CMT Level 1 Question Bank

Key points to remember –

1. Solve all the 120 questions within 120 minutes. (1 question per
minute)
2. If you score above 70% in this test, then you are likely to clear the
exam.
1. Annie Jones is the portfolio manager for a large-cap equity investment fund.
Her colleagues at another investment fund share details about a small-cap company
that is now showing a long-term basing pattern on the price charts, and whose
prospects for future growth and earnings are outstanding. She invests in the
company on behalf of the fund, and over the course of the next three years, the
performance of the company’s stock contributes greatly to her investment fund
beating its benchmark. Jones

a) has violated the CFA Institute Code and Standards because her investment in
the small- cap company is contrary to the stated objectives of the fund.
b) has not violated the CFA Institute Code and Standards because she conducted
additional research based on the information and found supporting evidence of
her trade action.
c) has violated the CFA Institute Code and Standards because she was made
aware of the opportunity by her colleagues at another firm, thereby using
confidential information in the process.
d) has not violated the CFA Institute Code and Standards because the investment
was in the common stock of a listed entity, which is allowed by the investment
fund she manages.

2. Which of the following actions is most likely to comply with the CFA Institute
Code of Ethics and Standards?

a) Posting information about questions from a prior year’s exam on a public

discussion forum.
b) Joining discussion groups on LinkedIn/Facebook to discuss and share exam
questions.
c) Posting derogatory comments regarding the CMT® Program on a website
for CMTcandidates.
d) Providing your exam prep course provider with a list of topics not tested from
the body of knowledge.

3. Maggie manages several client portfolios. She utilizes the research of

highly skilled analysts in her firm to support her investment decisions. Maggie

a) complied with the CFA Institute Code and Standards.

b) violated the CFA Institute Code and Standards because she failed to
disclose this information to her clients.
c) violated the CFA Institute Code and Standards because she did not exercise due
diligence in making her investment decisions.
d) violated the CFA Institute Code and Standards because she was unfamiliar
with the processes and procedures used by the analysts to arrive at
recommendations.

4. Which of the following is most likely to be considered a “material” piece of

information regarding a company?

a) A former board member predicting a long-term decline in the company’s stock.

b) The loss of a customer representing a significant portion of a company’s gross
 sales.
c) The loss of a customer representing a negligible portion of a company’s gross
sales.
d) A competitor CEO’s speculation of a pending management change at the company.
5. Qi Lee received a year-end gift of an expensive Rolex watch from a client
who wasdelighted by the performance of his portfolio, which was managed by
Lee. Lee should

a) decline the gift, as it is prohibited under the CFAI Code of Ethics and Standards.
b) decline the gift, as it may have an unintended impact on future performance.
c) accept the gift, keeping the matter confidential.
d) accept the gift, and disclose it to his employer.

6. TRIN index is calculated by

a) dividing total specialist short sales by total short sales.

b) subtracting the 26-day simple moving average from the 12-day simple moving
average.
c) subtracting the advance/decline ratio by the ratio of advancing volume to
declining volume.
d) dividing the advance/decline ratio by the ratio of advancing volume to declining
volume.

7. If the New High-New Low Index declines while the broad market stays flat or
rallies, it is time to

a) initiate fresh longs.

b) initiate fresh shorts.
c) take profits on short positions.
d) take profits on long positions.

8. The Advance/Decline line is calculated by

a) subtracting the number of declining stocks from advancing stocks and

ignoring unchanged stocks.
b) subtracting the number of advancing stocks from declining stocks and
ignoring unchanged stocks.
c) subtracting the number of advancing stocks and unchanged stocks from declining
stocks.
d) subtracting the number of advancing stocks from declining stocks and
adding back the unchanged stocks.

9. If the stock market reaches a new peak while the A/D line does not, it indicates
that

a) the market may continue to move higher.

b) many stocks are participating and the rally may continue.
c) many stocks are participating and the rally may be near its end.
d) fewer stocks are participating and the rally may be near its end.
10. When analyzing candlestick price charts, the appearance of a long body in
the same direction as the existing trend indicates

a) a potential reversal.
b) rising momentum.
c) continuation.
d) consolidation.

11. Identify the candlestick pattern in which the opening and closing prices are
very close or the same.

a) Doji.
b) spinning top
c) piercing line
d) dark cloud cover

12. When an indicator or oscillator fails to confirm the trend, it is called a

a) gap.
b) breakout.
c) divergence.
d) breadth thrust.

