EBF 301
Global Finance for the Earth, Energy, and Materials Industries

Lesson 9 Introduction

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Overview

Thus far, we have addressed the fundamental factors that influence energy prices. We also established that there are two main groups that trade in the financial energy commodities markets, commercial and non-commercial. The latter group represents the “pure” traders or “speculators." These participants are only interested in price movement. The type of commodity does not matter to them. In order to make trading decisions, they use technical analysis as opposed to fundamental analysis.

Technical analysis involves the use of charts to track price movement, establish the current market trend, and determine the probability of prices moving in one direction or another. Simply put, technical or “day” traders are interested in market activity as illustrated by the resulting prices.

Since the prices that occur in the market are the result of human decision-making, technical analysis really examines the behavior of market participants. As such, patterns emerge that have a high probability of recurring. It is precisely these events that technical traders are looking for. But, make no mistake; fundamental events cause traders to react emotionally, the results of which are also reflected in the price action.

In technical analysis, traders must first establish what the current price trend is, up or down. Then, they must determine the probability of the trend lasting or changing direction. It is this information that guides their buy/sell decisions.

Learning Outcomes

At the successful completion of this lesson, students should be able to:

  • distinguish the difference between technical and fundamental market analysis;
  • identify different types of technical charts and their uses;
  • recognize trendlines and market signals;
  • analyze “momentum” indicators.

What is due for this lesson?

This lesson will take us one week to complete. The following items will be due Sunday at 11:59 p.m. Eastern Time.

  • Lesson 9 Quiz
  • Lesson 9 Technical Chart Analysis Activity
  • Fundamental Factors

Questions?

If you have any questions, please post them to our General Course Questions discussion forum (not email), located under Modules in Canvas. The TA and I will check that discussion forum daily to respond. While you are there, feel free to post your own responses if you, too, are able to help out a classmate.