Reading 54: Technical Analysis
50 questions available
Key Points
- Three key principles: prices reflect all info, trends persist, patterns repeat.
- Contrasts with fundamental analysis; focuses on market sentiment and supply/demand.
- Chart types: Line, Bar, Candlestick.
- Logarithmic scales are used for large percentage price ranges.
- Volume analysis confirms price trends.
Key Points
- Uptrend: Higher highs, higher lows.
- Support vs. Resistance and Change in Polarity.
- Reversal Patterns: Head and Shoulders, Double/Triple Tops/Bottoms.
- Continuation Patterns: Triangles, Rectangles, Flags, Pennants.
- Price targets are derived from pattern dimensions.
Key Points
- Moving Averages: Smoothing data; Crossovers signal trend changes.
- Bollinger Bands: Standard deviation based; Squeeze signals volatility.
- Oscillators: RSI (0-100), MACD (convergence/divergence), Stochastic.
- Sentiment Indicators: Put/Call Ratio, VIX, Margin Debt.
- Contrarian strategies trade against extreme sentiment.
Key Points
- Intermarket analysis looks at relationships between asset classes.
- Relative strength charts compare two assets.
- Used in top-down asset allocation and bottom-up security selection.
- Can identify sector rotation and market leadership.
Questions
Which of the following is one of the three key principles upon which technical analysis is based?
View answer and explanationTechnical analysis primarily differs from fundamental analysis in that technical analysis:
View answer and explanationIn a candlestick chart, a shaded or filled body typically indicates that:
View answer and explanationWhich type of chart displays the high, low, and closing prices for each period as a vertical line with a point or dash on the right side?
View answer and explanationAn analyst observing a stock index that has increased exponentially over several decades would most likely use which type of scale on the vertical axis?
View answer and explanationA market is defined as being in an uptrend if prices are consistently reaching:
View answer and explanationThe principle of 'change in polarity' in technical analysis refers to:
View answer and explanationIn a head-and-shoulders pattern, the 'neckline' connects:
View answer and explanationA head-and-shoulders pattern has a neckline at $55 and a head at $80. If the price breaks down through the neckline, the projected price target is closest to:
View answer and explanationWhich of the following is considered a continuation pattern?
View answer and explanationA 'golden cross' occurs when:
View answer and explanationBollinger bands are constructed by drawing lines a specific number of standard deviations above and below a:
View answer and explanationIn the context of Bollinger bands, a 'squeeze' refers to:
View answer and explanationWhich of the following is a momentum oscillator that is calculated as 100 times the difference between the latest closing price and the closing price n periods earlier?
View answer and explanationAn RSI value of greater than 70 typically indicates that a market is:
View answer and explanationThe MACD line is calculated as the difference between:
View answer and explanationIn the Stochastic oscillator, the '%K' line represents:
View answer and explanationDivergence occurs when:
View answer and explanationThe Put/Call ratio is generally viewed as a contrarian indicator. An extremely high ratio suggests:
View answer and explanationThe Volatility Index (VIX) measures the volatility of options on which underlying index?
View answer and explanationAccording to technical analysts, an increase in total margin debt outstanding suggests:
View answer and explanationIntermarket analysis relies heavily on which type of chart to identify attractive asset classes?
View answer and explanationIn a relative strength chart comparing Asset A to Asset B, an increasing line indicates that:
View answer and explanationUsing technical analysis to identify markets and sectors that have outperformed others before making tactical asset allocation decisions is an example of:
View answer and explanationA bottom-up approach to portfolio management using technical analysis typically begins with:
View answer and explanationWhich of the following chart types includes opening prices?
View answer and explanationIf a stock's price breaks through a resistance level, the principle of change in polarity suggests that:
View answer and explanationWhich pattern is generally considered a reversal pattern at the end of a downtrend?
View answer and explanationA 'dead cross' is viewed as a sell signal and occurs when:
View answer and explanationA 'contrarian strategy' using Bollinger bands would involve:
View answer and explanationThe MACD signal line is defined as:
View answer and explanationTechnical analysts believe that identifying patterns in trading prices and volumes is useful because:
View answer and explanationWhich of the following describes a 'support level'?
View answer and explanationWhich type of chart pattern typically implies a pause in the trend rather than a reversal?
View answer and explanationIn the Stochastic oscillator, the trading signal is often generated when:
View answer and explanationA technical analyst would view a very high VIX level as a:
View answer and explanationVolume charts are usually displayed:
View answer and explanationAn uptrend line on a chart connects the:
View answer and explanationIf a stock's price is 50 and the 200-day moving average is 45, the moving average acts as:
View answer and explanationA 'triangle' pattern in technical analysis indicates:
View answer and explanationWhich technical indicator calculates the ratio of an asset's closing price to a benchmark value?
View answer and explanationIn the context of the RSI, a value of 20 would most likely indicate:
View answer and explanationWhich of the following is an advantage of technical analysis over fundamental analysis?
View answer and explanationA technical analyst using a top-down approach would likely start by analyzing:
View answer and explanationWhen the short-term moving average crosses below the long-term moving average, it is known as a:
View answer and explanationWhich indicator is calculated as the ratio of total price increases to total price decreases over a selected number of periods?
View answer and explanationA 'double top' pattern is most accurately described as:
View answer and explanationTechnical analysis assumes that the efficient markets hypothesis:
View answer and explanationWhich of the following refers to a situation where an oscillator shows a different pattern than prices?
View answer and explanationWhich sentiment indicator is based on the volume of options trading?
View answer and explanation