CMT-Level-II CMT Level II Exam Questions and Answers

Point-and-figure charts

Line charts

Japanese candlestick charts

Bar charts

Buy when the faster moving average crosses the slower moving average from above.

Buy when the faster moving average hooks the slower moving average from above.

Buy when the faster moving average hooks the slower moving average from below.

Buy when the current price crosses above both moving averages.

Trading decisions are less consistent

Most computerized systems are unprofitable in non-trending markets

Profit trades are exited too early

Computerized systems miss many market trends

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)

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

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

Initial Stop

Trailing stop

Sell stop

Standard deviation stop

Lagging groups fail to confirm new lows

Leading groups fail to confirm new lows

Relative strength of lagging groups begins to improve

Leading groups make new lows and accelerate to the downside

To reduce errors in a system

To improve the efficiency of the system

To see how long a pattern takes to form

All of the above statements

There is a different measuring objective for each

Flags fly at half mast and pennants are considered reversal patterns

The move after the pattern will be equal to the move before the pattern

Half the distance of the preceding move from breakout to the flag or pennant

Positions of hedgers and speculators

Historical open interest of each contract

Current open interest of each contract

Reportable and non-reportable positions

Relative strength analysis allows for identification of the strongest and weakest sectors

Charting tools such as trendlines and moving averages should not be employed with relative strength lines

Sectors whose relative strength lines are just turning up after a downtrend should be sold

This analysis does not hold for options or mutual funds due to the unique characteristics of these securities

Shares are losing momentum which can be confirmed by negative divergence between price and ROC; trader should be cautious and be quick to reduce position on a violation of trendline.

Shares are making a series of higher highs and higher lows; ROC has turned negative which is confirming the price action; should use current pullback to add to position.

ROC has turned negative which is a sell signal; should initiate a short position.

Negative divergence observed between price and ROC should be ignored as prices are near life time highs.

It depends upon the type of analysis only

It depends upon the period being explored only

It depends upon the type of analysis or the period being explored

It depends upon the type of analysis and the period being explored

Computerized trend following systems are profitable in all types of markets

Computerized systems improve the interpretation of complex trading patterns

Computerized trading systems remove the human emotion element

All of the above

Price level of the lowest box (for up counts) + (number of boxes in the reversal columns X reversal size)

Price level of the lowest box (for up counts) X number of boxes in the reversal columns X reversal size

Price level of the lowest box (for up counts) of the base X number of columns of the base X reversal size

Price level of the lowest box (for up counts) of the base + (number of columns of the base X reversal size)

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.

The pivot-point

The simple

The weighted

The exponential

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

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

The year is displayed at the bottom of the column and the month is not plotted

The year is displayed at the bottom of the column and the number of the month is plotted instead of the X or O

The month is displayed at the bottom of the column and the year is not plotted

The month is displayed at the bottom of the column and the number of the year is plotted instead of the X or O

Linearity

Normality

Outliers and homoscedasticity

All of the above

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

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

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

Volume rising and open interest rising = trend reversal

Volume rising and open interest falling = position liquidation

Volume falling and open interest rising = slow accumulation

Volume falling and open interest falling = congestion phase

Estimates which are subject to change

Inaccurate information

Statements inconsistent with the accumulated knowledge of technical analysis

Statements which disparage the work of other analysts

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

Wave four should not overlap wave one

The theory is composed of time, ratios and wave forms, in that order of importance

The theory was originally applied to individual stocks and does not work as well for indices

The theory works best in commodity markets traded primarily by professional traders such agricultural futures

A relative loss of 20% can be made back with a relative gain of 20%, but an absolute 20% loss requires a 25% gain to break even

A relative loss of 20% can be made back with a relative gain of 20%, but an absolute 20% loss don't require a 25% gain to break even

A relative loss of 20% can be made back with a relative gain of 20%, but an absolute 10% loss requires a 25% gain to break even

A relative gain of 20% can be made back with a relative loss of 20%, but an absolute 20% loss requires a 25% gain to break even

appear upon completion of star patterns

appear nowhere in star patterns, only in box ranges

ideally has a doji as second real bottom

can only be formed over long periods of time

extremely strong

strong

low

non-existent

Prices are consolidating but OBV direction has turned higher which indicates accumulation by long term traders.

