Finc 440-technical analysis of amp stock PDF

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Finc 440-technical analysis of amp stock...

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Introduction Ameriprise Financial- AMP is a diversified financial services company listed on the S&P 500 at number 119. It has a market capitalization of almost $18 billion and the common stock is trading at $129 per share. A technical analysis, of this stock, using common technical indicators will help predict the direction of future prices. This analysis is useful for those interested in actively trading as it looks at trending short-term price movements that are driven by market participants. Common indicators used to analyze AMP are either leading indicators, which will signal (predict) when a trend is beginning or lagging indicators that come after the price has started to move [ CITATION Jef17 \l 1033 ]. There are four types of indicators that technical traders use to determine where a price is headed: 

Trend Indicators show movement above the baseline which determines a stock to be bullish; when it moves below the established baseline it determines a stock to be bearish.

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Momentum Indicators help identify how fast prices are moving. Comparing current closing price and previous closing prices can signal a price and momentum trend.

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Volatility Indicators will indicate where the market may change direction but not which way it will go. It measures the rate of price movements based on the highest and lowest historical prices. An asset can be highly volatile, which means it strays far from the average or have low volatility, which means it does not change direction very much [ CITATION Vol18 \l 1033 ]. 1

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Volume Indicators show overall trading over a given period. A strong trend based on increased trading volume can cause large price movements.

The following indicators will be used to analyze Ameriprise Financial Stock. 

Trend Indicators-Moving Averages and MACD (Moving Average Convergence Divergence) which are both lagging indicators

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Momentum Indicators-Relative Strength Index and CCI (Commodity Channel Index) which are leading indicators

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Volatility Indicators- Average True Range ATR is lagging indicator

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Volume Indicators-Volume Rate of Change ROC s a lagging indicator

Analysis Section The Moving Average looks at historical prices to gauge the direction of the current trend. This is calculated by taking the previous 10 data points and dividing it by 10 which will show how the asset is priced compared to the last 10 days [ CITATION Cas18 \l 1033 ]. Previous ten days of data points were used to arrive at the 10 day Moving Average of $153.93. AMP stock last closed at $126.45 this indicator shows the stock as trending down which creates a buy opportunity. Moving Average Convergence Divergence (MACD) will identify a securities overall trend and help identify turning points in the market. MACD discovers the trend by calculating the difference between two different Moving Averages of different lengths and the EMA (exponential moving average) of those averages which is the signal line. When the MACD line crosses above the signal line it is a signal to buy the stock when the line crosses below the signal line it is a signal to sell. Currently the Ameriprise Financial 2

Stocks MACD is just below the signal line which indicates a buy opportunity. The MACD line is negative which is indicating the value is decreasing and the downside is trending. Relative Strength (RSI) compares how a stock is doing compared to the stocks own up and down days. It attempts to identify overbought and oversold assets and can signal a trend reversal or pullback in price. The range is between 0-100; above 70 is bullish and below 30 is bearish. This indicator is not just about identifying the trend but also the strength of the trend [ CITATION AlH18 \l 1033 ]. The formula to compute this is RSI=100-(100/1+RS) where RS=Average gain in the period/Average loss in the period. The RSI for AMP stock when looked at for 14 days, October 15 th – November 4th is 40. This is just above the level that would be considered undervalued or oversold. The speed and change in price movement is trending up [ CITATION Cha181 \l 1033 ]. The price for AMP stock is trending lower but the RSI is trending up. This is a positive divergence because AMP stocks RSI is making a higher bottom even though the share price is falling. Because the RSI is approaching 40 the indication is for traders to buy the stock [ CITATION Nat13 \l 1033 ]. Commodity Channel Index (CCI) is a leading indicator which will determine overbought or oversold conditions. This can be useful in determining new trends by measuring the current price level relative to the average price level over a given period of time. The one month CCI for AMP stock is -105.6 this shows weakness and a possible downtrend. The one day CCI for AMP stock shows even more weakness at -189.89. While the one month is considered more neutral the increase in weakness shows it is trending down and signals a buy opportunity [ CITATION Com18 \l 1033 ]. 3

Average True Range (ATR) volatility indicator will show how much an asset moves, on average in a given time period; this can be shown in small increments such as one minute or year to date. It looks back at historical data to get an annualized return. A high ATR can signal a possible trend change and a low ATR correlates with a weak trend movement. In the last 30 days AMP stock changed -5.23% and the last three months -2.05. Based on the increasing negative volatility a trend change is not anticipated and the stock is a safe buy opportunity [ CITATION Jen18 \l 1033 ]. Volume Rate of Change (ROC) is going to show the speed of volume trading and identify overbought or oversold extremes. ROC= {(Close-close n periods ago) / (close n periods ago)} * 100. The seven day ROC for AMP stock shows a -22.39 for a 30 day period of time is -63. It appears the volume, while still negative is trending up and the price is falling.

