Chapter 12, Problem 18PS

Summary Introduction

To identify:

The signals for any buy or sell by using table$9.3$and computing five days moving average for computer Inc.

Introduction:

Industry Analysis: It is a most important puppet which was used to compare a specified company's performance with the other's market in the same industry market.

Explanation of Solution

Given:

Table$9.3$

Detailed explanation / work out of the complete problem.

Days	Moving average formula	Moving average	Action
$\text{1 to 5}$	$\frac{19.63+20+20.50+22+21.13}{5}$	$20.62$
$\text{2 to 6}$	$\frac{20+20.50+22+21.13+22}{5}$	$21.13$
$\text{3 to 7}$	$\frac{20.50+22+21.13+22+21.88}{5}=\frac{107.51}{5}$	$21.50$
$\text{4 to 8}$	$\frac{22+21.13+22+21.88+22.5}{5}=\frac{109.51}{5}$	$21.90$
$\text{5 to 9}$	$\frac{21.13+22+21.88+22.5+23.13}{5}=\frac{110.64}{5}$	$22.13$
$\text{6 to 10}$	$\frac{22+21.88+22.5+23.13+23.88}{5}=\frac{113.39}{5}$	$22.68$
$\text{7 to 11}$	$\frac{21.88+22.5+23.13+23.88+24.50}{5}=\frac{115.89}{5}$	$23.18$
$\text{8 to 12}$	$\frac{22.5+23.13+23.88+24.50+23.25}{5}=\frac{117.26}{5}$	$23.45$	Selling point
$\text{9 to 13}$	$\frac{23.13+23.88+24.50+23.25+22.13}{5}=\frac{116.89}{5}$	$23.38$
$\text{10 to 14}$	$\frac{23.88+24.50+23.25+22.13+22}{5}=\frac{115.76}{5}$	$23.15$
$\text{11 to 15}$	$\frac{24.50+23.25+22.13+22+20.63}{5}=\frac{112.51}{5}$	$22.50$
$\text{12 to 16}$	$\frac{23.25+22.13+22+20.63+20.25}{5}=\frac{108.26}{5}$	$21.65$
$\text{13 to 17}$	$\frac{22.13+22+20.63+20.25+19.75}{5}=\frac{104.76}{5}$	$20.95$
$\text{14 to 18}$	$\frac{22+20.63+20.25+19.75+18.75}{5}=\frac{101.35}{5}$	$20.28$
$\text{15 to 19}$	$\frac{20.63+20.25+19.75+18.75+17.50}{5}=\frac{96.88}{5}$	$19.38$
$\text{16 to 20}$	$\frac{20.25+19.75+18.75+17.50+19}{5}=\frac{95.25}{5}$	$19.05$
$\text{17 to 21}$	$\frac{19.75+18.75+17.50+19+19.63}{5}=\frac{94.63}{5}$	$18.93$	Buying point
$\text{18 to 22}$	$\frac{18.75+17.50+19+19.63+21.50}{5}=\frac{96.38}{5}$	$19.28$

We see that in$\text{9 to 13}$, the trading price of${13}^{\text{in}}$day is lower than a$8^{\text{th}}$day so our selling point is when the price is high i.e. on${12}^{\text{th}}$day which is$\$23.45$.

And further, we see that${22}^{\text{nd}}$day value is high from${17}^{\text{th}}$day's value so on$17-{21}^{\text{st}}$day's average is the best point for buying the stock of computer Inc.

Conclusion

From the above, the selling point is${12}^{\text{th}}$day and buying point is the${21}^{\text{th}}$day of Computer Inc.