1. J-term Investment Club Meeting 2 (Jan 16 th 2007) Some important things we should all know …. Conceptual Understanding of … 4.RSI 5.Price to Book ratio 6.Short ratio

2. 4. Relative Stength Indicator RSI is a momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. RSI = 100 - [ 100 / (1 + RS) ] RS = EMA(n) of U / EMA(n) of D U = close today - close yesterday [[on a Upday]] D = close yesterday - close today [[on a Downday]] A stock is considered to be overbought and underbought when the RSI is above 70 and 30, respectively. What if the EMA of the past ndays of downdays and updays are the same?

3. 5. Price to Book ratio A ratio that compares the maket value of the company to its fundamental book value. Calculated by: Stock Price / [ (Total Assets) - (Intangible Assets + Liabilities) ] Lower P/B ratio indicates that the company is undervalued. Also could mean that there is something fundamentally wrong with the company (ex. Too many liabilities) Intended Usage: Cross comparison within industry

4. 6. Short Ratio Number of shares sold short / average daily volume (measured over 30 days or 90 days) There are various interpretations of this ratio. When people short, it is usually (but not always) because they are pessimistic about the security's future performance. Shorting involves buying at some point however. Hence, some would interpret a high short ratio as an indicator that there will be some buying pressure on the security that would increase its price.