Page 49 - FINAL CFA I SLIDES JUNE 2019 DAY 4
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Session Unit 3:

                                                                                                             13. Technical Analysis
     Stochastic oscillator = latest closing price and highest and

     lowest prices reached in a recent period, such as 14 days.
























      In a sustainable uptrend, prices tend to close nearer to the recent high, and in a sustainable

      downtrend, prices tend to close nearer to the recent low.


      Stochastic oscillators use two lines that are bounded by 0 and 100.


      The “%K” line is the difference between the latest price and the recent low as a percentage

      of the difference between the recent high and low.

     The “%D” line is a 3-period average of the %K line. Technical analysts typically use stochastic oscillators to

     identify overbought and oversold markets.
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