[ CITATION Ame18 \l 1033 ]

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Enterprise Value Some researchers feel that EV/DBITDA is the best valuation method. The Enterprise Value is the market value of the company-what it could be sold for today; calculate the market capitalization add the debt and subtract the cash. The EBITDA adds back in the interest, taxes, depreciation and amortization to the net profit to get a more accurate comparison of companies in the same sector [ CITATION The17 \l 1033 ]. If Ameriprise Financial were to be sold today its sale price, Enterprise Value would be $19,558 billion. The Enterprise Value to Earnings Before Interest Taxes Depreciation and Amortization for TTM is $2,990 billion. The ratio is 6.55. Ameriprise market cap is $18 billion[ CITATION Ame181 \l 1033 ]. AMP ratio of 6.55 is considered healthy. Summary/Conclusion Depending on your strategy some technical indicators are better to use than others with certain stocks. These indicators should be used in the right combination to get the best results. Indicators from the 4 different types of categories were used so charts were not produced with the same information with signals pointing in the same direction [ CITATION Bes18 \l 1033 ]. Ameriprise Financial Stock closed down on the last trading day. The Moving Average is clearly trending down and a buy opportunity; the MACD line although still below the signal line (and a buy opportunity) looks like it could be trending up to cross the signal line and become a sell opportunity; RSI is said to be neutral at around 40 but is also considered by some to be undervalued and a buying opportunity; CCI is in the negative and trending down which is indicating a buying opportunity; ROC indicates prices are changing and moving down but not with a big divergence; ATR for the stock are in the negative and a safe buy opportunity. The EV/EBITDA ratio for AMP

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is healthy and all technical indicators point towards no big divergence but still trending down and a good buy opportunity. Remember, “Don’t fight the trend” and “The trend is no friend at the end of the trend”, [ CITATION Let18 \l 1033 ]

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References Ameriprise Financial Inc (NYSE:AMP) Enerprise Value: $19,588 Mill. (2018, 11 04). Retrieved 11 04, 2017, from Gurufocus: https://www.gurufocus.com/term/ev/AMP/Enterprise-Value/AmeripriseFinancial-Inc Ameriprise Financial, Inc (AMP) chart. (2018, 11 04). Retrieved 11 04, 2017, from Yahoo Finanace: https://finance.yahoo.com/chart/AMP#eyJpbnRlcnZhbCI6ImRheSIsInBlcmlvZGljaXR5IjoxLCJjYW5 kbGVXaWR0aCI6NjYsInZvbHVtZVVuZGVybGF5Ijp0cnVlLCJhZGoiOnRydWUsImNyb3NzaGFpciI6dH J1ZSwiY2hhcnRUeXBlIjoibGluZSIsImV4dGVuZGVkIjpmYWxzZSwibWFya2V0U2Vzc2lvbnMiOnt9LCJ hZ2dyZWd Best Combination of Technical Indicators-Market Maker Methods. (2018, 04 03). Retrieved 11 04, 2018, from Trading Strategy Guides: https://tradingstrategyguides.com/best-combination-of-technicalindicators/ Charts:RSI-Relative Strength Index-AMP. (2018, 11 03). Retrieved from Profitspi: https://www.profitspi.com/stock/view.aspx?v=stockchart&uv=192087&p=AMP#&&vs=636768929241704723 Commodity Channell Index (CCI). (n.d.). Retrieved 11 04, 2018, from StockCharts: https://stockcharts.com/school/doku.php? id=chart_school:technical_indicators:commodity_channel_index_cci Desjardins, J. (2017, 05 02). 12 Types of Technical Indicators Used by Stock Traders. Retrieved from Visual Capitalist: http://www.visualcapitalist.com/12-types-technical-indicators-stocks/ Hill, A. (2018). 4 Simple Relative Strength Indes (RSI) Trading Strategies. Retrieved from TradingSim: https://tradingsim.com/blog/relative-strength-index/ Let's Get Technical: 3 Indicatiors to Help Find and Follow Trends. (2018). Retrieved 11 04, 2018, from The Ticker Tape: https://tickertape.tdameritrade.com/tools/technical-analysis-trend-indicators15565 Medina, J. (2018, 10 18). Ameriprise Financial, Inc. (AMP) Stock Recent Trading Summary. Retrieved 11 04, 2018, from Nasdaq Click: https://nasdaqclick.com/2018/10/18/ameriprise-financial-inc-ampstock-recent-trading-summary/ Murphy, C. (2018). Moving Averages:What are they? Retrieved from Investopedia: https://www.investopedia.com/university/movingaverage/movingaverages1.asp Nathan, N. (2013, 04 08). How to use RSI indicator to take decisions on buying and selling stocks. Retrieved 11 03, 2018, from ET Markets: https://economictimes.indiatimes.com/how-to-use-rsiindicator-to-take-decisions-on-buying-and-selling-stocks/articleshow/19414809.cms

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The importance of EBITDA. (2017). Retrieved 11 04, 2018, from Generational Equity: https://www.genequityco.com/insights/importance-of-ebitda Volatility Indicatiors And Binary Options-The Guide. (2018). Retrieved from Binary Options Trading in the UK: https://www.binaryoptions.co.uk/volatility-indicators

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