Question 1

Technical analysts agree with fundamental analysts regarding the usefulness of accounting data.

Accepted Answer

A) True 
 B)False  False

Question 2

A high short interest ratio is generally interpreted as:

Accepted Answer

A)  a bullish signal. 
B)  evidence of a downside breakout. 
C)  a bearish signal. 
D)  evidence of the presence of odd-lot individual investors. 
A)  a bullish signal. 
B)  evidence of a downside breakout. 
C)  a bearish signal. 
D)  evidence of the presence of odd-lot individual investors. A

Question 3

Explain three specific buy signals using a moving average.

Accepted Answer

(a) The price is above the moving average, moves toward the average but average flattens out. The price penetrates the average from below. 
 (b) Actual prices rise through the moving average on high volume.
 (c) The stock price falls below the moving average while it is rising.

Question 4

Which of the following is true regarding the resistance level?

Accepted Answer

A)  Resistance levels tend to develop due to profit taking. 
B)  It is the level at which a significant decrease in demand is expected. 
C)  It is the level at which a significant increase in supply is expected. 
D)  Resistance levels usually develop after a stock reaches a new low. 
A)  Resistance levels tend to develop due to profit taking. 
B)  It is the level at which a significant decrease in demand is expected. 
C)  It is the level at which a significant increase in supply is expected. 
D)  Resistance levels usually develop after a stock reaches a new low.

Question 5

Which of the following is not an assumption made by technical analysts?

Accepted Answer

A)  Changes in trend are caused by shifts in supply and demand relationships. 
B)  Stock price movements are independent of one another. 
C)  Security prices tend to move in trends. 
D)  Supply and demand of securities are determined by various factors. 
A)  Changes in trend are caused by shifts in supply and demand relationships. 
B)  Stock price movements are independent of one another. 
C)  Security prices tend to move in trends. 
D)  Supply and demand of securities are determined by various factors.

Question 6

A put/call ratio greater than the typical upper limit would be interpreted as a bullish signal by the contrarians.

Accepted Answer

A) True 
 B)False

Question 7

Which forms of the Efficient Market Hypothesis addresses the information used in technical and fundamental analysis? Do studies of technical analysis methods tend to support or refute the EMH?

Accepted Answer

The weak form EMH addresses market data

Question 8

The two primary tools of a technical analyst are:

Accepted Answer

A)  level of the market index and volume. 
B)  economic indicators and level of the market index. 
C)  price and earnings. 
D)  price and volume. 
A)  level of the market index and volume. 
B)  economic indicators and level of the market index. 
C)  price and earnings. 
D)  price and volume.

Question 9

Which of the following statements about the put/call ratio is most accurate?

Accepted Answer

A)  A negative ratio is bullish. 
B)  Investors interpret a ratio greater than 1 to be a bearish indicator. 
C)  Investors interpret a relatively low ratio to be a bearish indicator. 
D)  Investors interpret a relatively high ratio to be a bearish indicator. 
A)  A negative ratio is bullish. 
B)  Investors interpret a ratio greater than 1 to be a bearish indicator. 
C)  Investors interpret a relatively low ratio to be a bearish indicator. 
D)  Investors interpret a relatively high ratio to be a bearish indicator.

Question 10

Technical analysis is sometimes called market or:

Accepted Answer

A)  external analysis. 
B)  internal analysis. 
C)  stochastic analysis. 
D)  qualitative analysis. 
A)  external analysis. 
B)  internal analysis. 
C)  stochastic analysis. 
D)  qualitative analysis.

Question 11

The Dow Theory is intended to forecast the start but not the duration of a primary movement.

Accepted Answer

A) True 
 B)False

Question 12

Investors who sell short expect to make money when the stock price goes down. How, then, can a high short-interest ratio be considered bullish?

Accepted Answer

Short sales must be

Question 13

One rule of thumb is that a stock is attractive when its relative strength has improved for at least:

Accepted Answer

A)  1 month. 
B)  2 months. 
C)  3 months. 
D)  4 months. 
A)  1 month. 
B)  2 months. 
C)  3 months. 
D)  4 months.