13. A candlestick that has a long upper shadow emerging after an extended
uptrend suggests that

a) sellers have lost momentum.

b) buyers have lost momentum.
c) both buyers and sellers have lost momentum.
d) lack of decisive control by either buyers or sellers.

14. Momentum measures

a) the rate of change in price.

b) the change in price.
c) investor psychology.
d) investor sentiment.

15. Lower-priced securities tend to have greater ATR (Average True Range)
than higher- priced securities.

a) true
b) false
16. Average True Range (ATR) is an indicator that measures

a) volume.
b) breadth.
c) volatility.
d) momentum.

17. A breakaway gap usually

a) provides a major divergence signal.

b) signals the beginning of a new trend.
c) occurs at the end of an important price move.
d) occurs during the accumulation phase of the market cycle.

18. Common gaps usually appear in a

a) trading range.
b) bullish market.
c) bearish market.
d) trending market.

19. During a consolidation phase, price action normally

a) attempts a breakout within three weeks.

b) attempts a breakout within three months.
c) moves within well-defined neutral boundaries on low volume.
d) moves within well-defined neutral boundaries on high volume.

20. An exponential moving average

a) gives more weight to the most recent observation.

b) gives less weight to the most recent observation.
c) gives equal weight to all observations.
d) does not suffer from any lag.

21. Gaps normally occur

a) between the close of the market on one day and the open of the nextday.
b) between the close of the market on one day and the close of the next day.
c) between the open of the market on one day and the open of the next day.
d) between the high of the market on one day and the open of the next day.
22. Which of the following measures makes use of price and volume in its
calculation?

a) Plurality Index
b) Arms Index
c) Relative Strength Index (RSI)
d) Money Flow Index (MFI)

23. Which of the following types of moving averages drops off an old data point
when a newone is added?

a) simple moving average

b) weighted moving average
c) triangular moving average
d) exponential moving average

24. MACD line is calculated by

a) subtracting the 26-day simple moving average from the 12-day simple moving
average.
b) subtracting the 12-day simple moving average from the 26-day simple moving
average.
c) subtracting the 26-day exponential moving average from the 12-day
exponential moving average.
d) subtracting the 12-day exponential moving average from the 26-day
exponential moving average.

25. The basis of OBV is the belief that

a) price precedes volume.

b) volume precedes price.
c) volume matters most during breakouts.
d) volume and price are typically coincident indicators.

26. Top-down analysis refers to an analysis of

a) monetary policy.
b) company fundamentals.
c) the overall economic and business condition.
d) a specific government, company, (or) asset.

27. Government and companies raise money from investors in

a) money markets.
b) primary markets.
c) secondary markets.
d) both primary and secondary markets.
28. Calculate the nominal return based on the information provided below:
• The S&P 500 index fell 0.003 percent in 2015.
• Dividends paid during the year equaled 2.089 percent of the index’s value.
• Inflation was 3.4 percent, based on the change in the Consumer Price Index
(CPI) for the 10 months ended in November.

a) -2.08%
b) -1.3%
c) 1.30%
d) 2.08%

29. affects the amount of funds available to the economy as well as their
cost.

a) Credit policy
b) Economic policy
c) Monetary policy
d) Investment policy

30. Yield refers to the projected annual return on a bond based on

a) the interest rate of the bond.

b) the current price of the bond.
c) future interest payments.
d) a and b.

31. When a bond’s price is greater than 100, the yield is

a) lower than the prime rate.

b) lower than the coupon rate.
c) higher than the coupon rate.
d) lower than the discount rate.

32. Treasury inflation-protected securities (TIPS) are bonds whose is adjusted as

the consumer price index fluctuates.

a) principal
b) interest rate
c) future value
d) discount rate

33. An inverted yield curve has historically pointed toward

a) economic expansions.
b) inflationary pressures.
c) deflationary pressures.
d) slower economic growth and recessions.
34. Treasury bill returns come from

a) volatility.
b) price changes.
c) interest payments.
d) dividend payments.

35. The treasury yield curve is usually

a) flat.
b) humped.
c) inverted.
d) upward sloping.

