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Question 38 Not yet answered Marked out of 10,00 p Flag question Trends and Corrections Much of technical analysis seeks to uncover trends in market prices in search for momentum. Momentum can be absolute or relative. Relative Strength statistics are designed to uncover these cross sector potential opportunities. Relative Strength measures the extent to which a security has outperformed or underperformed either the market as a whole or its particular industry. Relative Strength (RS) is computed by calculating the ratio of the price of the security to a price of index for the industry. For example, the relative strength of a company versus its industry would be measured by the movements in the ratio of price of that company divided by the level of its industry index. A rising ratio implies the company has been outperforming the rest of the industry. RS - Price of Security / Index Level On day 1, the stock price of Ford was $15 and the automotive stock index was 125. On day 2, the stock price of Ford was $10 and the automotive stock index was 120. Explain, according to RS (I need to see the entire solution); A) Whether Ford is outperforming or underperforming the automotive industry? B) Whether the technical analysts who follow relative strength would advise buying or selling the stock. B Ff T: A X2 Question 38 Not yet answered Marked out of 10,00 p Flag question Trends and Corrections Much of technical analysis seeks to uncover trends in market prices in search for momentum. Momentum can be absolute or relative. Relative Strength statistics are designed to uncover these cross sector potential opportunities. Relative Strength measures the extent to which a security has outperformed or underperformed either the market as a whole or its particular industry. Relative Strength (RS) is computed by calculating the ratio of the price of the security to a price of index for the industry. For example, the relative strength of a company versus its industry would be measured by the movements in the ratio of price of that company divided by the level of its industry index. A rising ratio implies the company has been outperforming the rest of the industry. RS - Price of Security / Index Level On day 1, the stock price of Ford was $15 and the automotive stock index was 125. On day 2, the stock price of Ford was $10 and the automotive stock index was 120. Explain, according to RS (I need to see the entire solution); A) Whether Ford is outperforming or underperforming the automotive industry? B) Whether the technical analysts who follow relative strength would advise buying or selling the stock. B Ff T: A X2

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