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legal research analysis
Questions and Answers of
Legal Research Analysis
=+a. Calculate the monthly return for each of these stocks.
=+2. The monthly closing prices for VLO and TSO for the year 2005 are given in Table A.2.(The closing prices are adjusted for stock splits and dividends.)TABLE A.2 Monthly Closing Prices for VLO and
=+1. Explain the difference between descriptive and inferential statistics.
=+ How could these words be applied to money management?
=+8. In the words of a Kenny Roger's song, "You've got to know when to hold 'em, know when to fold 'em."
=+7. Explain how each of the following items would impact the percentage of capital you would want to allocate to a particular system:a. Average winning trade amountb. Average losing trade amountc.
=+6. Explain the difference in correlated (market) risk and uncorrelated (diversifiable) risk.
=+because "all my eggs are in one basket." Should I expect a higher return than I would if I had diversified my portfolio because I am taking so much risk? Explain.
=+5. A phrase heard frequently in finance is "more risk, more return." If I invest my entire portfolio in one stock, High Growth Energy Corporation (HGEC), I am taking substantial risk
=+How can you structure your strategy to use the system, but at the same time not exceed a 15% drawdown?
=+4. You are employed as a money manager and know you will lose your job if your drawdown exceeds 15%. However, you have a system with a 30% MDD that you would like to use.
=+How might you use leverage with this system to maximize your return, given the level of risk you are willing to take?
=+3. You have tested a system, and it has an MDD of 30%. You are willing to have a 45% drawdown.
=+c. What is the chance of having a run of five losses?
=+b. What is the chance of having a run of four losses?
=+a. What is the chance of having a run of three losses?
=+1. You have tested a system and find that it has a losing percentage of 25%.
=+net profit of only $8993. Explain why this information alone is not enough to determine that Jennifer's system is superior to Michael's.
=+7. Two of your friends, Jennifer and Michael, have developed systems to trade IBM. During the test period, Jennifer's system had a net profit of $9578, while Michael's system had a
=+what warnings would you want to give him?
=+ What questions would you have about his testing and optimization procedures, ?
=+year trading his system! He is ready to put the system in place to trade HPP this year, expecting to quadruple his money.
=+6. Your brother, eager to develop the "perfect" system to trade HPP, has developed a system, tested it, and optimized it. His results show that he would have quadrupled his money last
=+ Explain to your brother why you think it would be unwise to attempt to trade HPP using a moving average crossover system at this point. (Be sure to explain the concept of a whipsaw in your
=+(HPP). You do some initial investigation, and you think that HPP is currently in a trading range.
=+moving average crossover system is the way to go. He even knows what stock he wants to trade using the system—his favorite pharmaceutical company, High Profit Pharmaceuticals
=+5. After you explain the concept of risk to your brother, he still wants you to develop a trading system. In fact, he has done some reading and is convinced that a trend-following
=+want to make sure that he understands the concept of risk. How would you explain risk to him, especially as it is related to using a system for investing?
=+asks you to develop a trading system for him. Before you agree to take on this job, you
=+4. Your brother is a physician who does not have the time to manage his own money. Knowing that you have an interest in investments and have taken a class in technical analysis, he
=+3. How would you describe the discipline and mindset necessary to develop and follow a trading or investing system?
=+2. What are the advantages and disadvantages of a nondiscretionary system?
=+lost money over the past year. He is confused as to how investing in a relatively strong stock could result in a loss. Explain how this could happen.
=+the past year, and he has found a strongly upward-sloping line. He thought that this meant that BCDE was a relatively strong stock; however, he noticed that investors in BCDE have
=+8. Andrew has been following the performance of the stock of his favorite company, Back Country Driving Equipment (BCDE). He has plotted the ratio of BCDE to the S&P 500 for
=+7. Explain what is meant by the term "relative strength" in this chapter and the implications of a stock's relative strength for the investor.
=+Explain why she will have to have a return greater than 30% to get back to her initial capital level of $10,000.
=+6. Lauren inherited $10,000 and immediately invested the money in the stock market. Unfortunately, she lost 30% of her investment.
=+5. Explain the basic principle behind cyclical analysis and its importance to the investor.
=+4. Explain the basic premise of secular analysis and its importance to the investor.
=+6. Explain why using EWT can be difficult for the average analyst.
=+how you will arrive at the golden ratio.
=+5. Choose any two numbers, and go through the method shown in Box 20.1 to demonstrate
=+4. Explain the difference between a zigzag and a flat in EWT.
=+3. Explain what a Fibonacci number is.
=+2. The EWT partem is often said to be like "three steps forward and two steps back." Explain this phrase as it relates to EWT.
=+1. Explain the following Elliott Wave Theory terms:a. Motive waveb. Corrective wavec. Impulse waved. Subwavee. Truncationf. Equality g. Alternation h. Rule
=+21-day centered SMA. Explain ways in which this information might be used to determine and project cycles.
=+6. Using the S&P 500 data you collected in Question 5, plot a 41-day centered SMA and a
=+c. Does the plot of this oscillator reveal any cycle in your data?
=+b. Detrend the data by creating an oscillator that is constructed using a ratio of the current close to the 11-day SMA.
