Pierre has been plotting the price behaviour of QLT using a 100-day moving average. The 100-day moving average line has been above the daily market price for several weeks. However, the price of QLT broke through the moving average line with heavy trading volume, and the moving average line is moving higher. What action should Pierre take based on this information?

This scenario describes a classic bullish signal in technical analysis. When a stock's price, which has been trading below its moving average, decisively crosses above it, it suggests a potential reversal from a downtrend to an uptrend. The heavy trading volume confirms the strength and validity of this breakout. Furthermore, the fact that the moving average line itself is beginning to move higher reinforces the signal that a new upward trend is forming. The appropriate action based on this strong buy signal is to purchase the shares.

A. Buying a put option is a bearish strategy, betting on a price decline, which is contrary to the bullish signals observed.
B. Selling shares is a bearish action, directly opposing the buy signal indicated by the price crossing above the moving average.
D. Selling a call option is a neutral to bearish strategy, inappropriate when a strong upward price movement is anticipated.

1. Canadian Securities Institute. (2023). Canadian Securities Course (CSC®), Volume 2. Chapter 9: Technical Analysis, Section 2: Charting, p. 9-13. "A buy signal is generated when the stock price moves up through the moving average line... A sell signal is generated when the stock price falls through the moving average line."

2. Murphy, J. J. (1999). Technical Analysis of the Financial Markets. New York Institute of Finance. Chapter 9: Moving Averages, p. 228. "The most popular method for interpreting a moving average is to compare the relationship between the moving average and the security's price... A buy signal is given when prices cross above the moving average."

3. MIT OpenCourseWare. (2003). 15.433 Financial Markets, Lecture Notes, Lecture 10: Technical Analysis. Section 3.2: Moving Averages. (Course materials often describe a price crossing above a moving average as a standard buy signal).