36. are bonds without any collateral backing them other than a company’s
full faith and credit.

a) Debentures
b) Treasury bills
c) Commercial paper (CP)
d) Certificates of deposit (CDs)

37. give companies the option to buy them back before maturity.

a) Treasury bills
b) Putable bonds
c) Callable bonds
d) Convertible bonds

38. provide investors with the option to swap debt for equity.

a) Treasury bills
b) Putable bonds
c) Callable bonds
d) Convertible bonds

39. At least touches of each trend line are required for a valid rectangle.

a) one
b) two
c) three
d) four
40. In a dark cloud cover candlestick pattern, which candle has the higher high?

a) the first candle

b) the second candle
c) the third candle
d) it could be any

41. occurs after an upward breakout when prices return to the

breakout point or chart pattern boundary.

a) A pullback
b) A relief rally
c) A throwback
d) A dead cat bounce

42. When analyzing long term price movements, it could be helpful to use chart.

a) a logarithmic
b) a candlestick
c) an Equivolume
d) a point and figure

43. An uptrend line has

a) a positive slope and is formed by connecting two or more low points.

b) a positive slope and is formed by connecting two or more high points.
c) a negative slope and is formed by connecting two or more high points.
d) a negative slope and is formed by connecting two or more low points.

44. The key variable in the CAPM (Capital Asset Pricing Model) equation is

a) rho.
b) beta.
c) delta.
d) alpha.

45. A complete Elliott wave cycle is made up of waves.

a) three
b) five
c) eight
d) thirteen
46. In Elliott wave theory, sub-waves 2 and 4 are called

a) zigzags.
b) motive waves.
c) impulse waves.
d) corrective waves.

47. is a sideways, three-wave corrective pattern.

a) Flat
b) Zigzag
c) Triangle
d) Ending diagonal

48. Open interest in a futures contract represents

a) the number of contracts traded in a day.

b) the sum of total volume and open interest.
c) the number of outstanding contracts on any given day.
d) the number of outstanding contracts on the first day of the month.

49. When the market is under pressure, there is a net buying of , which will
result in .

a) put options, lower implied volatility

b) put options, higher historical volatility
c) call options, higher historical volatility
d) put options, higher implied volatility

50. Force Index is calculated by

a) subtracting the previous day’s close from the current day’s close and
multiplying byvolume.
b) subtracting the current day’s close from the previous day’s close and
multiplying by volume.
c) subtracting the previous day’s close from the current day’s close and
multiplying by the 10-day average volume.
d) subtracting the previous day’s close from the current day’s close and
multiplying by the 10-day average volume.

51. A protective stop is

a) an order to sell below the market when you are long.

b) a stop-loss order that protects you from getting badly hurt by a reversal.
c) an order to cover the short positions above the market when you are short.
d) all of the above.
52. In constructing a point & figure chart, a new box is added only when

a) price has moved to a new high.

b) volume confirms the price movement.
c) price has moved by less than the specified box size.
d) price has moved by equal to or more than the specified box size.

53. Violated support levels typically

a) lose importance after three weeks.

b) indicate an imminent price reversal.
c) lose importance after three months.
d) become resistance.

54. A rising relative strength line for a stock in a falling market indicates that

a) price and volume are diverging.

b) the stock is performing worse than the market.
c) the stock is performing better than the market.
d) it may be moving into an overbought state.

55. Which of the following lists arranges cycles from shortest to longest in duration?

a) presidential, seasonal, Kondratieff

b) Kondratieff, presidential, seasonal
c) seasonal, presidential, Kondratieff
d) presidential, Kondratieff, seasonal

56. A narrowing of Bollinger Bands normally indicates that

a) a stock is ready for a rally.

b) a stock is ready for a decline.
c) a stock’s volatility has increased.
d) a stock’s volatility has decreased.

57. A company whose stock is in a well-established uptrend, reports earnings

slightly above consensus estimates. After an initial rally, the stock then ends lower
on the day. This would probably be an example of

a) market discounting.
b) investor under-reaction.
c) unrealistic expectations.
d) a short-coming of fundamental analysis.
58. To increase the sensitivity of a 5×3 point & figure chart, one could

a) increase the box size.

b) decrease the box size.
c) increase the number of boxes needed for a reversal.
d) none of the above would increase the sensitivity of a point and figure chart.

59. According to the work of Charles Dow and his successors, now referred
to as Dow Theory, which of the following is not a hypothesis for the nature of
markets and technical analysis?

a) The primary trend is inviolate.

b) The averages discount everything.
c) Dow Theory is not infallible.
d) Prices move at random.

60. Sentiment data may include

a) moving averages.
b) momentum oscillators.
c) point and figure reversals.
d) results of investor polls and surveys.

61. In a 5-day simple moving average, each day’s price is assigned a

weighting of a) 5%.
b) 10%.
c) 20%.
d) 25%.