Negative divergence between price and indicator suggest distribution is taking place at top.

Prices are higher but OBV is sideways which can't be interpreted.

Positive divergence between price and indicator suggest uptrend is weak and near reversal.

On-balance volume

Accumulation/Distribution

New High/New Low index

Slope of the 200 day moving average

On days when prices close higher, it is assumed that all volume is represented by sellers

It is a breadth momentum oscillator

It is the sum of two exponential moving averages

It is used for longer-range trading compared to the McClellan Summation Index which is more useful for short term trading

First, make a decision as to how many columns to average.

First, re-draw the chart as a 1X1 chart,

First, find the longest column, and count the number of filled boxes.

First, convert the chart to a conventional line chart.

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

Price, momentum and volume

Price, pattern and volume

Waves, alternation and reversals

Pattern, ratio and time

10

96

48

30

1, 2, 3

1, 2, 4

½, 1, 2

1, 3, 5

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

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

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

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

Return 30 percent to the $80 to return to the $100 break-even level

Return 25 percent to the $70 to return to the $100 break-even level

Return 30 percent to the $70 to return to the $100 break-even level

Return 25 percent to the $80 to return to the $100 break-even level

The top of the upper shadow of one candle is at the same price as the bottom of the lower shadow of the other candle

The opening price of the second candle equals the opening price of the first candle

The two candles have the same color

It is a reversal pattern

Pattern recognition,

Trend following

Non-exogenous signal systems

Countertrend

Bullish or Bearish Triangle

Triple Top or Triple Bottom

Double Top or Double Bottom

Bullish or Bearish Fulcrum

Sell when the right shoulder penetrates the neckline

Buy when the head forms a higher high

Buy on the first rally after the neckline is penetrated

Buy when the right part of the head is forming

bonds turn up before stocks and commodities.

stocks turn up before bonds and commodities.

commodities turn up before bonds and stocks.

all the asset classes turn up simultaneously.

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

All new techniques must be fully documented even if proprietary methods must be disclosed to do so

New procedures must be documented as to procedure and rationale

New procedures must be supported by adequate back testing confirmed by at least technician

New methods need not be consistent with the accumulated knowledge of the field of technical analysis

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

Decisions among asset classes

Decisions among equity market sectors

Decisions among mutual fund

All of the above

Volume

Trend

Slope or momentum

Ratio of two prices

Used as the main confirmation test in Dow Theory

Compares risk to expected returns

Compares actual returns to expected returns

Signals moving average crossovers

To help identify long-term variations from the short-term trend

To spot confirmations between technical indicators

To pinpoint the crossing of two moving averages

All of the above

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

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.

In an uptrend, volume should increase on down days

In a downtrend, volume should increase on up days

Price precedes volume

Volume precedes price

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

Smoothing technique used

Distance between bands

Selection of trend speed

Use of a scaling factor

Moving averages provide the most valid trade signals in sideways markets

Moving averages provide the most valid trade signals in trending markets

Moving averages always provide more valid trade signals than oscillators

Oscillators always provide more valid trade signals than moving averages

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

Sentiment indicators

Breadth indicators

Flow of Funds indicators

Cycle indicators

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.

A

B

C

D

Downtrends follow uptrends

Complex patterns follow simple patterns

Price follows volume

Prices alternate in Fibonacci sequences

TRIX

Moneyflow Index

True Strength Index

Herrick Payoff Index

Seasonal

Long-term

Short-term

Intermediate-term

In the exponential moving average more weight is given to volume on higher volume days

The simple moving average is the geometric mean of previous prices

The linear weighted average addresses the problem of including only the price action covered by the length of the average itself

A shorter term moving average more closely tracks price action

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

First day of the week

Day before a holiday

Triple witching days

Summer days

TRIX

Money Flow Index

True Strength Index

Intraday Intensity

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

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

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

When virtually everyone takes the position that the market is headed in a certain direction, there is no one left to push the trend any further

Always trade against the prevailing trend

The future can be extrapolated based on present trends

Fundamental analysis is always wrong