Latest Study Questions for CMT-Level-II Exam

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1. In trend-based trading systems, what is the major determinant of trading activity (i.e., how often buy or sell signals are generated)?

Smoothing technique used

Distance between bands

Selection of trend speed

Use of a scaling factor

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2. According to the raw performance statistics which of the following statements predicts the correct when the performance of a broadening pattern at its best and its failure rate?

At best, the performance of an expanding pattern is average, and its rate of failure is above average

At best, the performance of an expanding pattern is average, and its rate of failure is below average

At best, the performance of an expanding pattern is above average, and its rate of failure is above average

At best, the performance of an expanding pattern is below average, and its rate of failure is above average

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3. Which of the following is true of the window pattern?

It is a reversal pattern

It occurs when the real bodies of two consecutive candles do not overlap

It occurs when the shadows of two consecutive candles do not overlap

One should buy on dips after a falling window

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4. Speculative stocks put on their best performance in which of the following markets?

During the whole bull market

At the early stages of a bull market.

Near the final stages of a bull market.

Both in the beginning and at the end of a bull market

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5. An MTA Member or Affiliate using the MTA mailing list to send _____________ would not be in violation of the Code of Ethics:

Research reports

A free membership to a club

Charting discount coupons

CMT Newsletter

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6. The _______________ tracks the degree of mass participation in rallies and decline.

MACD line

RSI

Relative strength

Advance/Decline line

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7. A breakout:

Is a minor pattern which is rarely seen and has no real significance on either the near or long term

Occurs when price passes through specific levels

Has no significance to a trader of investor

Needs to be confirmed by other indicators

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8. Paul Jones is a chemical industry research analyst for a large brokerage company. That industry is currently seeing an increase in mergers and acquisitions. While flying through Chicago, Jones sees several senior officers who she knows are from the largest and fourth largest chemical companies walk into a conference room. She concludes that negotiations for an acquisition might be taking place. Jones:

may not act or cause others to act on this information.

may not act but advise others to act on this information.

may use this information to support an investment recommendation.

should inform her compliance officer that she has material nonpublic information on firms she covers.

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9. A security has just broken out of its trading range to the upside. Over the course of the next 2 days, it rises an additional 5% from the point of the breakout. It then returns to its prior resistance line, before continuing the uptrend .

What term best describes this phenomenon?

Failure

Shortfall

Throwback

Premature Breakout

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10. Which of the following is a FALSE statement about MACD?

The signal line is also a moving average

It is most useful in a trending market

The calculation does not use any simple moving averages

If MACD has had a positive value for more than 12 periods, this is predictive of a reversal.

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11. What would be the price objective for a head and shoulders pattern with a neckline at 63, top of the first shoulder at 72, top of the head at 96 and top of the second shoulder at 78?

10

96

48

30

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12. Which crossover in MACD-Histogram is the strongest signal generated in the following chart of Alphabet Inc.

C ABD

A

B

C

D

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13. In 3-box point and figure charts,

A double-bottom and double top can be continuation patterns

Only a double-bottom can be a continuation pattern

Only a double-top can be a continuation pattern

Neither can be continuation patterns. They do not exist in Point and Figur

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14. Interpret the relationship between the S&P 500 and the NASDAQ 100 indexes based on the chart shown below, if the Pearson's coefficient of correlation is 0.45:

Linear relationship, as the Best Fit line is curvilinear.

Linear relationship, as points fall generally along a straight line.

Non-linear relationship, as points fall generally along a straight line.

Non-linear relationship, as the Best Fit line is curvilinear.

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15. Which of the following factors would be a CORRECT interpretation of the morning star pattern?

The pattern contains two candles

The real bodies of the first and second candles generally overlap

It is considered a bullish reversal pattern

It is considered a bearish reversal pattern

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16. Which of the following is not an example of initial decision taken into consideration in the field of system testing?

