midterm mcqs to memorize

Question 1

Which of the following would LEAST likely be a continuation pattern?
a. Flag
b. Ascending triangle
c. Broadening formation
d. Inverse head and shoulders

Answer 1

d. Inverse head and shoulders

Question 2

8. According to Dow Theory, secondary corrections can most likely be replaced by a
   a. flag.
   b. line.
   c. wedge.
   d. triangle.

Answer 2

b. line.

Question 3

Which of the following would be the LEAST important factor in determining the significance of a trendline?
a. Duration
b. Angle of ascent or descent
c. Distance from current price
d. Number of times touched by prices

Answer 3

c. Distance from current price

Question 4

What is most likely indicated when Bollinger Bands narrow?
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.

Answer 4

d. A stock’s volatility has decreased.

Question 5

Which of the following does NOT represent a sell signal confirmation for Dow Theory?
a. The Dow Jones Industrials and the Dow Jones Transportation indexes peak simultaneously.
b. The Dow Jones Industrials and the Dow Jones Transportation indexes fail to confirm at the highs.
c. Both the Dow Jones Industrials and the Dow Jones Transportation indexes break below an important intermediate term support level.

Answer 5

b. The Dow Jones Industrials and the Dow Jones Transportation indexes fail to confirm at the highs.

Question 6

Point and figure charts are LEAST likely suited for
a. establishing targets.
b. identifying breakouts.
c. identifying areas of support and resistance.
d. identifying areas of accumulation or distribution.

Answer 6

d. identifying areas of accumulation or distribution.

Question 7

Using moving averages to signal buy/sell decisions can result in a number of whipsaws in
a. up trending markets.
b. down trending markets.
c. sideways trending markets.

Answer 7

c. sideways trending markets.

Question 8

Which of the following is usually associated with major market tops?
a. A pennant pattern
b. Ascending triangles
c. An extended third wave
d. A broadening formation

Answer 8

d. A broadening formation

Question 9

Which of the following types of gaps is LEAST likely to be filled when it occurs with high volume?
a. Common
b. Runaway
c. Breakaway
d. Exhaustion

Answer 9

c. Breakaway

Question 10

Regarding trends, which of the following statements is NOT correct?
a. Always trade with the trend.
b. A trendline break is at least a warning of a changing trend.
c. Breakouts from support/resistance are usually a change in trend.
d. The longer the trend, the more difficult it is to identify its reversal.

Answer 10

d. The longer the trend, the more difficult it is to identify its reversal.

Question 11

Symmetrical triangles
a. are also called coils.
b. are usually broadening patterns.
c. represent the acceleration of an existing trend.

Answer 11

a. are also called coils.

Question 12

Which of the following statements regarding moving averages is NOT correct? Longer term moving averages

a. give fewer buy and sell signals than shorter term moving averages.
b. are better at giving signals at major tops than shorter term moving averages.
c. give back a lot more when the trend reverses than shorter term moving averages.

Answer 12

b. are better at giving signals at major tops than shorter term moving averages.

Question 13

Symmetrical triangle price patterns should generally be accompanied by
a. consistent volume within the pattern.
b. a gradual decline in volume until the breakout.
c. heavier volume in the direction of the eventual breakout.
d. no discernible difference in volume until after the breakout occurs.

Answer 13

b. a gradual decline in volume until the breakout.

Question 14

The objective of Dow Theory is to determine
a. the timing of market bottoms.
b. changes in market psychology.
c. the likelihood of volume reversals.
d. the primary direction of the stock market.

Answer 14

d. the primary direction of the stock market.

Question 15

The concept of Relative Strength (RS) measures the relationship between
a. two securities.
b. volume changes and price changes.
c. buying pressure and selling pressure.
d. a stock’s own price movement during the past 14 periods.

Answer 15

a. two securities.

Question 16

An exhaustion gap is associated with
a. light trading volume.
b. the beginning stage of a bear market.
c. the terminal phase of a rapid advance or decline.
d. an extended period of sideways movement in price.

Answer 16

c. the terminal phase of a rapid advance or decline.

Question 17

Which of the following statements regarding point and figure charts and bar charts is
correct?
a. Period volume is clearly shown on a point and figure chart.
b. Time intervals are clearly shown on a point and figure chart.
c. Bar charts do not show the closing price for each time interval.
d. A new plot on a point and figure chart is made only when the price changes by a given amount.

Answer 17

d. A new plot on a point and figure chart is made only when the price changes by a given amount.

Question 18

Which chart type is more commonly used for displaying relative strength between a stock and the market?
a. Bar
b. Line
c. Candlestick
d. Point and figure

Answer 18

b. Line

Question 19

An important use of a trendline is to
a. provide a signal of a reversal in trend.
b. determine overbought or oversold market conditions.
c. identify the cyclical interval between bull and bear markets.
d. identify a price target for the extent of the price movement.

Answer 19

a. provide a signal of a reversal in trend.

Question 20

A sell signal is normally given when a
a. shorter length moving average remains above a longer length moving average.
b. longer length moving average remains above a shorter length moving average.
c. shorter length moving average crosses a longer length moving average from above.
d. longer length moving average crosses a shorter length moving average from above

Answer 20

c. shorter length moving average crosses a longer length moving average from above.

Question 21

Rising relative strength (RS) indicates
a. positive price momentum.
b. lack of investor conviction.
c. the market is performing better than the security.
d. the security is performing better than the market or the entity being compared.

Answer 21

d. the security is performing better than the market or the entity being compared.

Question 22

Which of the following is NOT an underlying assumption of technical analysis?
a. Markets trend
b. Investors act rationally
c. Price discounts everything
d. Price is determined by the interaction of supply and demand

Answer 22

b. Investors act rationally

Question 23

Which of the following bar chart patterns are LEAST useful?
a. Wedges
b. Pennants
c. Triangles
d. Broadening formations

Answer 23

d. Broadening formations

Question 24

Which of the following statements about gaps is NOT correct?
a. The most profitable gaps are opening gaps.
b. Common gaps are of little or no consequence.
c. Upward breakaway gaps usually occur on heavy volume.
d. Exhaustion gaps occur at the end of a move and signal a trend reversal.

Answer 24

a. The most profitable gaps are opening gaps.

Question 25

Which of the following is not included in Robert Rhea’s Dow Theory hypotheses?
a. Dow Theory is infallible.
b. The primary trend is inviolate.
c. The averages discount everything.

Answer 25

a. Dow Theory is infallible.

Question 26

Dow Theory teaches that the investor should forego attempting to predict the secondary trends because
a. they are too random.
b. they are subject to manipulation.
c. exogenous events can be too great of an influence.
d. their reversals are too similar to primary reversals and can create confusion.

Answer 26

d. their reversals are too similar to primary reversals and can create confusion.

Question 27

The Dow tenet that says “Volume goes with the trend” is mainly focused on
a. all the trends.
b. only the primary trend.
c. only the secondary trend.
d. both the primary and secondary trend.

Answer 27

d. both the primary and secondary trend.