62. Volume divergences occur when

a) volume expands while open interest contracts.

b) volume declines during a sideways congestion pattern.
c) volume expands while the daily trading range contracts.
d) a new high in an uptrend takes place on declining volume.

63. The primary use of a candlestick pattern is to

a) determine if you are in a bull market or a bear market.

b) define the primary, intermediate, and short-term trends.
c) strengthen the possibility of a reversal of a price trend.
d) define the intermediate and short-term trends, but not the primary trend.
64. Which is an example of candle pattern filtering?

a) Using cycles to confirm the existence of a pattern.

b) Using western techniques to confirm a candle pattern.
c) Accepting only those patterns that fit the strict definition of their pattern.
d) Accepting only those patterns that are confirmed by the intermediate-term trend.

65. A point & figure chart

a) ignores time.
b) is limited by a four-year time horizon.
c) cannot be used to project price targets.
d) gives a clear picture of volume distribution.

66. The Kondratieff cycle extends for a period of about

a) 13 years.
b) 50 years.
c) 54 years.
d) 60 years.

67. Put-call parity refers to

a) the link between an asset’s put and call premiums as they relate to the
price of theunderlying asset.
b) equality of premiums for an asset’s puts and calls of the same strike and
expiration.
c) equal volatility for an asset’s puts and calls.
d) expected volatility of an asset based on its option premiums.

68. Trend lines

a) are not useful for short-term trading.

b) offer late confirmation of a change in trend.
c) are more significant the longer they stay in force.
d) can only be determined by least square regression method.

69. Which of the following is a continuation pattern?

a) flag
b) diagonal
c) rising wedge
d) broadening formation
70. Seasonality is a cycle that occurs

a) yearly.
b) weekly.
c) monthly.
d) quarterly.

71. The interchangeability of a financial instrument is normally referred to as

a) hedging.
b) fungibility.
c) arbitraging.
d) backwardation.

72. The VIX index measures

a) the implied volatility of the S&P 100 index options.

b) the historical volatility of the S&P 500 index options.
c) the historical volatility of the S&P 100 index options.
d) the implied volatility of the S&P 500 index options.

73. If the VIX is quoted at 20, it indicates the market is expecting a movement of
about____percent over the next 30 days.

a) 3.77
b) 5.77
c) 3.33
d) 5.07

74. In a double bottom pattern, volume is generally

a) rising throughout the pattern.

b) declining throughout the pattern.
c) lower on the left bottom than the right.
d) higher on the left bottom than the right.

75. When an economic crisis begins, investors generally buy securities for
their relative safety and sell securities.

a) corporate, treasury
b) treasury, corporate
c) commercial papers, corporate
d) corporate, TIPS (Treasury Inflation-Protected Securities)
76. The index is a popular benchmark for measuring the performance of
small-capcompanies.

a) S&P 500
b) Russell 2000
c) NASDAQ Composite
d) Dow Jones Industrial Average

77. The NASDAQ Composite index is a weighted index.

a) market-cap
b) price
c) trade
d) equal

78. Which moving average(s) assign GREATER weight to the most recent data?

a) simple
b) weighted
c) exponential
d) both b and c

79. A moving average

a) follows the trend.

b) lags market action.
c) is a smoothing device.
d) is all of the above.

80. Bullish support lines on a 3-box reversal Point & Figure chart are drawn at
a_____ degree angle.

a) 45
b) 60
c) 75
d) 90

81. If a fund has a beta of 1.2, then it has than the overall market.

a) 2% more volatility
b) 20% less volatility
c) 0.2% more volatility
d) 20% more volatility
82. An effective way of detrending price data to identify cycles is to

a) use an oscillator and identify extreme levels.

b) use a moving average of the highs/lows over n periods.
c) divide the closing prices by a moving average of those prices.
d) plot a linear regression (best-fit) line through the data midpoint.

83. An important feature of the martingale process that makes it an appropriate

model for EMH is

a) the absence of future price predictability.

b) the absence of price return anomalies that are unexplained.
c) the presence of price return anomalies that are unexplained.
d) the presence of information that aids in future price predictability.

84. In EMH, technical traders can be thought of as a specific type of noise trader
because

a) technical traders are rational traders.

b) technical traders are not rational traders.
c) a positive feedback loop can lead to pronounced bubbles.
d) the cancel-out phenomenon will apply to a large number of trend following
strategies.