Set the time-routine

You need a Risk Management Plan

You need to configure the machine time horizon

Determine what markets to concentrate can be delayed initially

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17. Reversals in point and figure charts:

Are set by convention as all point and figure charts have the same reversals

Depend on the investment time horizon of the holder

Can change within the same chart

Should be less than a week

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18. The MACD Histogram is a/an:

trend-following indicator.

momentum indicator.

breadth indicator.

oscillator

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19. Which of the following is the formula for calculating RSI?

RSI = 100 - (100/(1 X RS))

RSI = 100 - (100/(100 + RS))

RSI = 100 - (100/(1 + RS))

RSI = 100 + (100/(1 + RS))

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20. According to the MTA Code of Ethics, what prohibitions MUST be adhered to after making a buy or sell recommendation?

Allow adequate time for clients to act on recommendations before the analyst acts on the recommendation

Analysts must give clients and their employer adequate time to trade, but the analyst's family members are under no such restriction

Analysts may effect trades for their own account even if their employer has not had time to act on their recommendation

Insider trading activity is the subject of SEC regulations, therefore the MTA Code of Ethics is silent on this issue

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21. Which of the following is true of W.D. Gann's trading techniques?

His work is valid for equities but does not apply to commodities

When price meets time, a change is imminent

Gann used 10%, 20%, 30% and 40% as his key resistance and retracement levels

Gann's work is an advanced interpretation of point and figure charts

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22. What are three common ways that a greed-driven investor can suffer losses, even when his longerterm market forecast is CORRECT?

Options, indexes and pyramiding

Options, indexes and currencies

Options, leveraging and pyramiding

Options, leveraging and currencies

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23. What trading decision must a trader make based purely on trend line in the chart below?

Hold long positions

Close out long positions

Close out short positions

Trading decisions cannot be made by using trend lines.

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24. If 300 shares traded at a certain price which of the following conclusions cant be drawn from this given situation?

Traders could determine the price at which supply and demand were equalized

Traders would record four bars at that price

Traders could determine the support

Traders could determine the resistance zones

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25. Which of the following is NOT true in chart interpretation:

A price chart is a representation of human behavior

The goal is to find consistent, reliable and logical patterns

Chart patterns can be caused by commonly used trading techniques

The behavioral aspects of prices are irrational

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26. Which of the following applies to the interpretation of point and figure charts in analyzing futures prices?

Pattern analysis is more complex than for stocks

Futures prices offer a greater variety of chart formations than stocks

Only the most basic techniques are generally used such as a one box breakout

Incorporating open interest data into a point and figure chart makes this type of chart more useful for futures

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27. Stocks with superior fundamentals will normally decouple and start outperforming on an relative basis during:

a rampant bull market.

a market consolidation.

the last legs of an uptrend.

a market correction (bear market).

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28. What is the bearish counterpart to the Piercing Line candlestick pattern?

3 Black Crows

Dark Cloud Cover

Hanging Man

Shooting Star followed by an Inverted Hammer

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29. Which of the following is true of moving average crossovers?

It is considered bearish when a short term moving average crosses above a longer term moving average

In a triple crossover trading system buying is signaled when the shortest term moving average crosses over one of the other moving averages

The first crossover in a triple crossover system during an upside reversal is when the shortestterm moving average crosses above one of the other two averages

Once a moving average system is optimized, it can be used for trading all markets

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30. What is the proper use of long-term charts versus daily price charts?

Long-term charts are more useful for making trading decisions

Daily price charts allow for a thorough trend analysis

Long-term charts allow for a better assessment of the price trend

Daily price charts allow for a better assessment of the price trend

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31. The MTA Code of Ethics applies to:

Members only

Affiliates only

CMT candidates

All of the above

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32. Which of the following is NOT true of the rising and falling three methods patterns?

They are continuation patterns

It starts with a long candle is followed by three short candles of the opposite color

The final day is another long candle of the opposite color of the three preceding small candles

The pattern consists of a single candle

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33. A trend based trading system where signals occur when the current price reaches a new high or low:

Point and figure

Simple moving average

Swing breakout

N-day breakout

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34. Which of the following would be a valid trading interpretation of top chart patterns?

