Brett Daly Is An Active Stock Trader and An Avid

Brett Daly is an active stock trader who relies on technical analysis to make investment decisions. He has been tracking Nautilus Navigation, a profitable tech company with volatile earnings and stock prices, for 3-4 months. Brett wants to analyze technical indicators like relative strength index (RSI) and moving averages on Nautilus's stock prices to determine whether now is a good time to buy or sell.

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Brett Daly Is An Active Stock Trader and An Avid

Uploaded by

Amit Pandey

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Solved: Brett Daly is an active stock trader and an avid

Brett Daly is an active stock trader and an avid market technician. He got into technical analysis
about 10 years ago, and although he now uses the Internet for much of his analytical work, he
still enjoys running some of the numbers and doing some of the charting himself. Brett likes to
describe himself as a serious stock trader who relies on technical analysis for some—but
certainly not all—of the information he uses to make an investment decision; unlike some market
technicians, he does not totally ignore a stock’s fundamentals. Right now he’s got his eye on a
stock that he’s been tracking for the past 3 or 4 months.

The stock is Nautilus Navigation, a mid-sized high-tech company that’s been around for a
number of years and has a demonstrated ability to generate profits year-in and year-out. The
problem is that the earnings are a bit erratic, tending to bounce up and down from year to year,
which causes the price of the stock to be a bit erratic as well. And that’s exactly why Brett likes
the stock—as a trader, the volatile prices enable him to move in and out of the stock over
relatively short (3- to 6-month) periods of time.

Brett has already determined that the stock has “decent” fundamentals, so he does not worry
about its basic soundness. Hence, he can concentrate on the technical side of the stock. In
particular, he wants to run some technical measures on the market price behavior of the
security. He’s obtained recent closing prices on the stock, which are shown in the table below.

Questions

a. Use the closing share prices in the table above to compute the stock’s relative strength index
for (1) the 20-day period from 9/30/13 to 10/31/13; and (2) the 22-day period from 11/30/13 to
12/31/13.

1. Contrast the two RSI measures you computed. Is the index getting bigger or smaller, and is
that good or bad?

2. Is the latest RSI measure giving a buy or a sell signal? Explain.

b. Based on the above closing share prices, prepare a moving-average line covering the period
shown in the table; use a 10-day time frame to calculate the individual average values.

1. Plot the daily closing prices for Nautilus from 8/15/13 through 12/31/13 on a graph/chart.

2. On the same graph/chart, plot a moving-average line using the individual average values
computed earlier. Identify any buy or sell signals.

3. As of 12/31/13, was the moving-average line giving a buy, hold, or sell signal? Explain.

Reach out to [email protected] for enquiry.

How does that result compare to what you found with the RSI in part a? Explain.

c. Based on the technical measures and charts you’ve prepared, what course of action would
you recommend that Brett take with regard to Nautilus Navigation? Explain.