Gather the daily high, low, and closing prices for McDonald’s stock (ticker symbol MCD)

for January 2009 through July 2010 from Yahoo! Finance or another electronic source.

a. Using a spreadsheet, calculate 10-day and 60-day SMAs. Plot these two curves with a bar chart of the stock prices.

b. Compare and contrast the 10-day and the 60-day SMA.

c. Explain the relationship between the market trend and the 60-day SMA during the following periods:

i. May 2004–October 2004 ii. October 2004–May 2005 iii. May 2005–July 2005

d. Find a point in your graph where the faster moving average crosses the slower moving average. What type of signal would occur at this point? In hindsight, would trading on that signal have been profitable? Why or why not?

e. Construct DMI+ and DMI– for McDonald’s for the period August 2004–March 2005.

i. Interpret DMI+ during this time.

ii. Interpret DMI– during this time.

iii. Compare DMI+ and DMI– with the price movement over this time. What type of relationships do you see?

298 Part III Trend Analysis Download