Find a market with a long consolidating base and high volatility

Liquidate positions at prior major resistance points, top formations or the break of a major support line

Sell whenever a major support level is tested but not breached

Sell when there is a major price retrenchment in a bull market

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35. Which of the following is an INCORRECT interpretation of the put-call ratio?

When options traders are bullish, call volume exceeds put volume

A very high ratio indicates an oversold market

A low ratio is considered a warning of an overbought market

When call volume exceeds put volume, this has bullish future implications for the market

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36. Which of the following is a CORRECT point and figure chart pattern interpretation?

Upside breakout above an ascending triple top signals sell

Upside breakout above a bullish resistance line signals sell

Downside breakout of a bearish triangle signals sell

Downside breakout below a bearish support line signals buy

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37. Protective stops that are placed too far away can result in which of the following factors?

Small frequent elections

Large losses

Too many trades

Unwanted liquidation

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38. Which of the following is an INCORRECT interpretation of the candlestick piercing pattern?

It is a bullish reversal pattern

The greater the penetration into the price levels of the prior day's real body, the greater predictive power

It is the opposite of the dark cloud cover

It is preceded by a market uptrend

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39. _______________ as a risk measure results in an estimation of a price move in either direction.

Put/ call parity

Plurality index

Implied volatility

Standard deviation

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40. The Sharpe Ratio is defined as?

(expected return plus the risk free interest rate) divided by the standard deviation of returns

(expected return minus the risk free interest rate) divided by the standard deviation of returns

(expected return divided by the risk free interest rate) divided by the standard deviation of returns

(expected return times the risk free interest rate) divided by the standard deviation of returns

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41. How can one identify the existence of a cycle?

Switch time frames

Remove price trend

Remove volume trend

Use n period extremes

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42. In some point-and-figure charts, what is the actual representation of the new price recorded on the chart?

The first letter or the number of the month is plotted

The number of the month is plotted

The first letter of the month is plotted

The name or the number of the month is plotted

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43. Which of the following is a CORRECT guideline in pyramiding trades positions?

Each successive layer should be larger than the prior layer

Take profits on winning positions

Add to losing positions, as a form of dollar cost averaging

Adjust protective stops to the breakeven point

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44. Which of the following is a CORRECT interpretation of the shooting star pattern?

It is even more bearish than the gravestone doji candle

Shooting stars in charts, as in life, are omens of good fortune

The color of the real body is of utmost importance to its significance

It is a bearish reversal pattern

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45. Which of the following must every MTA Member and Affiliate comply with?

Rules promulgated by the MTA Board of Governors

MTA Constitution

MTA By-laws

All of the above

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46. ___________ is used for comparing the long-term performance of one system against another.

Beta

Sharpe Ratio

Calmar ratio

Treynor Ratio

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47. What are common mistakes made by impatient traders?

Entering the market too soon

Exiting the market too soon

Abandoning well reasoned trading strategies due to adversity

All of the above

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48. A morning star pattern is typically:

A very small pattern consisting of two candles that is infrequently seen

A continuation consisting of at least five candles

A bottom reversal pattern consisting of three candles

A top reversal pattern consisting of three candles

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49. __________ is used to calculate the relative volatility of the current portfolio compared to the benchmark by calculating the annualized return less the risk-free return and then divided by beta.

Sharpe ratio

Calmar ratio

Sortino ratio

Treynor ratio

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50. If the upper breakout level is getting higher and higher along the upper trend line which of the following statement is not predicted correctly about this trend?

It using up much of any potential gain after a breakout

It is also moving farther from any realistic protective stop level

It is increasing the risk

It using up much of any potential gain just before a breakout

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51. Which of the following is the correct method to plot a percentage change in point-and-figure charts?

The approximated prices are plotted as a number

The prices are converted into their logarithmic equivalent and plotted as a logarithmic number

The exact prices are plotted as a number

The prices are converted into their arithmetic equivalent and plotted as an arithmetic number

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52. A trend-based trading system where the trend is the weighting of the recent closing prices by a smoothing constant:

Point and figure

Simple moving average

Exponential smoothing

N-day break

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53. Which of the following is an INCORRECT statement regarding the inverted hammer pattern?