85. The stochastics indicator measures

a) where today’s typical price fits into the recent trading range.
b) the distance in percentage between the first and last values over n-days.
c) the relative position of the closing price within a past high-low range.
d) the relative strength of the current price movement as it increases from 0 to 100.

86. Which of the following statements is an important assumption of the

Efficient Market Hypothesis?

a) Investors as a group will act irrationally.

b) Investors as a group will act rationally.
c) Prices typically do not reflect all available information.
d) Liquidity constraints may sometimes drive prices away from their intrinsic value.

87. Slippage is normally attributed to

a) the bid-ask spread.

b) default risk.
c) market risk.
d) credit risk.
88. Objective technical analysis methods

a) normally witness less drawdown.

b) normally witness high drawdown.
c) require a disciplined approach for success.
d) are well-defined procedures that issue unambiguous signals.

89. When a great majority of investors have the same view of the market

a) market sentiment is positive.

b) it is safe to assume that the market may trend to further highs.
c) it is a warning to expect a reversal contrary to the majority opinion.
d) it is safe to assume that a reversal of trend is a low-probability outcome.

90. The Fed largely controls

a) money supply.
b) long-term interest rates.
c) short-term interest rates.
d) both money supply and short-term interest rates.

91. In rectangle, triangle, flag and pennant patterns, volume generally

a) increases as the pattern develops.

b) decreases as the pattern develops.
c) spikes midway through the pattern.
d) cannot be measured.

92. Monetary indicators are considered indicators.

a) internal
b) external
c) sentiment
d) momentum

93. A flag is generally formed by a in a bull market or a in a bear market.

a) rally, pullback
b) rally, correction
c) correction, rally
d) correction, throwback
94. As per the theory of contrary opinion, a high degree of consensus normally
precedes a

a) trend reversal.
b) trend continuation.
c) short-term consolidation.
d) pause within an existing trend.

95. The white or black portion of a candlestick is also referred to as the

a) doji.
b) shadow.
c) real body.
d) spinning top.

96. has the highest component weighting in the U.S. Dollar index.

a) Euro
b) Japanese yen
c) British pound
d) Canadian dollar

97. In relation to the principles of technical analysis, the phrase “patterns are
fractal” refers to the assumption that

a) patterns tend to break existing trends.

b) Mandelbrot originated the concept of chart patterns.
c) pattern analysis is universal and independent of time.
d) chart patterns found in an intraday chart can generate signals in a daily chart.

98. When a larger number of stocks register new lows vs. new highs, the New
High-NewLow Index is

a) positive, and is below the centerline.

b) positive, and is above the centerline.
c) negative, and is above the centerline.
d) negative, and is below the centerline.

99. The distribution of open interest among various categories of market

participants inthe futures markets is reported in

a) the Short Interest report.

b) Market Vane.
c) the Commitments of Traders report.
d) insider purchases and sales.
100. Identify the point & figure pattern highlighted below.

a) quadruple top buy

b) upside breakout of a descending triangle
c) upside breakout of a symmetrical triangle
d) upside breakout of an ascending triangle

101. The Elliott Wave pattern highlighted below is

a) a triangle.
b) a rising wedge.
c) an ending diagonal.
d) a leading diagonal.
102. Identify the Elliott Wave pattern highlighted below.

a) flat in a bull market

b) flat in a bear market
c) zigzag in a bull market
d) zigzag in a bear market

103. The Elliott Wave pattern highlighted below is

a) a flat.
b) a regular flat.
c) a running flat.
d) an expanded flat.
104. Identify the Elliott Wave pattern highlighted below.

a) expanded flat
b) running flat
c) regular flat
d) zigzag

105. Identify the following “Double-Three” combination pattern as per the

Elliott Wave Theory.

a) zigzag, flat, flat

b) zigzag, zigzag, flat
c) zigzag, flat, zigzag
d) flat, zigzag, zigzag

106. Relative strength studies suggest that strong performance over which time
period is an indicator of strong performance to follow?

a) 4 weeks
b) 13 weeks
c) 26 weeks
d) 52 weeks
107. The chart formation highlighted below is

a) an island bottom.
b) an ascending triangle.
c) a descending triangle.
d) a symmetrical triangle.

