Dakota State University
BUS
418 Financial Futures & Options
Spring 2001
Computer Assignment #2
Technical Analysis: Moving
Averages
[ta.doc]
| Assignment Due: | Tuesday, February 6, 2001 10:00 pm |
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Assignment Software: |
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Procedure
Create a chart using 4-day and 10-day moving averages of the settlement prices that will generate buy and sell signals for trading your contract. Make a copy of the first assignment to modify. That way if you make mistakes, you can always simply go back and start all over again.
In two new columns calculate a simple (i.e., not weighted) 4-day moving average of the settlement prices [Example: =sum(f9.f12)/4] and a simple 10-day moving average of the settlement prices [Example: =sum(f9.f18)/10]. Note that the 4-day moving average will have three missing points in the beginning and the 10-day moving average nine missing points. You have to include these empty cells with missing data when you specify the new data series so that the plot of the moving averages is not shifted to the left. Also note that you are not using the moving averages to make forecasts. You are using them to describe past and current data. Therefore the moving average formula in any cell should include the data for the same date next to it (not the previous date as would be done for forecasting).
You can start by just choosing one of the moving average columns or the settlement prices and clicking on the Chart Wizard icon. Choose Line as both the Chart type and sub-type. The dates in the A column are the Category (X) axis Labels. Include the series all the way to March 23. Then add the other two series. Your chart will have three different lines on it. Include dashed gridlines.
Name the series in the Source Data dialogue box from the Chart menu. Do not add markers to the lines. Use different lines for the two moving averages and the settlement prices, remembering that you will be showing them to the class with black and white transparencies. Add a legend at the bottom of the page by using Chart Options in Chart menu. Change the second line of the titles to Technical Analysis with Moving Averages. See the handout in class for an example of what the chart should look like. Because we will be comparing everyone's chart to the others, it is important that the charts be consistent.
This exercise provides an example of technical analysis. A moving average is used to smooth data to detect underlying trends, and the relative movement of two different moving averages is used by technicians to generate buy and sell signals. Use these signals to determine whether you should be long or short during the entire computer project (Computer Assignment #3).
TURN IN
1. A hardcopy of the chart.
2. A hardcopy of spreadsheet showing data with the new moving average columns.
3. A hardcopy of the spreadsheet showing formulas. Expand column widths so all
of the formula shows. Include border row and column headings.