The color of the real body is of utmost importance to its significance

It has the same form as the shooting star pattern

It comes at the end of a market downtrend

It is a bottom reversal signa

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54. Which of the following is a diversification technique in trading?

Trade multiple securities in markets with high correlation

Stick to a single trading system

Balance risk across multiple markets and trading systems

All of the above

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55. Which of the following is the MOST important thing to keep in mind in attempting to find a perfect indicator?

Indicators do not take into account trading costs

Indicators optimized for the past often do not work in the present

Indicators are frequently so complex to create as to be of little use in making trading decision

Indicators usually give conflicting trading advice

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56. What is the MTA's position with respect to knowledge of client and employer information:

Only knowledge of current clients and employers must be kept in confidence

The MTA Code of Ethics does not apply to confidentiality of unlawful client or employer activity

The MTA Code of Ethics is silent on client and employer confidentiality so members must refer to laws/rules promulgated by regulatory authorities

All information pertaining to any lawful activity of past or present clients or employers must be kept in confidence

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57. Which of the following is the reason behind choosing a logarithmic scale? Select the best possible answer.

When short periods of trading activity are plotted

When long or short periods of trading activity are plotted

When long periods of trading activity are plotted

When intervals of trading activity are plotted over a limited span

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58. Which of the following is NOT a valid trading rule using Elliott Wave Theory?

Identify a main trend

Determine the current status of the main trend by locating the major peaks and bottoms

Look for five wave corrections and three wave sub-trends or extensions

Draw trendlines to determine direction

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59. Which of the following is GENERALLY true of financial media explanations for market moves?

These stories uncover the true underlying drivers of the market

Such stories are essentially gossip

Price movements are not news

These stories are generally the authoritative explanation of market moves

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60. In tweezers tops patterns, which aspects of the two candles MUST match?

Both candles must have shaven tops

Both candles must have the same high price

Both candles must have the same color real bodies

The tops of both real bodies must be the same

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61. According to Kirkpatrick and Dahlquist, during emotional times, flow of funds signals:

Appear to work poorly because price seems to divorce itself from economics.

Appear to work exceptionally well because of the market's flight to safety.

Function no differently than at any other time in the market cycle because of shortcomings in the measurement procedures.

Suggests the duration of the next downleg in the market cycle

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62. Which is the CORRECT interpretation of the candlestick umbrella pattern?

They can be bullish or bearish depending on the market

They are bearish after a rally

They are called hammers after a downtrend

All of the above

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63. Which of the following statement states the correct percentage of the percentage gain on a loss of 50 percent?

It requires an 80% gain to break even

It requires a 100% gain to break even

It requires a 90% gain to break even

It requires a 70% gain to break even

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64. Which of the following is true of volume and open interest?

Volume precedes price

On-balance volume is not as accurate measure of volume as basic volume column charts

Within an uptrend, a sudden leveling off or decline in open interest often signals that the current trend will accelerate

Decreases in volume and open interest help confirm the resolution of price patterns

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65. Tick volume refers to:

the number of contracts traded at each price tick.

the number of contracts traded at each time interval.

the change in open interest during a particular time interval.

the number of recorded price changes during a particular time interval.

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66. A technical analyst was at a convention in which a long-term point and figure stock chart was being discussed. He noticed that low-price action did not appear as active as high-price action on the chart.

One suggestion the technical analyst could provide, to clear up this apparent distortion, would be to:

Change the charting scale to logarithmic

Increase the time frame on the chart

Change the scale to arithmetic

Add the daily opening prices to provide a more visual benchmark of price changes

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67. An evening doji star:

Has a doji in the last position

Has a doji in the middle position

Is completely comprised of dojis

Is completed by dojis leading out of the pattern

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68. Which of the following best helps quantify the risk of a trading system?

