of the stock may be extrapolated (i.e., basic human emotions can be predicted). But beware. There is another popular notion: past performance is no guarantee of future results. A trend, no matter how exact and meticulous, is still based on past data. No trend can possibly accurately predict the future. Many times trends help investors make profitable moves, and many other times investors get burned if they get too sucked into following trends. That seventh spin on the roulette table may turn out to land on black after all. With that in mind, here are some items used in technical analysis.

52-Week Price Range - This is used by many investors to figure out where a stock stands compared to its high and low points during the past year. A stock that is trading at or close to its 52-week high might be considered a growing stock. Another trading near their 52-week lows may have fallen on hard times. But this could also mean that the stock is now relatively cheap and it may be a good time to buy it. The range can also demonstrate the volatility of the stock during the past year. Some investors may consider the 52-week high and low prices as loose limits within which a stock is bound, especially if the stock has hit the 52-week highs or lows several times. This means that they buy the stock as it gets close to its lows (feeling marginally safe that it will not drop below its 52-week low) and they sell (or short) the stock as it gets close to its 52-week high (feeling marginally confident that it will not go past its 52-week high). This is, of course, a simplistic plan and without consideration of other factors it could be easily defeated.

Volume And Average Volume - This is an indicator for the liquidity of the stock. The average volume is the average number of shares traded over a given period of time such as 10 days. The volume indicates how


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    Table of Contents Copyright and Disclaimer Foreword Money
    Bonds Futures Stocks Options
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