Page 43 - FINAL CFA I SLIDES JUNE 2019 DAY 4
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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 technical analysis?
irrational?
Fundamental analysis = futuristic and more Technical analysis = the past – focus not on why/
rationale -intrinsic value by looking at the reason for trade but the past trades.
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
