1. Entry Task
Joe scored a 79%, 81%, 93%, 63% and a 88% on his tests. What is his average test score?

2. 1-4 SIMPLE MOVING AVERAGES
Banking
5/14/2018
1-4 SIMPLE MOVING AVERAGES
OBJECTIVES
Understand how data is smoothed.
Calculate simple moving averages using the arithmetic average formula.
Calculate simple moving averages using the subtraction and addition method.
Graph simple moving averages using a spreadsheet.
Chapter 1

3. Banking
5/14/2018
Key Terms
smoothing techniques – statistical tools that allow an investor to reduce the impact of price fluctuations and focus on patterns and trends
simple moving average (SMA) – an avg. over a given time
arithmetic average (mean) - average
lagging indicators – moving averages, because they use past indicators
fast moving average – a graph w/ a shorter time interval
slow moving average - a graph w/ a longer time interval
crossover – when one average overtakes another
Chapter 1

4. How can stock data be smoothed?
Banking
5/14/2018
How can stock data be smoothed?
What factors might contribute to the fluctuation of stock market prices?
Chapter 1

5. Banking
5/14/2018
The closing prices for 10 consecutive trading days for a particular stock are shown. Calculate the 5-day SMA and plot both the closing prices and the averages on a graph.
Example 1
Chapter 1

6. CHECK YOUR UNDERSTANDING
Banking
5/14/2018
CHECK YOUR UNDERSTANDING
Closing prices for 10 consecutive trading days were $55, $60, $62, $48, $40, $42, $45, $46, $43, and $49. Calculate the 5-day SMA. Plot both the closing prices and the averages on a graph.
$53
$50.40
$47.40
$44.20
$43.20
$45.00
Chapter 1

7. Banking
5/14/2018
Example 2
Use the subtraction and addition method to determine the 4-day SMA for the following closing prices.
$121, $122, $120, $119, $124, $128, $126
Chapter 1

8. CHECK YOUR UNDERSTANDING
Banking
5/14/2018
CHECK YOUR UNDERSTANDING
Use the subtraction and addition method to determine the 3-day SMA for the closing prices $28, $31, $37, $38, and $35.
Chapter 1

9. Graph simple moving averages using a spreadsheet
Banking
5/14/2018
Graph simple moving averages using a spreadsheet
Chapter 1

10. Banking
5/14/2018
EXAMPLE 3
Use a spreadsheet to calculate the 5-day SMA of the closing prices for 10 consecutive trading days.
Open up the excel doc called 5 day SMA on the S drive in my Outbox.
Chapter 1

11. CHECK YOUR UNDERSTANDING
Banking
5/14/2018
CHECK YOUR UNDERSTANDING
Add column D to the spreadsheet to calculate the 3-day SMA. In what cell do you start? What formula do you use?
Chapter 1

12. Banking
5/14/2018
EXAMPLE 4
The graph shows the closing prices for 30 consecutive trading days. It also charts the 7-day and 21-day simple moving averages. What signal might the graphs give an investor?
Chapter 1

13. CHECK YOUR UNDERSTANDING
Banking
5/14/2018
CHECK YOUR UNDERSTANDING
Suppose that on the 35th trading day, the 21-day SMA graph rises above the 7-day graph. What might that indicate?
Sell: The slow moving graph overtook the fast moving one. This can indicate a reversal of the trend. The buyer should consider selling.
Chapter 1

14. Assignment
P. 27 #1, 2, 3, 6,10