108. The chart formation highlighted below is

a) a triple bottom.
b) a double bottom.
c) an island bottom.
d) a three Buddha pattern.
109. Identify the candlestick pattern highlighted in the chart.

a) hammer
b) evening star
c) hanging man
d) inverted hammer

110. The chart formation highlighted below is a

a) hammer.
b) morning star.
c) hanging man.
d) bullish engulfing.
111. Identify the Point & Figure pattern highlighted below.

a) triple top buy

b) bullish catapult
c) ascending triple top
d) bullish ascending triangle breakout

112. Identify the type of gap highlighted in the chart.

a) common gap
b) runaway gap
c) breakaway gap
d) exhaustion gap
113. The chart formation highlighted below is

a) a triple bottom.
b) an island bottom.
c) a head and shoulders top.
d) a head and shoulders bottom.
114. Identify the gap highlighted (black arrow) in the chart.

a) common gap
b) runaway gap
c) exhaustion gap
d) breakaway gap

115. After testing and refining a trading system, further validation should be done
using dataknown as

a) in-sample.
b) out-of-sample.
c) daily.
d) weekly.
116. The chart formation highlighted below is a

a) flag.
b) pennant.
c) triangle.
d) rising wedge.

117. Identify the point & figure pattern highlighted below.

a) triple bottom
b) symmetric triangle
c) descending triangle
d) descending triple bottom
118. The point & figure pattern highlighted below is a

a) triple top buy.

b) bullish catapult buy.
c) spread triple top buy.
d) ascending triple top buy.

119. The point & figure pattern highlighted below is a

a) bearish catapult.
b) double bottom sell.
c) downside breakout of a bullish support line.
d) downside breakout of a bearish support line.
120. Identify the chart formation below.

a) triple top
b) rising wedge
c) rounding top
d) head and shoulders top

Answer key begins on the next

page.
1. Annie Jones is the portfolio manager for a large-cap equity investment fund.
Her colleagues at another investment fund share details about a small-cap company
that is now showing a long-term basing pattern on the price charts, and whose
prospects for future growth and earnings are outstanding. She invests in the
company on behalf of the fund, and over the course of the next three years, the
performance of the company’s stock contributes greatly to her investment fund
beating its benchmark. Jones

a) has violated the CFA Institute Code and Standards because her investment in
the small- cap company is contrary to the stated objectives of the fund.
Reference: CFA Institute Code of Ethics and Standards of Professional
Conduct

2. Which of the following actions is most likely to comply with the CFA Institute
Code of Ethics and Standards?

d) Providing your exam prep course provider with a list of topics not tested from
the body of knowledge.
Reference: CFA Institute Code of Ethics and Standards of Professional
Conduct

3. Maggie manages several client portfolios. She utilizes the research of

highly skilled analysts in her firm to support her investment decisions. Maggie

a) complied with the CFA Institute Code and Standards.

Reference: CFA Institute Code of Ethics and Standards of Professional
Conduct

4. Which of the following is most likely to be considered a “material” piece of

information regarding a company?

b) The loss of a customer representing a significant portion of a company’s gross

sales. Reference: CFA Institute Code of Ethics and Standards of
Professional Conduct

5. Qi Lee received a year-end gift of an expensive Rolex watch from a client

who wasdelighted by the performance of his portfolio, which was managed by
Lee. Lee should

d) accept the gift, and disclose it to his employer.

Reference: CFA Institute Code of Ethics and Standards of Professional
Conduct

6. TRIN index is calculated by

d) dividing the advance/decline ratio by the ratio of advancing volume to declining

volume.
7. If the New High-New Low Index declines while the broad market stays flat or
rallies, it is time to

e) take profits on long positions.

8. The Advance/Decline line is calculated by

a) subtracting the number of declining stocks from advancing stocks and

ignoring unchanged stocks.

9. If the stock market reaches a new peak while the A/D line does not, it indicates
that

d) fewer stocks are participating and the rally may be near its end.

10. When analyzing candlestick price charts, the appearance of a long body in
the same direction as the existing trend indicates

c) continuation.

11. Identify the candlestick pattern in which the opening and closing prices are
very close or the same.

a) doji

12. When an indicator or oscillator fails to confirm the trend, it is called a

c) divergence.

13. A candlestick that has a long upper shadow emerging after an extended
uptrend suggests that

b) buyers have lost momentum.

14. Momentum measures

a) the rate of change in price.

15. Lower-priced securities tend to have greater ATR (Average True Range)
than higher- priced securities.

b) False
16. Average True Range (ATR) is an indicator that measures

c) volatility.

17. A breakaway gap usually

b) signals the beginning of a new trend.

18. Common gaps usually appear in a

a) trading range.

19. During a consolidation phase, price action normally

c) moves within well-defined neutral boundaries on low volume.

