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21
9.5 Learning Goal 5
1) A principal objective of technical analysis is trying to determine when to invest.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1
2) Investors should never combine fundamental analysis and technical analysis.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1
3) Resources for technical analysis are readily available on the Internet.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1
4) For technical analysts, the forces of supply and demand have an important effect on the
prices of securities.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1
5) The stock market is considered strong when the market volume decreases in a declining
market.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 5
6) Market volume is a function of market demand for and supply of stocks.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 5
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7) The breadth of the market refers to the spread between the number of stocks advancing and
those declining in value.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 5
8) A relatively high level of short sales is an indicator of a current bull market.
AACSB: 3 Analytical thinking
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Learning Goal: Learning Goal 5
9) The odd-lot theory supports buying into the market when the number of odd-lot trades rises.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 5
10) Technical analysis is so called because it relies on sound scientific principles rather than
intuition.
AACSB: 3 Analytical thinking
Question Status: New Question
Learning Goal: Learning Goal 5
11) The new high-new lows measure suggests that buying opportunities occur when new lows
outnumber new highs.
AACSB: 3 Analytical thinking
Question Status: New Question
Learning Goal: Learning Goal 5
12) An oversold market is generally considered to be overvalued.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 5
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13) Technical analysis primarily monitors shifts in the ________ in the market.
A) level of risk
B) supply and demand forces
C) volume of trading
D) rate of return
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1
14) Which of the following are included in technical analysis?
I. charting price movements
II. tracking trading volume
III. determining the investor's risk tolerance
IV. monitoring odd-lot trading
A) I and II only
B) II and III only
C) I, II and III
D) I, II and IV
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1
15) Technical analysis is used for which of the following purposes?
I. deciding when to enter the market
II. deciding whether to sell a stock
III. deciding which stocks to buy
IV. deciding whether basic economic conditions are favorable for investing
A) I and II only
B) II and III only
C) I, II and III only
D) I, II, III and IV
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1
24
16) The principal objective of technical analysis is
A) determining the best time to get into or out of the market.
B) maintaining the lowest level of risk possible.
C) avoiding all unpleasant surprises in the market.
D) increasing trading to improve overall profits.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 1
17) Which of the following are used as indicators of a strong market in the future?
I. The advance-decline spread is increasing at a time when the advances outnumber the
declines.
II. The level of short interest is relatively high.
III. The net difference of odd-lot purchases minus odd-lot sales begins increasing.
IV. The trading volume increases in a declining market.
A) I and II only
B) III and IV only
C) I, II and III only
D) I, II, III and IV
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 5
18) The odd-lot trading theory advocates that small investors
A) tend to buy high and sell low.
B) react in a manner which generally forecasts the future direction of the market.
C) are the first to react to market changes.
D) tend to be the first to speculate on a bull market.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 5
25
19) Which of the following practices are typical of technical analysis?
I. charting
II. computing moving averages
III. computing financial ratios
IV. plotting advance-decline lines
A) I and III only
B) I, II and IV only
C) I, II and III only
D) I, II, III and IV
AACSB: 3 Analytical thinking
Question Status: New Question
Learning Goal: Learning Goal 5
20) The new highs-new lows measure typically looks at a period of
A) 10 trading days.
B) one month.
C) 100 days.
D) 52 weeks.
AACSB: 3 Analytical thinking
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Learning Goal: Learning Goal 5
21) One of the most popular tools of technical analysis is
A) charting.
B) financial statement analysis.
C) investor profiling.
D) investor behavior analysis.
AACSB: 3 Analytical thinking
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Learning Goal: Learning Goal 5
26
22) Chartists advocate that
A) history repeats itself.
B) patterns appear that are very clear and distinctive.
C) formations are less important than the direction of the latest price movement.
D) a breakout below a support line is a buy signal.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 5
23) Technical analysts believe that some of the key elements of market behavior—called
technical indicators-can provide valuable insights about the condition of the market. Briefly
discuss each of the following indicators.
• Market volume
• Breadth of the market
• Short-interest
• Odd-lot trading
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 5
27
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9.6 Learning Goal 6
1) The relative strength index compares a security's price relative to itself over a period of time.
AACSB: 3 Analytical thinking
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Learning Goal: Learning Goal 6
2) The simple moving average is a weighted average.
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Learning Goal: Learning Goal 6
3) The purpose of moving averages is to reduce the effect of random, short-term market
fluctuations.
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Learning Goal: Learning Goal 6
4) The mutual fund cash ratio (MFCR) compares the percentage of an investor's portfolio held
in cash to the percentage held in mutual funds.
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Learning Goal: Learning Goal 6
5) The on-balance volume indicator is used as a means of evaluating the significance of price
movements.
AACSB: 3 Analytical thinking
Question Status: New Question
Learning Goal: Learning Goal 5
6) Charts are used as a means of spotting developing trends.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 5