Maximum Cumulative Drawdown

Maximum Favorable Excursions

Longest Flat Time

Length of Average Winning Trade

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69. Which of the following instances marks a single best valid buy signal with respect to the direction system for the next new trend?

A

B

C

D

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70. A trend-based trading system where the trend is the average of a pre-determined number of previous days' (n) closing prices is:

Point and figure

Simple moving average

Linear regression slope

N-day breakout

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71. Standard deviation is:

A descriptive statistic which defines the central tendency

The square root of the variance

The covariance of two securities

An inferential statistic which measures symmetry around the mean

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72. How would a technician utilize a support line which has been broken?

A broken support line no longer has a valid technical interpretation

The break in the support line would be a buy signal

The support line now becomes a resistance line

The break in the support line is of no technical importance

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73. Which is NOT a measure of central tendency:

Mean

Median

Mode

Variance

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74. Which of the following BEST describes the rule of alternation?

Downtrends follow uptrends

Complex patterns follow simple patterns

Price follows volume

Prices alternate in Fibonacci sequences

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75. Which of the following is a true statement according to Elliott Wave Theory?

A complete bull market cycle is made up of eight waves, three waves up followed by five waves down

A trend divides into three waves in the direction of the next longer trend

Corrections always take place in five wave patterns

The two types of simple corrections are zigzags and flats

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76. Which of the following is one of the key rules for traders?

Take profits but be patient with losing positions and give them time to rebound

Buy low, sell high

Be a contrarian and trade against the trend

Always meet margin calls promptly

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77. Why doesn't the doji candle have a real body?

The doji is an abbreviated method of drawing candles

The open and close are the same

The high and low are the same

Buyers are stronger than sellers

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78. Allen Johnson, CMT, is working in the Singapore office of German Investment Corporation. From an informal conversation, Allen learns that the company's most recent annual report contains misappropriated information. No one at the Singapore office expresses concern, however, because there has been no breach of Singapore's law.

Barrett should:

do nothing because the branch is outside of German jurisdiction.

seek advice from the company counsel to determine appropriate action.

do nothing because the branch is outside of Singapore's jurisdiction.

disassociate himself from the case with a written report to his supervisor.

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79. Which of the following statement is not true about the Diamond Top with regards to pattern analysis?

It is a profitable pattern

It consists of a combination of a broadening pattern and a symmetrical triangle

It occurs at the top of a very sharp upward rise in prices

It is not rare at price bottoms

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80. A trend based trading system where signals occur when the current high or low price exceeds the previous swing high or low price:

Point and figure

Simple moving average

Swing breakout

N-day breakout

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81. The Efficient Market Hypothesis assumes that:

I. Most investors will act rationally

II. Most investors will act irrationally

III. Prices typically reflect all available information

IV. Prices typically do not reflect all available information

I & III

I & IV

II & III

II & IV

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82. Which of the following asset classes as a leading indicator for the stock market?

Bonds

Bullion

Precious metal

Energy

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83. Which of the following would BEST improve the profitability of a trend-based trading system?

Use of additional trend periods

Increase the delay in taking action after a trade signal is given

Utilize support and resistance lines

Utilize candlestick charts instead of bar charts

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84. What is the main impediment to making objective trading decisions?

Lack of complete information

Failing to consider trading costs

Conflict between technical and fundamental models

Emotional considerations cloud judgment

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85. Which of the following would NOT be true in designing a trading system utilizing bands?

Buy when prices penetrate the upper band

Close out longs when prices reverse and go below the center of the band

Close out shorts when prices reverse and go below the center of the band

Sell when price breaks below the lower band

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86. Which of the following are valid interpretations of the put-call ratio?

It is the major sentiment index used for options trading

It is used as a contrary indicator

Extreme levels are trading signals

All of the above

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87. Which of the following are true of the concepts of divergence and confirmation in technical analysis

They are opposite concepts

Confirmation has a valid technical interpretation but in the case of divergence, no valid conclusion can be drawn

Confirmation indicates a likely change in trend since all technical indicators are in agreement

Divergence indicates continuation in trend since different technical indicators do not agree

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88. Which of the following is a CORRECT usage of oscillators in technical analysis?

