As it is cleared from its name that this shape of yield curved is formed when market conditions are normal and there are no chances of any significant changes in the economy like inflation rate according to investors and they believe in that economy will continue to grow up at a normal rate. We also get awareness of interest rate which can be raised in future by Federal Reserve. In fact interest rates are only risen by Federal Reserve when economy is expanding rapidly and there is danger of inflation in an economy too.
Flat yield curve
A flat yield curve is plotted as straight line on a graph and gives us knowledge about interest rate in relation to the changes in an economy and tells us when Federal Reserve is going to be cutting interest rates. In fact, when astringent happens in an economy that time to kindle that economy Federal Reserve cuts the interest rates. In the light of above discussion we can named flat yield curve as a symbol of an economy slowdown. A flat yield curve take places when there is transition in market that emits altered but immediate indications of what interest rates will do in future. In simple words, it can also be explained as short-term interest rates will be risen and long-term interest rate will be fallen.
Inverted yield curve
These yield curves are rare and are formed when there are extraordinary market conditions in which the expectations of investors are entirely the inverse of those expectations which are demonstrated by the normal yield curve for investors. An inverted yield curve is happened when long- term yields are fallen below the short-term yields. Inverted yield curve gives us an indication related to the economic situation worseness and since 1970s it has indicated 6 out of 7 times. In this situation, recession, Federal Reserve cut interest rates radically so inverted yield curve gives sign in relation to the economy that it is in recession.
International Power PLC
International power, formed in 2000, is a growing independent power generation company with interest in over 45 power stations which have 32,000MW of power generating capacity, located in 21 countries. International power is generating 7,075 MW in North America, 9,155MW in Europe, 7,435MW in Middle East, 3,723MW in Australia and 4,970MW in Asia and 3,430MW is under construction.
Together with power generation, International power is using it's capabilities to successfully and profitably develop closely-linked businesses which are included, *Wholesale production of fresh water through seawater desalination
*Production and distribution of steam
* A small but growing electricity retail business
*Open-cast coal mining
*Gas transportation
*Renewable energy
It also owns equity in three companies, Al kamil Power Company, Kot addu Power Company limited and the Hub Power Company Ltd, which are listed on public exchanges and International power is listed in London exchange.
Company strategy is to deliver growth in shareholder value through power generation, ensuring a balanced international portfolio in terms of market, fuel, contract type and technology.
At 31st Dec 2008 the company had net assets of worth £4,135m and £559m profit. Its net income was £789m in Dec 2008 and basic earning per share was £32.4p. Today price of share is £326.60 in stock market.
5 Years Shares Performance
INTERNATIONAL POWER (LSE)
Range:
1d 5d 3m 6m 1y 2y 5y max
Type:
Bar | Line | Cdl
Scale:
Linear | Log
Size:
M | L
Top of Form
Compare: IPR.L vs FTSE 100 FTSE 250 DowJones
Bottom of Form
Moving Average Strategy
Chat for 50-days with the range of 5years.
INTERNATIONAL POWER (LSE)
Range:
1d 5d 3m 6m 1y 2y 5y max
Type:
Bar | Line | Cdl
Scale:
Linear | Log
Size:
M | L
Moving Avg:
5 | 10 | 20 | 50 | 100 | 200
EMA:
5 | 10 | 20 | 50 | 100 | 200
Indicators:
MACD | MFI | ROC | RSI | Slow Stoch | Fast Stoch | Vol | Vol+MA | W%R
Overlays:
Bollinger Bands | Parabolic SAR | Splits | Volume
Top of Form
Compare: IPR.L vs FTSE 100 FTSE 250 DowJones
Bottom of Form
Splits:none
The above is the graph of International Power with a Range of five years and Moving Average 50 days.
Blue line showing IPR.L price trend and dark red line is the moving average line that showing the trend of the market.
In MA strategy, we calculate simple buying signals and selling signals with the help of this graph. The addition of both buying point and selling point is equal to total signals.
In this graph total buying signals are 16 and total selling signals are 11. Now its easy to calculate total signals that are equal to their addition. Total signals are 16 + 11= 27.
According to the moving average strategy we count buying signal and selling signals altogether then we divide selling signals by total number of signals that indicates the stock market performance of financial instruments.
According to my given company selling signals within 50 days analysis are 11 after dividing selling signals by total number of signals 27, I got 0.41 that is less than 0.5. (0.41<0.50)
Specifically, graph is showing the turn over in stock market, but actually reconciling with the moving average analysis that is less than (0.41<0.5) , so it's the time to buy the stock instead of sell. We should sell it when moving average analysis result should be equal to 0.5 or more than it. Such a case we can make profit otherwise we will be in deficit.
Why use Moving Average
Moving average basically measures the average price or exchange rate of a currency pair over a definite time frame. The conclusion derived by a smooth line that gives information on the direction of the market. There are different types of moving averages like simple, exponential, time series, triangular, variable and weighted.
There are different types of time frames which are used for moving average but the most common time frames for moving average are 10, 20, 50, 200 periods on a daily chart. In fact, if the period of time frame is longer then reliability of study will be more. Moving average helps to track the prices trend. They don't forecast but they shack light on what prices have been and are doing in the market. Therefore, moving average helps to give you support for your decision in knowing that which time is suitable to get in and out of a market. They work most excellent in trending markets, that is the reason by which oscillator comes in handy for choppy or sideways markets.
Usually we use Simple Moving Average which is used in many places and has important use as an ocular support for formative the tendency of market, the second significant use of a moving average comes into play when the real value of the market falls under the value of the moving average. It should not be taken lightly because it is an important signal especially if the moving average is above than a period of 40weeks.
Annexure
www.yieldcurve.com
http://uk.finance.yahoo.com/q/ta?s=IPR.L
http://www.ipplc.co.uk/
http://uk.finance.yahoo.com/q/ta?s=IPR.L&t=5y&l=on&z=m&q=l&p=m50&a=&c=
http://www.fxwords.com/m/moving-averages.html
http://www.paritech.com.au/paritech-site/education/technical/indicators/trend/movavg.asp
www.courwork.info
