Page 63 - FINAL CFA SLIDES DECEMBER 2018 DAY 4

Session Unit 3:

13. Technical Analysis, p314

LOS 13.a: Explain principles of technical analysis, its applications, and its underlying

assumptions, p. 314

Technical analysis - study of the collective market sentiment (rationale or irrational) that

influences the volume of trading (demand and supply, D/S) and, hence the market prices,
of (financial) assets!

Which aspects of market sentiment plays a bigger role in determining market prices?

Rational or Fundamental analysis vs

irrational? technical analysis?

Fundamental analysis = futuristic and more Technical analysis = the past – focus not on why
rationale -intrinsic value by looking at the reason for trade but past trade.

market and projecting financial statements Less subjectivity but still subjective -why?

Potential subjectivity in projections? Can easily be applied to currencies & commodities

Problem for assets like currencies or Great when financial statement fraud
commodities: why? occurs or before re-statement of fs–why?

Does not work in illiquid markets or markets subject
to central bank intervention, e.g. currency