Part IV: Analvtical Problems (6x5 30 points) Q1. The following figures show the
ID: 1156680 • Letter: P
Question
Part IV: Analvtical Problems (6x5 30 points) Q1. The following figures show the price movements, volume and open interest, and Relative Strength Index for April 2018 Feeder Cattle futures contract during the last two months. The last bar in the upper panel of the chart shows yesterday's prices. The black line shows 20-day moving average, while the grey line shows 10-day moving average. The bars in panel show the volumes of trade and the line show shows th s open interests. The line in the lower panel e relative strength index. Analyze the chart and determine your trading strategy for today, and provide your justification der Cattle Apr'18 (GR18) Barthart.com 52 300 4250 37 50 40 an 15 an 22 an 29Explanation / Answer
As per the chart given let us understand the details given in each of the subcomponent within feeder cattle future contracts :
the candlestick chart shows the prices, black line shows the 20 days moving average, grey line shows 10 day moving average, the bars in middle panel depicts the volume of trade & the line shows the open interests, the line in the lower panel shows the relative strength index.
So now after knowing the depiction of chart let us analyse each of them in detail; -
if we see the price movement during last two months it was on a rising mode but with more of ups and downs where it went low during january and bit low during february and after that it is again steeping downwards.
the 20 day MA was constantly moving in january and taking a higher side later moving in the rising direction only.
the 10 day moving average is moving almost constantly without showing any extreme fluctuations with regards to the changes in prices
the bar chart of volume of trade and the open interest line is going hand in hand on the same orbit, and there is no much extreme fluctuations but we can see a trernd that the points when the prices (according to the candle stick chart) went down the volume of trade has taken a hike. So this is tottally beneficiary that the prices go down as the volume of trade inceases. And if we look at the open intersest line it remains constant throughout and there is no effect of change with prices and volume.
The relative strength index slows a bit of change during the feb month due to the various changes with price and volume as explained above.
So looking forward to the trading strategy for today where the prices are not too high and looking to the last price of yesterday we can trade freely and sell more of future contracts and buy less as the prices are on the rising stage and due to which we will have to pay more as in future contracts we set the price today for the contracts that are going to be conducted in future.