Question 1

The oldest approach to common stock selection is:

Accepted Answer

A) technical analysis. 
B) fundamental analysis. 
C) stochastic analysis. 
D) value analysis. 
A) technical analysis. 
B) fundamental analysis. 
C) stochastic analysis. 
D) value analysis.

Question 2

If a trend exhibits support and resistance levels simultaneously that appear well defined,the trend lines are referred to as channel lines.

Accepted Answer

A) True 
 B)False

Question 3

How is relative strength calculated and used?

Accepted Answer

The relative strength of a stock is a ra

Question 4

Which of the following is not one of the three major variables to be decided by the investor in order to construct a moving average?

Accepted Answer

A) Price to be used 
B) Time period to be used 
C) Weight to be used 
D) Type of moving average to be constructed 
A) Price to be used 
B) Time period to be used 
C) Weight to be used 
D) Type of moving average to be constructed

Question 5

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 6

Explain how profit taking and support levels are related.

Accepted Answer

The scenario is as follows:The stock pri

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Technical analysis reflects the idea that stock prices:

Accepted Answer

A) move upward over time. 
B) move inversely over time. 
C) move in trends. 
D) move randomly. 
A) move upward over time. 
B) move inversely over time. 
C) move in trends. 
D) move randomly.

Question 9

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.

Question 10

Which of the following would be considered a strong bearish signal?

Accepted Answer

A) High mutual fund liquidity 
B) Bullish advisory opinion 
C) Low short interest ratio 
D) Bearish advisory opinion 
A) High mutual fund liquidity 
B) Bullish advisory opinion 
C) Low short interest ratio 
D) Bearish advisory opinion

Question 11

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 12

Technical analysis differs from fundamental analysis in that technical analysis:

Accepted Answer

A) is aimed at the market,while fundamental analysis is aimed at individual stocks. 
B) is based on published market data and focuses on internal factors. 
C) focuses on the long-term trends of production. 
D) does not consider price and volume. 
A) is aimed at the market,while fundamental analysis is aimed at individual stocks. 
B) is based on published market data and focuses on internal factors. 
C) focuses on the long-term trends of production. 
D) does not consider price and volume.

Question 13

In the 1990s,many investment firms hired numerous fundamental analysts and very few technical analysts.Following the market downturns of 2000,2001,and 2008,investment firms realized their mistake and hired far more technical analysts than fundamental analysts.

Accepted Answer

A) True 
 B)False

Question 14

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 15

If an investor buys a stock when its price has increased 2 percent from its previous price,the investor is employing:

Accepted Answer

A) a contrarian indicator. 
B) a filter rule. 
C) a sentiment indicator. 
D) relative strength analysis. 
A) a contrarian indicator. 
B) a filter rule. 
C) a sentiment indicator. 
D) relative strength analysis.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

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.

Question 19

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 20

Which of the following is not true regarding the Dow Theory?

Accepted Answer

A) It is intended to forecast the start of a primary movement. 
B) It does not forecast how long a movement will last. 
C) It has a very high success rate. 
D) It is subject to many criticisms. 
A) It is intended to forecast the start of a primary movement. 
B) It does not forecast how long a movement will last. 
C) It has a very high success rate. 
D) It is subject to many criticisms.

Exam 16: Technical Analysis

The oldest approach to common stock selection is:

If a trend exhibits support and resistance levels simultaneously that appear well defined,the trend lines are referred to as channel lines.

How is relative strength calculated and used?

Which of the following is not one of the three major variables to be decided by the investor in order to construct a moving average?

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

Explain how profit taking and support levels are related.

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

Technical analysis reflects the idea that stock prices:

A high short interest ratio is generally interpreted as:

Which of the following would be considered a strong bearish signal?

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

Technical analysis differs from fundamental analysis in that technical analysis:

In the 1990s,many investment firms hired numerous fundamental analysts and very few technical analysts.Following the market downturns of 2000,2001,and 2008,investment firms realized their mistake and hired far more technical analysts than fundamental analysts.

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

If an investor buys a stock when its price has increased 2 percent from its previous price,the investor is employing:

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

Which of the following is true regarding the resistance level?

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:

Which of the following is not a contrary trading rule?

Which of the following is not true regarding the Dow Theory?

Understanding Investments

Investment Alternatives

Indirect Investing

Securities Markets and Market Indexes

How Securities Are Traded

The Risks and Returns From Investing

Portfolio Theory

Portfolio Selection

Asset Pricing Models

Common Stock Valuation

Common Stocks: Analysis and Strategy

Market Efficiency

Economy Market Analysis

Industry Analysis

Company Analysis

Bond Yields

Bonds: Analysis and Strategy

Options

Futures

Portfolio Management

Evaluation of Investment Performance

Filters