Page 39 - FINAL CFA I SLIDES JUNE 2019 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

What other chart types are out there?
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 irrational?

Fundamental analysis vs technical analysis?

Fundamental analysis = futuristic and more rationale – Technical analysis = the past – focus not on why/ reason for trade
assesses intrinsic value by looking at the market and but the past trades.
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
commodities: why? Great when financial statement fraud
occurs or before re-statement of fs–why?
Does not work in illiquid markets or markets subject to central bank
intervention, e.g. currency