Chapter 6

Question 1

The following 3 assumptions are the bases of ____

1. All influences on market action are automatically accounted for or discounted in price activity.
2. Prices move in trends and those trends tend to persist for relatively long periods of time.
3. The future can be found in the past.

Answer 1

Technical analysis

Question 2

Technical Analysis is practiced under 4 disciplines. What are they?

Answer 2

1. Chart Analysis
2. Statistical Analysis
3. Sentiment Analysis
4. Intramarket Analysis

Question 3

If a stock trades below an uptrend or below a down trend it is referred to as a ____ or ____.

Answer 3

Break or Violation

Question 4

A _____ is the price at which the majority of investors sense value.

Answer 4

Support level

Question 5

A ____ is the price at which investors believe the stock is fully valued.

Answer 5

Resistance level

Question 6

Getting ____ means taking a certain position in anticipation of the market moving in a certain direction, only to have it go the opposite way.

Answer 6

whipsawed

Question 7

This form of technical analysis is made possible by the increased sophistication of computers.

Answer 7

Statistical Analysis

Question 8

An ____ is an indicator that moves between two values.

Answer 8

Oscillator

Question 9

The ____ indicator the difference between a short term and longer term exponential moving average (EMA).

Answer 9

MACD

Question 10

The _____ indicator is a good tool for assessing the quality of market moves. It indicates whether the market is closing near its highs and lows.

Answer 10

Stochastic

Question 11

The ___ measures momentum by comparing the ____ of prices gains on days that a stock closes up to the strength of price declines on days that stocks closes own.

Answer 11

Relative Strength Indicator (RSI)

Question 12

____ indicators are focused on investor expectations, or their degree of bullishness or bearishness about a particular stock or stock index.

Answer 12

Sentiment

Question 13

There are 3 basic relationships that inter market analysts follow. Name them

Answer 13

1. Stocks verses bonds
2. Bonds vs commodities
3. Commodities versus currencies

Question 14

____uses one of the oldest known charting techniques, which originates in Japan in the early 17th century.

Answer 14

Candlestick

Question 15

The most common support and resistance levels are the highs and lows of trading ranges. These levels are known as ___ and ___ levels.

Answer 15

Horizontal support and horizontal resistance

Question 16

Some reversal formations take ____ or even ____ to develop.

Answer 16

Weeks or months

Question 17

When a head and shoulder formation appears at the end of the bull market it is called a head and shoulders ____. When it takes place at the end of a bear market it is called a head and shoulders ____ or a ____ head and shoulders.

Answer 17

Top
Bottom
Inverse

Question 18

The _____ triangle usually indicates a continuation but may occasionally indicate a reversal. In this triangle h support and resistance lines are equal in length and slope.

Answer 18

Symmetrical

Question 19

____ are bullish patterns that hav a horizontal resistance line and a positively sloped trend line acting as support.

Answer 19

Ascending triangles

Question 20

____ consists of a horizontal support line and a negatively sloped trend line.

Answer 20

Descending triangle

Question 21

The RSI is considered a down trend if the value is below what value for an extended period?

Answer 21

50

Question 22

What put/call value is considered a buy signal?

Answer 22

80

Question 23

The current dividend of LSB stock is $3.17. Its growth rate is 2% and the discount rate is 4%. Calculate the intrinsic value of LSB.

Answer 23

$161.67

Question 23

Calculate the sustainable growth rate for XYZ Corp which has a return on equity of 15%, dividend payout ratio of 45%, and fully diluted earnings per share of $5.26.

Answer 23

g = (1 - dividend payout ratio) x return on equity

g = (1 - 0.45) x 15% = 8.25%.

Question 24

Which formation looks most similar to the capital letter “M”?

Answer 24

Double Top

Question 25

Which types of industries display the greatest sensitivity to changes in the economy?

Answer 25

Cyclical

Question 26

Financial statements are more comparable across industries in what form of accounting?

Answer 26

Principal based accounting

Question 27

In the Bank of Canada bought 5 year treasury bonds in the open market would this be inflationary of deflationary?

Answer 27

Inflationary

Question 28

A ___ is a line connecting a series of ascending lows or descending highs. Although it can be drawn by connecting just two points, a third point is needed to confirm that it is valid.

Answer 28

Trendline

Question 30

What maximum amount of time could a trader need to wait before a reversal breaks the current trend?

Answer 30

Years