20. An exponential moving average

a) gives more weight to the most recent observation.

21. Gaps normally occur

a) between the close of the market on one day and the open of the next day.

22. Which of the following measures makes use of price and volume in its
calculation?

d) Money Flow Index (MFI)

23. Which of the following types of moving averages drops off an old data point
when a newone is added?

a) simple moving average

24. MACD line is calculated by

c) subtracting the 26-day exponential moving average from the 12-day

exponential moving average.

25. The basis of OBV is the belief that

b) volume precedes price.

26. Top-down analysis refers to an analysis of

c) the overall economic and business condition.

27. Government and companies raise money from investors in

b) primary markets.

28. Calculate the nominal return based on the information provided below:
• The S&P 500 index fell 0.003 percent in 2015.
• Dividends paid during the year equaled 2.089 percent of the index’s value.
• Inflation was 3.4 percent, based on the change in the Consumer Price Index
(CPI) for the 10 months ended in November.

b) -1.3%

29. affects the amount of funds available to the economy as well as their
cost.

c) Monetary policy

30. Yield refers to the projected annual return on a bond based on

d) a and b.

31. When a bond’s price is greater than 100, the yield is

b) lower than the coupon rate.

32. Treasury inflation-protected securities (TIPS) are bonds whose is adjusted as
the consumer price index fluctuates.

a) principal

33. An inverted yield curve has historically pointed toward

d) slower economic growth and recessions.

34. Treasury bill returns come from

b) price changes.

35. The treasury yield curve is usually

d) upward sloping.

36. are bonds without any collateral backing them other than a company’s
full faith and credit.

a) Debentures

37. give companies the option to buy them back before maturity.

c) Callable bonds
38. provide investors with the option to swap debt for equity.

d) Convertible bonds

39. At least touch(es) of each trend line are required for a valid rectangle.

b) two

40. In a dark cloud cover candlestick pattern, which candle has the higher high?

b) the second candle

41. occurs after an upward breakout when prices return to the
breakout point or chart pattern boundary.

c) A throwback

42. When analyzing long term price movements, it could be helpful to use chart.

a) a logarithmic
43. An uptrend line has

a) positive slope and is formed by connecting two or more low points.

44. The key variable in the CAPM (Capital Asset Pricing Model) equation is

b) beta.

45. A complete Elliott wave cycle is made up of waves.

c) eight

46. In Elliott wave theory, sub-waves 2 and 4 are called

d) corrective waves.

47. is a sideways, three-wave corrective pattern.

a) Flat

48. Open interest in a futures contract represents

c) the number of outstanding contracts on any given day.

49. When the market is under pressure, there is a net buying of , which will
result in .

d) put options, higher implied volatility

50. Force Index is calculated by

a) subtracting the previous day’s close from the current day’s close and
multiplying byvolume.

51. A protective stop is

d) all of the above.

52. In constructing a point & figure chart, a new box is added only when

d) price has moved by equal to or more than the specified box size.

53. Violated support levels typically

d) become resistance.

54. A rising relative strength line for a stock in a falling market indicates that

c) the stock is performing better than the market.

55. Which of the following lists arranges cycles from shortest to longest in duration?

c) seasonal, presidential, Kondratieff

56. A narrowing of Bollinger Bands normally indicates that

d) a stock’s volatility has decreased.

57. A company whose stock is in a well-established uptrend, reports earnings
slightly above consensus estimates. After an initial rally, the stock then ends lower
on the day. This would probably be an example of

a) market discounting.

58. To increase the sensitivity of a 5×3 point & figure chart, one could

b) decrease the box size.

59. According to the work of Charles Dow and his successors, now referred
to as Dow Theory, which of the following is not a hypothesis for the nature of
markets and technical analysis?

d) Prices move at random.

60. Sentiment data may include

d) results of investor polls and surveys.

61. In a 5-day simple moving average, each day’s price is assigned a weighting of

c) 20%.

62. Volume divergences occur when

d) a new high in an uptrend takes place on declining volume.

63. The primary use of a candlestick pattern is to

c) strengthen the possibility of a reversal of a price trend.

64. Which is an example of candle pattern filtering?

b) Using western techniques to confirm a candle pattern.

65. A point & figure chart

a) ignores time.

66. The Kondratieff cycle extends for a period of about

c) 54 years.

67. Put-call parity refers to

a) the link between an asset’s put and call premiums as they relate to the
price of theunderlying asset.

68. Trend lines

c) are more significant the longer they stay in force.

