Senior Project Presentation Stock Market Models

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Senior Project PresentationStock Market Models

• Yan-Xia Xiao
• April 30, 1999
• Under the guidance of Professor Carol Shilepsky

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Introduction

• The importance of the stock market
• Almost every large company in the US and around
  the world is traded on a stock market.
• It reflects the prosperity of a nation.
• It affects everything you do.
• Overview of the rest of my presentation

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Fundamental Analysis

• It is the study of economic, industry, and
  company conditions to determine the intrinsic
  value of a particular companys stock.
• It focuses on important statistics of a companys
  financial statements such as the Balance Sheet,
  the Income Statement, and the Cash Flow
  Statement, to determine whether the stock price
  is correctly valued.

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Some Major Aspects of Fundamental Analysis Focus
On

• Assets
• Corporate earnings
• Debt
• Dividends

• Inventory
• Revenue
• Risk expectation
• Taxes

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Where to Get Fundamental Information

• Newsletters
• Newspapers
• Financial magazines
• Brokerage house letters.

• Some useful web sites
• www.marketguide.com
• www.quicken.com
• www.quote.com
• http//biz.yahoo.com/z/a/m/msft.html

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Benjamin Grahams Asset Value Strategy

• Grahams approach requires selecting stocks
  selling for no more than 66 percent of the net
  current asset value
• Calculate the net current asset value
• subtract total liabilities from total current
  assets
• gives the companys net current asset value
• divide the net current asset value by the number
  of shares outstanding gives the net current asset
  value per share

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Technical Analysis

• It is the study of analyzing market actions or
  prices through the use of charts for the purpose
  of predicting future price direction.
• Tools for technical analysis are indicators and
  systems which are used on price charts. Some of
  them require many calculations
• Price charts are available in various forms, such
  as line, bar and point, and figure.
• Technicians seek to discover predictable price
  patterns, which they hope to to make a profit.

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Technical Analysis Indicators

• Are used to determine the trend of a market
• Some can be quantified in the form of an equation
  or algorithm
• Others show up as patterns, such as trend lines,
  support and resistance

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Support and Resistance

• Resistance Level sellers take control of price
• Support Level buyers take control of price
• Breakout prices cross through either the
  resistance or the support level

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Trend Lines

• Definition
• Rising trends
• Falling trends
• The goal of understanding trend lines
• One benefit of trend lines is that they almost
  always keep you on the right side of the market.

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Moving Average

• Definition
• Moving average length
• 5-13 days
• 14-25 days
• 26-49 days
• 50-100 days
• 100-200 days

• Calculation
• (highlow)/2
• (closehighlow)/3
• (openclosehighlow)/4
• (highlowcloseclose)/4
• Buy signal
• Sell signal

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Speed Resistance Lines

• To draw Speed Resistance Lines, do the following
  
• ? Draw a line from a major low to a major high.
• ? Draw a vertical line on the day the major high
  occurred. Divide this vertical line into
  thirds.
• ? Draw lines from the major low so they intersect
  the vertical line at the 1/3 and 2/3 levels.

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A Trading System CANSLIM

• Current quarterly earnings per share must be up
  at least 18
• Annual earnings per share should show a growth
  rate of greater than 25 over the last 4 or 5
  years
• New Products, Management, and Price Highs
• Supply and Demand look for companies with 5 to
  25 million shares outstanding
• Leader look for stocks that have outperformed at
  least 80 of the market during the last year
• Institutional Sponsorship look for stocks that
  have 5 to 25 institutional ownership
• Market Direction buy when the market as a whole
  is going up

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ONeils Suggestions on When to Sell a Stock

• Limit your loss to 7 or 8 of your cost
• Sell while the stock was still advancing or sell
  on the way down
• Allow a normal 8 to 12 correction. Sell if a
  decline from peak exceeds 12 or 15
• Some stock can be sold when they are 70 to 100
  above their 200-day moving average price line

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• If following the trend line indicator, I would
  sell at about 33.50 per share.
• I f following the CANSLIM system, I would sell at
  about 43 per share.

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• If following the moving average indicator, I
  would sell at about 33.50 per share.
• I f following the CANSLIM system, I would sell at
  about 43per share.

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• If following the speed resistance indicator, I
  would sell at about 37.50 per share.
• I f following the CANSLIM system, I would sell at
  about 43 per share.

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Acknowledgements

• Professor Carol Shilepsky
• Professor John E. Markert
• Professor Alfred N. Ntoko
• Michaela Denning
• MPS Faculties
• MPS Colleagues and Friends