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28
7) The advance/decline line is be used to time both the purchase and the sale of securities.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
8) Which one of the following relative strength values would most indicate that a stock is
oversold?
A) 120
B) 80
C) 20
D) -20
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
9) Over the last 14 trading days, the average price increase for Quincy Industries stock was
$0.88 and the average drop on down days was $0.44. The relative strength index for Quincy is
A) 2.
B) 66.67.
C) 50.
D) 33.33.
AACSB: 3 Analytical thinking
Question Status: New Question
Learning Goal: Learning Goal 6
10) The theory behind the mutual fund cash ratio is
A) mutual fund managers hold high levels of cash when they are optimistic about market
conditions.
B) when mutual fund managers hold high levels of cash, they must eventually buy stocks with
it.
C) when mutual fund managers hold low levels of cash they are pessimistic about market
conditions.
D) when market conditions are favorable, shareholders remit more cash than the managers can
invest.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
29
11) On a given trading day, 700 stocks advanced and 1,200 stocks declined. The volume of
declining stocks was 280 million while the volume of advancing stocks was 530 million. What
is the ARMS (a.k.a. TRIN) index value for the day?
A) 0.31
B) 0.91
C) 1.10
D) 3.24
AACSB: 3 Analytical thinking
Question Status: Revised
Learning Goal: Learning Goal 6
12) A high TRIN value is considered
A) good for the market when the number of advancing stocks is declining.
B) good for the market when the volume of advancing stocks is declining.
C) bad for the market when the trading volume in the declining stocks is rising.
D) bad for the market when the number of declining stocks is stable.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
13) The confidence index indicates a strong stock market when the
A) ratio of the average yield on high-grade corporate bonds to the average yield on low-grade
corporate bonds rises.
B) ratio between the average yield on S&P 500 stocks to the average yield on high-grade
corporate bonds rises.
C) consumer confidence index rises above its long-term trend.
D) demand for bonds declines relative to the demand for equity securities.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 5
14) The confidence index indicates
A) stock investors ' perceptions of risk in the economy.
B) bond investors ' perceptions of risk in the economy.
C) consumers' perceptions of risk in the economy.
D) investors' trust in financial advisors.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 5
30
15) Which one of the following combinations best signals a strong market?
I. a greater number of advancing stocks than declining stocks
II. a greater number of declining stocks than advancing stocks
III. a greater volume in rising stocks than in declining stocks
IV. a greater volume in declining stocks than in advancing stocks
A) I and III
B) I and IV
C) II and III
D) II and IV
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
16) The on balance volume (OBV) indicator
A) considers only the amount of daily trading volume.
B) indicates an up market when heavy volume accompanies price increases.
C) is divergent when the OBV is falling and prices are also falling.
D) rises by 10,000 on a day when the trading volume is 5,000 shares and the price rises by $2.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
17) Which one of the following statements is correct concerning the mutual fund cash ratio
(MFCR)?
A) The lower the value of the MFCR, the stronger the market will be in the future.
B) The MFCR is equal to the cash inflows into money market funds divided by the cash flows
out of money market funds.
C) A low MFCR indicates that fund managers might be forced to sell securities should
investors wish to withdraw funds.
D) A MFCR greater than 12% is considered a bearish signal.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
31
18) Which one of the following statements is correct concerning the mutual fund cash ratio
(MFCR)?
A) When mutual funds have a lot of cash it is a bearish signal because managers are not buying
stocks.
B) Low mutual fund cash is bullish because it means managers have been buying stocks.
C) High mutual fund cash indicates that fund managers might be forced to sell securities should
investors wish to withdraw funds, a bearish signal.
D) A high MFCR is like high short interest in that it indicates pent up demand.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
19) The on balance volume (OBV) indicator
A) indicates a market bottom when prices and volume are both falling.
B) is optimistic when prices are rising on low volume.
C) is optimistic when prices are rising on high volume.
D) is neutral whenever prices and volume move in opposite directions.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
20) Technical analysts consider the stock market to be strong when volume ________ in a
rising market and ________ during a declining market.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 5
21) Which of the following is a contrary indicator?
A) odd-lot trading
B) breadth of market
C) the advance/decline line
D) the TRIN measure
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
32
22) Price and volume of shares traded of Salem Industries on four consecutive days are shown
below.
Monday
Tuesday
Wednesday
Thursday
$27
$26
$28
$30
100,000
80,000
70,000
110,000
Compute Salem's on balance volume at the end of Thursday's trading. Assume last Friday's
closing price was $26.50.
A) 200,000
B) -40,000
C) 180,000
D) 360,000
AACSB: 3 Analytical thinking
Question Status: New Question
Learning Goal: Learning Goal 6
23) Which of the following is used to identify long-term trends?
A) odd-lot trading
B) breadth of market and market volume
C) 10 moving average
D) 100 day moving average
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
24) Which of the following signals that a market top or bottom is near?
A) mutual fund cash ratio
B) the relative strength index
C) odd-lot volume
D) on balance volume
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
33
25) According to chartists, a breakout below a support level
A) is a sell signal.
B) is a signal that the market is stagnant.
C) is a buy signal but only for value investors.
D) is a buy signal.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
26) On a given day, 200 of the S&P 500 stocks were up, 300 were down. Volume for up stocks
was 500 million, volume for down stocks was 700 million. The ARMS or TRIN for that day
was
A) 0.48.
B) 0.70.
C) 0.93.
D) 3.50.
AACSB: 3 Analytical thinking
Question Status: Revised
Learning Goal: Learning Goal 6
27) What is the ten-day simple moving average if the latest daily closing prices are $5, $7, $8,
$5, $4, $6, $7, $8, $9, $10?
A) $6.00
B) $6.90
C) $7.67
D) $10.00
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
34
28) Which one of the following statements is correct concerning moving averages?
A) The longer the time period under consideration, the more sensitive the moving average is to
daily price fluctuations.
B) A simple moving average is computed as the arithmetic mode.
C) The shorter the time period under consideration, the easier it is to spot long-term price
trends.
D) A moving average helps remove short-term fluctuations from the analysis.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
29) A sell signal is indicated by a security's price
A) rising above the moving average.
B) falling below the moving average.
C) equaling the moving average.
D) running parallel to the moving average.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
30) Explain why technical analysts use charts so extensively.
AACSB: 3 Analytical thinking
Question Status: Previous Edition
Learning Goal: Learning Goal 6
