Question 1

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 2

Technical analysis utilizes a top-down, fundamental approach to common stock analysis.

Accepted Answer

A) True 
 B)False

Question 3

Conclusions about technical analysis suggest that:

Accepted Answer

A)  it is difficult to justify technical analysis. 
B)  it has been found to be completely deficient. 
C)  stock price movements repeat themselves constantly. 
D)  there is complete agreement about the interpretation of technical signals. 
A)  it is difficult to justify technical analysis. 
B)  it has been found to be completely deficient. 
C)  stock price movements repeat themselves constantly. 
D)  there is complete agreement about the interpretation of technical signals.

Question 4

How does a point-and-figure chart compress many price changes into a small space?

Accepted Answer

By recording only "significant

Question 5

Explain how profit taking and support levels are related.

Accepted Answer

The scenario is as follows: The stock pr

Question 6

Institutional investors are often considered to have the "smart money," while small, individual investors are not so well informed about the market. Which two sentiment indicators treat both institutions and individuals alike?

Accepted Answer

The odd-lot theory asserts that one shou

Question 7

The bearish-sentiment index is calculated as the ratio of advisory services that are bearish to the total number with an opinion.

Accepted Answer

A) True 
 B)False

Question 8

What is usually shown at the bottom of a bar chart?

Accepted Answer

A)  A point and figure chart 
B)  Advance/decline line 
C)  Closing price 
D)  Volume 
A)  A point and figure chart 
B)  Advance/decline line 
C)  Closing price 
D)  Volume

Question 9

What do technical analysts believe is the best source of data to use in analyzing stocks?

Accepted Answer

A)  Corporate earnings growth prospects 
B)  Insider buying and selling of shares 
C)  Current P/E ratios versus historical ratios 
D)  The market itself 
A)  Corporate earnings growth prospects 
B)  Insider buying and selling of shares 
C)  Current P/E ratios versus historical ratios 
D)  The market itself

Question 10

Identify a widely reported measure of market data that is used by many investors as a rough indicator of a stock's trading range. Explain why the measure is reported.

Accepted Answer

One of the most widely reported measures

Question 11

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 12

Secondary movements are often termed technical corrections.

Accepted Answer

A) True 
 B)False

Question 13

The cash position of mutual funds is a contrarian indicator.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

A put/call ratio of 0.70 indicates:

Accepted Answer

A)  puts have a cost 70% less than the cost of calls. 
B)  there are 7 puts purchased for every one call purchased. 
C)  there are 70% more puts purchased than calls. 
D)  there are 7 puts purchased for every 10 calls purchased. 
A)  puts have a cost 70% less than the cost of calls. 
B)  there are 7 puts purchased for every one call purchased. 
C)  there are 70% more puts purchased than calls. 
D)  there are 7 puts purchased for every 10 calls purchased.

Question 16

A daily accumulation of stocks advancing or declining is used in:

Accepted Answer

A)  volume of trading analysis. 
B)  relative strength analysis. 
C)  breadth of market analysis. 
D)  short interest analysis. 
A)  volume of trading analysis. 
B)  relative strength analysis. 
C)  breadth of market analysis. 
D)  short interest analysis.

Question 17

One of the primary tools of a technical analyst is:

Accepted Answer

A)  sell-side research. 
B)  buy-side research. 
C)  Value Line earnings estimates. 
D)  charts of stock price and volume. 
A)  sell-side research. 
B)  buy-side research. 
C)  Value Line earnings estimates. 
D)  charts of stock price and volume.

Question 18

Which of the following is not one of the factors to consider in performing a valid test of a technical trading rule?

Accepted Answer

A)  The transaction and other costs incurred by the rule. 
B)  The consistency of performance from the rule. 
C)  The holding period implied by the rule. 
D)  The risk inherent in the rule. 
A)  The transaction and other costs incurred by the rule. 
B)  The consistency of performance from the rule. 
C)  The holding period implied by the rule. 
D)  The risk inherent in the rule.

Question 19

Volume and specific calendar time are not considered important in a:

Accepted Answer

A)  logarithmic price and volume chart. 
B)  point and figure chart. 
C)  nominal price and volume chart. 
D)  moving average convergence and divergence chart. 
A)  logarithmic price and volume chart. 
B)  point and figure chart. 
C)  nominal price and volume chart. 
D)  moving average convergence and divergence chart.

Question 20

The short interest ratio is found by dividing the number of shares sold short by the average:

Accepted Answer

A)  number of shares outstanding in the market. 
B)  daily volume of trading on the exchange. 
C)  number of stocks reaching new lows. 
D)  daily number of stocks bought long. 
A)  number of shares outstanding in the market. 
B)  daily volume of trading on the exchange. 
C)  number of stocks reaching new lows. 
D)  daily number of stocks bought long.

Exam 16: Technical Analysis

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

Technical analysis utilizes a top-down, fundamental approach to common stock analysis.

Conclusions about technical analysis suggest that:

How does a point-and-figure chart compress many price changes into a small space?

Explain how profit taking and support levels are related.

Institutional investors are often considered to have the "smart money," while small, individual investors are not so well informed about the market. Which two sentiment indicators treat both institutions and individuals alike?

The bearish-sentiment index is calculated as the ratio of advisory services that are bearish to the total number with an opinion.

What is usually shown at the bottom of a bar chart?

What do technical analysts believe is the best source of data to use in analyzing stocks?

Identify a widely reported measure of market data that is used by many investors as a rough indicator of a stock's trading range. Explain why the measure is reported.

Technical analysis differs from fundamental analysis in that technical analysis:

Secondary movements are often termed technical corrections.

The cash position of mutual funds is a contrarian indicator.

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

A put/call ratio of 0.70 indicates:

A daily accumulation of stocks advancing or declining is used in:

One of the primary tools of a technical analyst is:

Which of the following is not one of the factors to consider in performing a valid test of a technical trading rule?

Volume and specific calendar time are not considered important in a:

The short interest ratio is found by dividing the number of shares sold short by the average:

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