Question 14

Which of the following is not a contrary trading rule?

Accepted Answer

A)  Relative strength ratio 
B)  Investment advisory opinions 
C)  Mutual fund liquidity positions 
D)  Put/call ratio 
A)  Relative strength ratio 
B)  Investment advisory opinions 
C)  Mutual fund liquidity positions 
D)  Put/call ratio

Question 15

A filter rule specifies a breakpoint for a stock or average and trades are made when the price move is greater than the filter.

Accepted Answer

A) True 
 B)False

Question 16

A period of correction is often followed by a period of:

Accepted Answer

A)  channel lines. 
B)  momentum. 
C)  reversals. 
D)  consolidation. 
A)  channel lines. 
B)  momentum. 
C)  reversals. 
D)  consolidation.

Question 17

Which of the following is a characteristic of the short interest ratio?

Accepted Answer

A)  It is calculated daily as well as weekly. 
B)  It is often interpreted without any additional information. 
C)  It has had a value between 2 and 3 in recent times. 
D)  It is considered to be a measure of investor sentiment. 
A)  It is calculated daily as well as weekly. 
B)  It is often interpreted without any additional information. 
C)  It has had a value between 2 and 3 in recent times. 
D)  It is considered to be a measure of investor sentiment.

Question 18

In a candlestick chart, what does it mean if the candlestick is shaded?

Accepted Answer

A)  It is a bearish indicator. 
B)  It is a bullish indicator. 
C)  It means the stock's closing price was above its opening price. 
D)  It means the stock's opening price was above its closing price. 
A)  It is a bearish indicator. 
B)  It is a bullish indicator. 
C)  It means the stock's closing price was above its opening price. 
D)  It means the stock's opening price was above its closing price.

Question 19

The breadth of the market is typically measured by which of the following:

Accepted Answer

A)  200-day moving average. 
B)  50-day moving average. 
C)  the put-call ratio. 
D)  the advance-decline line. 
A)  200-day moving average. 
B)  50-day moving average. 
C)  the put-call ratio. 
D)  the advance-decline line.

Question 20

If a trading rule has been tested on data other than that used to produce the rule and found to be accurate, this is known as:

Accepted Answer

A)  consistency. 
B)  relative strength. 
C)  out-of-sample validity. 
D)  a filter rule. 
A)  consistency. 
B)  relative strength. 
C)  out-of-sample validity. 
D)  a filter rule.

Exam 16: Technical Analysis

Technical analysts agree with fundamental analysts regarding the usefulness of accounting data.

A high short interest ratio is generally interpreted as:

Explain three specific buy signals using a moving average.

Which of the following is true regarding the resistance level?

Which of the following is not an assumption made by technical analysts?

A put/call ratio greater than the typical upper limit would be interpreted as a bullish signal by the contrarians.

Which forms of the Efficient Market Hypothesis addresses the information used in technical and fundamental analysis? Do studies of technical analysis methods tend to support or refute the EMH?

The two primary tools of a technical analyst are:

Which of the following statements about the put/call ratio is most accurate?

Technical analysis is sometimes called market or:

The Dow Theory is intended to forecast the start but not the duration of a primary movement.

Investors who sell short expect to make money when the stock price goes down. How, then, can a high short-interest ratio be considered bullish?

One rule of thumb is that a stock is attractive when its relative strength has improved for at least:

Which of the following is not a contrary trading rule?

A filter rule specifies a breakpoint for a stock or average and trades are made when the price move is greater than the filter.

A period of correction is often followed by a period of:

Which of the following is a characteristic of the short interest ratio?

In a candlestick chart, what does it mean if the candlestick is shaded?

The breadth of the market is typically measured by which of the following:

If a trading rule has been tested on data other than that used to produce the rule and found to be accurate, this is known as:

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