Technical Analysis

Question 1

The study of collective market sentiment as expressed in buying and selling of assets

Answer 1

Technical Analysis

• Reports that price and volume reflect the collective behavior of buyers and sellers
• Uses only the firms share price and trading volume data to project a target price.

Question 2

Analysis which attempts to determine the intrinsic value of an asset

Answer 2

Fundamental Analysis

*Uses the firms financial statements and other information to analyze its financial position

Question 3

Chart that maps the high and lows of each period

Answer 3

Bar Charts

Question 4

Chart that uses the same data as the bar chart, but displays a box bounded by the opening and closing prices. The box is open if price increases. The box is closed if the price decreases.

Answer 4

Candlestick Chart

Question 5

A chart helpful in identifying changes in the direction of price movements. Price is on the y-axis, the number of directional changes is on the x-axis.

Answer 5

Print and Figure Chart

Question 6

A calculation of the ratios of an assets closing price to benchmark values, and draws a line chart of the ratios.

Answer 6

Relative Strength Analysis

Question 7

When selling is supposed to emerge that prevents further price increases.

Answer 7

Resistance levels

Question 8

In an uptrend, the trendline connects

Answer 8

the increasing lows in price.

Question 9

If price crosses, trendline by a significant amount, a breakdown occurs, signaling an end to that period of increasing lows. (FOR UPTREND)

Answer 9

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Question 10

In a downtrend, the trendline connects

Answer 10

the decreasing highs in price.

Question 11

If price crosses the trendline by a significant amount, a breakout occurs, signaling the end of that period of decreasing highs. (FOR DOWNTREND)

Answer 11

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Question 12

When buying is expected to emerge to prevent further price decreases.

Answer 12

Support Level

Question 13

The belief that breached resistance levels become support levels and the breached support levels become resistance levels.

Answer 13

Change in Polarity

Question 14

Patterns that occur when a trend approaches a range of prices but fails to continue beyond that range.

Answer 14

Reversal Patterns

Question 15

A pattern that suggests that demand has been pricing the uptrend is fading, especially if the highs in the pattern occur on declining volume.

Answer 15

Head and Shoulders Pattern
*Analysts use the difference in price between the “head”, the highest price reached, and the “neckline”, the support level to which the price retraced after the “left shoulder” and “head” have formed.

Question 16

A pattern that suggests a pause in trend rather than reversal

Answer 16

Continuation patterns

• triangles form when prices reach lower highs, and higher lows over a period of time and converge.
• Rectangles form when trading temporarily forms a range between a support level and a resistance level.
• **Flags = ST Rectangles
• *** Pennants = ST Triangles

Question 17

Moving Average Lines (MALs) are used to smooth fluctuations in a price chart

Answer 17

MALs = mean of last n closing prices

Question 18

When the ST average crosses above LT average, signaling buy into uptrend.

Answer 18

Golden Cross

Question 19

When ST average crosses below LT average, signals sell into downtrend.

Answer 19

Dead Cross

Question 20

Indicators that are constructed based on the standard deviation of closing prices over the last n periods.

Answer 20

Bollinger Bands

Question 21

Indicators used to identify overbought or oversold markets. Or convergence and divergence.

Answer 21

Oscillators

• the are indicators based on market prices but scaled so that they “oscillate” around a given value, or between 2 values.
• Extreme high values signal overbought market
• *Extreme low values signal oversold market

Question 22

An oscillator calculated as 100 times the difference between the latest closing price and the closing price n periods later.

Answer 22

Rate of Change Oscillator (ROC) or momentum oscillator.

• buy when oscillator goes from - to +, signaling uptrend.
• • sell when oscillator goes from + to -, signaling downtrend

Question 23

An index based on the ratio of total price increases to total price decreases of a selected number of periods.

Answer 23

Relative Strength Index (RSI)

• Oscillates between 0 and 100
• • 70 is overbought. 30 is oversold.

Question 24

Indicators that is drawn using exponentially smoothed moving averages, which place greater weight on more recent observations.

Answer 24

Moving Average Convergence / Divergence Lines

• Oscillates around 0 with no bounds.
• • indicates overbought and oversold markets, as well as convergence / divergence.

Question 25

Indicators found through opinion polls

Answer 25

Sentiment Indicators

Question 26

Put/Call Ratios Calculation

Answer 26

Put Volume / Call Volume

• Put options increase value when price decreases
• Call options decrease value when price increases
• As the ratio increases, the sentiment is more negative.

Question 27

An index that measures volatility of options on S&P 500 index.

Answer 27

Volatility Index (VIX)

*A high VIX suggests investors fear declines.

Question 28

An increase in total margin debt outstanding suggests aggressive buying by bullish margin investors. Which leads to a price decline.

Answer 28

Margin Debt

Question 29

A ratio that is the number of shares investors have borrowed and sold short. As this ratio increases, strong negative sentiment is indicated.

Answer 29

Short interest ratio (SIR)

SIR = short interest / avg. trading volume

Question 30

= (# of advancing issues / # declining issues) / (volume advancing issues / volume declining issues)

Answer 30

ST trading index (TRIN) or Arms Index

• As TRIN spikes up, it signals a large daily loss.
• • As TRIN spikes down, it signals a large daily gain

Question 31

= Mutual Funds Cash / Mutual Funds Assets

Answer 31

Mutual fund cash position

• increases when failing market
• • decreases when rising market

Question 32

New equity issuance or secondary offerings add to supply of stock. Coincides with market peaks when high.

Answer 32

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Question 33

The belief that financial market prices can be described by an interconnected set of cycles, ranging from minutes to centuries.

Answer 33

Elliot Wave Theory

• Size of the waves correspond to Fibonacci numbers
• *Ratios of Fibonacci ratios converge to 0.618 and 1.618
• Used to set price targets

Question 34

Analysis of the interrelationships among the market values of major asset classes, including stocks, bo nds, commodities and currencies.

Answer 34

Intermarket Analysis