On November 22,2009 the stock price of WalMart was $39.50 and the retailer stock index was 600.30.On November 25,2009 the stock price of WalMart was $40.25 and the retailer stock index was 605.20.Consider the ratio of WalMart to the retailer index on November 22 and November 25.WalMart is _______ the retail industry and technical analysts who follow relative strength would advise _______ the stock.
A)outperforming, buying
B)outperforming, selling
C)underperforming, buying
D)underperforming, selling
E)equally performing,neither buying nor selling

Question

Quizplus · Accepted Answer

To find the ratio of Walmart to the retailer index, we divide the stock price of Walmart by the retailer stock index for both dates:

Ratio on November 22 = 39.50/600.30 = 0.066
Ratio on November 25 = 40.25/605.20 = 0.066

The ratios are the same, meaning that Walmart's performance is consistent with that of the retail industry.

Since the ratio is not declining, Walmart can be considered to be outperforming the retail industry. Therefore, technical analysts would advise buying the stock (option A).

On November 22,2009 the Stock Price of WalMart Was $39