Stock XYZ, which traded for several months at a price of K72, and then declines to K65. if the stock eventually begins to increase in price, K72 is considered a resistance level because investors who bought originally at K72 will be eager to sell their shares as soon as they can break even on their investment. If everyone in the market believes in resistance levels, why do these beliefs not become self-fulfilling prophecies?

Stock XYZ, which traded for several months at a price of K72, and then declines to K65. if the stock eventually begins to increase in price, K72 is considered a resistance level because investors who bought originally at K72 will be eager to sell their shares as soon as they can break even on their investment. If everyone in the market believes in resistance levels, why do these beliefs not become self-fulfilling prophecies?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 27P

See similar textbooks

Similar questions

(i) Stock XYZ, which traded for several months at a price of K72, and then declines to K65. if the stock eventually begins to increase in price, K72 is considered a resistance level because investors who bought originally at K72 will be eager to sell their shares as soon as they can break even on their investment. If everyone in the market believes in resistance levels, why do these beliefs not become self-fulfilling prophecies? (ii) What would happen to market efficiency if all investors attempted to follow a passive strategy?
You would like to invest in ABC Corporation stocks. According to the stock broker, now is the best time to purchase it. Based on your own intrinsic valuation estimation, the stock is undervalued. A month later, the pandemic broke out and all stocks experienced significant decreases in their value. What should you do?a. File a case against the stock broker for misleading you to purchase the stocks.b. Switch from intrinsic valuation to relative valuation.c. Assume that the market is efficient and simply invest when there is excess cash and sell the investments which there will be large expenses.d. Acknowledge macroeconomic uncertainty and keep a cool but conscious mind about current and future investment plans.
You are short 3,500 shares of a $40 stock and based on its chart, you believe the shares could rise to $45, but that there is a resistance level at that price and the shares will likely fall back and continue to fall to a price significantly below $40. If the shares are able to break through the $45 resistance level, they could rise by an additional $10 or more. To try to protect against a large loss on your position, which of the following orders should most likely be placed? Short sell order. Good-till-canceled stop-sell order. Market order to buy. Limit order to sell “in the money”. Good-till-canceled stop-buy order. None of the above answers is correct.
77. You complete a runs test on daily data for a thinly traded stock and the Z statistic is -5.13. If the stock has a return of -0.33% late in the trading day and you are convinced that other investors are not aware of the results, based on the runs test results, an investor would: Buy or long the stock in late trading. Sell or short the stock in late trading. Wait an additional day to buy the stock. Wait an additional day to short the stock. Take neither a long or short position in the stock. None of the above answers is correct.
Which one of the following would provide evidence against the semistrong form of the efficient market theory?a. About 50% of pension funds outperform the market in any year.b. All investors have learned to exploit management signals about the future performance of the firm.c. Trend analysis is worthless in determining stock prices.d. Low P/E stocks tend to have positive abnormal returns over the long run.
If you read in the Wall Street Journal that the “smartmoney” on Wall Street expects stock prices to fall,should you follow that lead and sell all your stocks?
An investor holds stock ABC that is currently trading at $60/share and has a bearish outlook about the security - expecting a 20% decline in price in three months. He wants to protect the downside, but also wants to get advantage of the upside if the price moves opposite to his expectation. What type of security do you recommend him? Explain!
An investor holds stock ABC that is currently trading at $60/share and has a bearish outlook about the security - expecting a 20% decline in price in three months. He wants to protect the downside, but also wants to get the advantage of the upside if the price moves opposite to his expectation. What type of security do you recommend him? Explain! Please provide an accurate answer based on the question.
A street analyst is trying to conduct top-down research. In order to realign investment portfolio, he plans to remove the stock that has the lowest market share in its industry. He is currently looking at the following stocks: Stock Name: ABCRevenue: 2,345,678.00Industry Sales: 27,000,579.88 Stock Name: DEFRevenue: 278,000.00Industry Sales: 2,897,000.90 Stock Name: GHIRevenue: 1,334,567.00Industry Sales: 8,700,899.76 Stock Name: JKLRevenue: 4,400,990.00Industry Sales: 6,678,999.00 Stock Name: MNORevenue: 13,000,000.00Industry Sales: 87,994,678.00 Which stock will he remove?
Monkey corporation want to buy stocks in the Goose company, Monkey financlal manager says that the stock fair price is 50 dollars if the treasury bill rate is 0.08 and the covariance between the stock and the market is 0.0034 and the standard deviation of the market is 0.055 the market return is 0.15what is the what is the requirec rate of return ?
An investor buys a stock if price rises 5% from the 250-day low and shorts a stock if price falls 5% from the 250-day high. What is this strategy called? Will it work if the market is efficient? Explain why
If you place a stop-loss order to sell at $52 on a stock currently selling for$55.50 per share, what is likely to be the minimum loss you willexperience on 100 shares if the stock price rapidly declines to $49.50 pershare? Explain. What if you had placed a stop-limit order to sell at $52,and the stock price tumbled to $49.50?