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If you were, a technical analyst and you use Simple Moving Average as an indicator of buy and sell
signals. Use the above graph to indicate buy and sell signals.
During an interview with her investment adviser, a retired investor made the following two statements:
1. "I have been very pleased with the returns I've earned on Apple sock for the past three years
and I am certain that it will be superior performer in the future."
2. "I am pleased with the returns from the Apple stock because I have specific uses for that money.
For that reason, I certainly want my retirement fund to continue owning the Apple stock."
Identify which principal of behavioral finance is most consistent with each of the investor's two
statements and explain why.
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3. Sell signals are indicated when the market price is lower than the simple moving average. This is because it indicates that the mood of the market is bearish and so the stock has crossed its normal expectation also to stop at lower levels. In this case, it can be seen that around the period of Nov 1 ’13, the stock price had crossed the simple moving average line from up and the stock price kept on declining. This was a sell signal. Similarly, between May 1 ’14 and Nov 3 ’14, the stock price had crossed the simple average line from up and it was a sell signal. The stock price kept on declining for about 4 months after that...