=+a. Plot this data in a chart. Are any cycles apparent in your chart?
=+5. Download daily data for the S&P 500 for the period July 1, 2004 through July 1, 2005.(This historical data is available at http://finance.yahoo.com.)
=+in the calculation rather than plotting it at the end of the time period?
=+4. What is the argument for plotting a centered moving average centered over the time period
=+3. What do "left translation" and "right translation" mean? When would you expect to see each of these occurring in a cycle?
=+2. Explain what each of the following terms means as it refers to cycles:a. Amplitudeb. Periodc. Phased. Summatione. Inversionf. Harmonics
=+ How do the supporters of cycle theory respond to these criticisms?
=+1. A great deal of controversy surrounds cycle theory. What are the reasons why some oppose cycle theory?
=+7. Explain what is meant by the term "confirmation." What are some general concepts the analyst should consider when looking for confirmation?
=+6. Explain how moving averages and oscillators can be used in conjunction with each other for trading in trending and trading markets.
=+ Explain why using one oscillator is preferable to using the information from multiple oscillators.
=+5. Most analysts will choose one oscillator to use in their analysis.
=+Do you see many similarities among the results of the five different calculations?
=+b. What information do you gain about Valero from these calculations?
=+a. Use the data you collect in Question 3 to calculate the following:i. MACD (using 12- and 26-day EMA)ii. 14-day rate of change (ROC)iii. 14-day relative strength index (RSI)iv. 14-3-3 stochastic
=+4. Look at the volume data for Valero in Question 3. Do you see any spikes or dips in volume? If so, how might these volume patterns enter into your analysis of the stock?
=+b. Looking at the calculations you have made, what observations can you make about Valero over the three-month period observed?
=+iii. Williams Variable Accumulation Distribution iv. Accumulation Distribution v. Chaikin Money Flow vi. Money Flow Index (using a seven-day period)
=+a. Using this information, calculate the following:i. On-Balance-Volume ii. Price-volume trend
=+3. Gather trading information for Valero (VLO) from August 1-October 31, 2005.
=+Sketch a graph of this stock's price and comment on how the curve's shape is impacted by momentum.Day Price of XYZ 23 '4 56 78 910 11 12 28 28 29 30 32 35 39 43 47 51 54 57 Day Price of XY Z 13 14
=+ Looking at the prices for a hypothetical stock, XYZ, explain what is happening as far as the price trend and momentum over time.
=+2. What is meant by the term "momentum"?
=+1. General rules for interpreting volume data date back to the mid-l930s. According to these general rules, how should volume statistics be used?
=+Does the price behave as you would expect after each of these patterns? Explain.a. Morning starb. Dojic. Hammerd. Inverted hammere. Shooting starf. Harami g. Engulfing h. Hanging man
=+August 15-October 15, 2005. Find the following patterns in this chart.
=+7. The candlestick chart in Figure 17.29 is of AmeriSourceBergen Corp. (ABC) for
=+every ten highs." What does he mean by this statement, and what is the implication for traders using these reversal patterns?
=+6. Schwager (1996) states that the one-day reversal pattern "successfully call(s) 100 out of
=+5. Define an inside day, outside day, narrow-range day, and wide-range day. Which of these days represents increasing volatility, and which represents contracting volatility? Explain your answer.
=+ Did MRK follow the typical Dead Cat Bounce pattern?
=+4. In August 2005, Merck (MRK) lost an initial Vioxx product liability lawsuit. Create a daily bar chart for MRK for August-September 2005. Use this chart to describe the Dead Cat Bounce.
=+How would an analyst distinguish between these three types of gaps?
=+ How do breakout, runaway, and exhaustion gaps differ from each other?
=+2. Explain what is meant by the term "gap."
=+1. Why must investors know the underlying long-term trend before using short-term patterns?
=+ Describe each of the following types of trend lines on the three-point reversal chart:a. Bullish support lineb. Bearish support linec. Bullish resistance lined. Bearish resistance line
=+8. How do the trend lines that are drawn on three-point reversal point-and-figure charts differ from trend lines drawn on other types of charts?
=+How would this count be used to determine a price target?
=+How is vertical count determined in these charts?
=+7. How is horizontal count determined in a three-point reversal chart?
=+6. Explain how the term "top" is used differently with three-point reversal charts than with bar charts and one-point reversal point-and-figure charts.
=+5. How is count used in one-point reversal charts to determine a price target?
=+4. Explain each of the following terms as it relates to point-and-figure charting:a. Congestion areab. Trend linec. Walld. Count
=+3. Explain the major difference between the one-point reversal method and the three-point reversal method, highlighting the advantages to each approach.
=+2. Why might one-point reversal point-and-figure charts be a useful tool for an analyst following currency trading?
=+1. Time and volume are not pictured on a point-and-figure chart. Explain why point-andfigure analysts might consider these two factors irrelevant to their analysis.
=+9. Select three companies, and look at the price charts for those companies over the past three months. Can you recognize any of the formations discussed in this chapter in those charts?
=+8. Explain the formation and characteristics of a head and shoulders bottom.
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