Oscillators are least useful when they reach an extreme reading near the upper or lower ends of their boundaries

Divergences between price and oscillators are important confirmation signals

When an oscillator crosses the zero line, it provides an important trading signal in the direction of the trend

All of the above

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89. According to Charles Dow, what has been the main downfall of Wall Street investors?

Independent thinking

Failure to stay the course

Pride of opinion

Failure to abide by classic trading rules

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90. How might one detrend data to determine if a cycle exists?

Divide the current prices by a moving average of those prices

Create an oscillator that plots a standard deviation of the period lows

Apply volume weighting to both high and lows in the data

Plot a linear regression line through the data midpoin

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91. What is the position of the MTA Code of Ethics as it pertains to trading on inside information?

Under no circumstances is insider trading allowed

The Code of Ethics takes no position on insider trading

Insider trading which violates the laws/regulations of any governmental or regulatory agency is prohibited

Inside information may be disseminated but not acted upon

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92. Which of the following is a CORRECT interpretation of volume?

In an uptrend, volume should increase on down days

In a downtrend, volume should increase on up days

Price precedes volume

Volume precedes price

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93. Which of the following factors would increase the predictive power of the evening star pattern?

If there is no overlap among the real bodies of the candles in the pattern

If the last candle closes deeply into the body of the first candle

If there is light volume on the first candle of the pattern and heavy volume on the last candle of the pattern

All of the above

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94. Which of the following is an INCORRECT definition of cycle terminology?

Amplitude - the height of the wave (cycle)

Period - the time needed to finish one wave (cycle)

Frequency - the number of cycles that repeat every 360°

Phase - a measure of separation between the top and bottom of a wave (cycle)

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95. Which of the following is an important point in interpreting chart patterns?

Chart pattern interpretation is based solely on the current pattern and ignores the prior trend

Chart patterns should be interpreted separately from trendline analysis

Longer-term patterns are more valid than shorter patterns

Topping patterns usually have smaller price ranges and take longer to build

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96. Which is the CORRECT interpretation of the candlestick hanging man pattern?

A hanging man always has a black real body

A hanging man comes after a market rally

A hanging man has no lower shadow

A hanging man need not be confirmed by other indicators

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97. Which of the following is typically a period of heavier volume?

First day of the week

Day before a holiday

Triple witching days

Summer days

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98. Interpret price action in the chart below, combined with takeaways from the SPX New High-New Low index:

Confirmation between price action and indicator; the ongoing pullback can be bought.

Divergence between price action and indicator; suggests exiting of long positions.

Divergence between price action and indicator; can initiate shorts at current levels.

Can initiate long positions at current price level; breadth bottomed out at the same level as the pullback in October 2014.

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99. The "Rising 3 Methods" candlestick pattern is:

I. Bullish

II. Bearish

III. Long White Body followed by a series of smaller falling candles

IV. Long Black Body followed by a series of smaller rising candles

I & III

I & IV

II & III

II & IV

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100. _____________ captures an increasing part of the profits as price moves in a favorable direction.

Initial Stop

Trailing stop

Sell stop

Standard deviation stop

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101. Which of the following factors would increase the predictive power of an engulfing pattern?

The first day has a very long real body and the second day has a very short real body

The pattern appears after a consolidation pattern

There is heavy volume on the first day of the engulfing pattern

None of the above

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102. Which of the following is a CORRECT interpretation of open interest?

Rising open interest in an uptrend is bearish

Declining open interest in an uptrend is bearish

Rising open interest in a downtrend is bullish

Declining open interest in a downtrend is bearish

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103. What method could one utilize to analyze the long-term trends of futures prices, despite the fact that each contract is ONLY traded for several months?

Candlestick charts

Point and figure charts

Equivolume charts

Continuation charts

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104. Which of the following pieces of information is NOT contained in the CFTC's Commitment of Traders report?

Positions of hedgers and speculators

Historical open interest of each contract

Current open interest of each contract

Reportable and non-reportable positions