69. Which of the following is a continuation pattern?

a) flag

70. Seasonality is a cycle that occurs

a) yearly.

71. The interchangeability of a financial instrument is normally referred to as

b) fungibility.

72. The VIX index measures

d) the implied volatility of the S&P 500 index options.

73. If the VIX is quoted at 20, it indicates the market is expecting a movement of
about ___ percent over the next 30 days.

b) 5.77
74. In a double bottom pattern, volume is generally

d) higher on the left bottom than the right.

75. When an economic crisis begins, investors generally buy securities for
theirrelative safety and sell securities.

b) treasury, corporate

76. The index is a popular benchmark for measuring the performance of

small-capcompanies.

b) Russell 2000

77. The NASDAQ Composite index is a weighted index.

a) market-cap

78. Which moving average(s) assign GREATER weight to the most recent data?

d) both b and c

79. A moving average

d) is all of the above.

80. Bullish support lines on a 3-box reversal Point & Figure chart are drawn at
a _____ degree angle.

a) 45

81. If a fund has a beta of 1.2, then it has than the overall market.

d) 20% more volatility

82. An effective way of detrending price data to identify cycles is to

c) divide the closing prices by a moving average of those prices.

83. An important feature of the martingale process that makes it an appropriate

model for EMH is

a) the absence of future price predictability.

84. In EMH, technical traders can be thought of as a specific type of noise trader
because

b) technical traders are not rational traders.

85. The stochastics indicator measures

c) the relative position of the closing price within a past high-low range.

86. Which of the following statements is an important assumption of the

Efficient Market Hypothesis (EMH)?

b) Investors as a group will act rationally.

87. Slippage is normally attributed to

a) the bid-ask spread.

88. Objective technical analysis methods

d) Are well-defined procedures that issue unambiguous signals.

89. When a great majority of investors have the same view of the market

c) it is a warning to expect a reversal contrary to the majority opinion.

90. The Fed largely controls

d) both money supply and short-term interest rates.

91. In rectangle, triangle, flag and pennant patterns, volume generally

b) decreases as the pattern develops.

92. Monetary indicators are considered indicators.

b) external

93. A flag is generally formed by a in a bull market or a in a bear market.

c) correction, rally

94. As per the theory of contrary opinion, a high degree of consensus normally
precedes a

a) trend reversal.

95. The white or black portion of a candlestick is also referred to as the

c) real body.

96. has the highest component weighting in the U.S. Dollar index.

a) Euro

97. In relation to the principles of technical analysis, the phrase “patterns are
fractal” refers to the assumption that

c) pattern analysis is universal and independent of time.

98. When a larger number of stocks register new lows vs. new highs, the New
High-NewLow Index is

d) negative, and is below the centerline.

99. The distribution of open interest among various categories of market
participants in the futures markets is reported in

c) the Commitments of Traders report.

100. Identify the point & figure pattern highlighted below.

d) upside breakout of an ascending triangle

101. The Elliott Wave pattern highlighted below is

c) an ending diagonal.

102. Identify the Elliott Wave pattern highlighted below.

c) zigzag in a bull market

103. The Elliott Wave pattern highlighted below is

d) an expanded flat.

104. Identify the Elliott Wave pattern highlighted below.

b) running flat

105. Identify the following “Double-Three” combination pattern as per the

Elliott Wave Theory.

b) zigzag, zigzag, flat

106. Relative strength studies suggest that strong performance over which time
period is an indicator of strong performance?

c) 26 weeks
107. The chart formation highlighted below is

b) an ascending triangle.

108. The chart formation highlighted below is

b) a double bottom.

109. Identify the candlestick pattern highlighted in the chart.

a) hammer

110. The chart formation highlighted below is a:

d) d. bullish engulfing.

111. Identify the Point & Figure pattern highlighted below.

c) ascending triple top

112. Identify the type of gap highlighted in the chart.

d) exhaustion gap

113. The chart formation highlighted below is

d) a head and shoulders bottom.

114. Identify the gap highlighted (black arrow) in the chart.

d) Breakaway gap

115. After testing and refining a trading system, further validation should be done
using dataknown as

b) out-of-sample.
116. The chart formation highlighted below is a

a) flag.

117. Identify the point & figure pattern highlighted below.

a) triple bottom

118. The Point & Figure pattern highlighted below is a

c) spread triple top buy.

119. The point & figure pattern highlighted below is a

d) downside breakout of a bearish support line.

120. Identify the chart formation below.

d) head and shoulders top