Investment Analysis and Portfolio Management 9th Edition TestBank Chapter 15

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CHAPTER 15—TECHNICAL ANALYSIS TRUE/FALSE Question: Fundamentalists

contend that past price movements will indicate future price movements. Answer:

Question: Technical analysts believe that security prices do not adjust rapidly. Answer:

Question: One of the potential disadvantages of technical analysis is that it can lead to

investing too early, even before fundamental analysts do. Answer:

Question: The use of trading rules requires a great deal of subjective judgment. Answer:

Question: Most technicians feel that since price patterns repeat themselves, a single trading

rule is sufficient. Answer:

Question: If technical trading rule is successful, more traders use it, causing the rule to

become even more successful. Answer:

Question: For technical trading rules to consistently generate superior returns, the market

would have to be inefficient. Answer:

Question: The majority of technicians follow many trading rules and attempt to arrive at a

consensus among their rules. Answer:

Question: Two major classes of technicians include the contrarians and those who “follow

the smart money”. Answer:

Question: Contrary trading rules assert that investors tend to be wrong except at market

peaks and troughs. Answer:

Question: The confidence index increases as the yield on lower grade bonds decreases,

everything else being constant. Answer:

Question: The T-Bill-Eurodollar yield spread widens during periods of international crisis.

Answer:

Question: An increase in debit balances in brokerage accounts is viewed by technicians as

a bullish sign. Answer:

Question: Technicians consider a high short interest ratio to be bearish. Answer:

Question: The Dow theory contends that stock price movements are similar to the

movement of tides, waves, and ripples. Answer:

Question: A resistance level is the price range at which the technician would expect an

increase in the demand of stock and a price reversal. Answer:

Question: A high put/call ratio indicates a pervasive bearish attitude by sophisticated

investors so it is a bearish indicator. Answer:

Question: The Confidence Index increases as the yield on lower grade bonds decreases,

everything else being constant. Answer:

Question: An increase in debit balances means more investing by naive investors and

would be a bearish indicator. Answer:

Question: If the aggregate market is rising, but the breadth index is declining, it is a

bearish signal. Answer:

Question: If the 50-day moving average line crosses the 200-day moving average line from

below on good volume, this would be a bullish signal. Answer:

Question: The relative strength ratio for a stock can be computed by dividing the value of

the S&P 500 stock index by the price of a stock. Answer:

Question: A rise in the Confidence Index published by Barrons is an indication investors

will purchase more lower-quality bonds. Answer:

Question: The breadth of the market measures the daily volume for a particular market.

Answer:

Question: A support level is the price range at which the technician would expect an

increase in the supply of stock and a price reversal. Answer:

Question: Candlestick charts indicate the price change from open to close by shading

whether the market went down or up for the day. Answer:

Question: Technical analysis differs from fundamental analysis in that

Answer:

Question: Which of the following is not considered an assumption of technical analysis?

Answer:

Question: For technical trading rules to generate returns that are superior to a buy-and-hold

strategy, net of transaction costs, the market would have to be

Answer:

Question: Technical analysts feel that financial accounting statements lack information, or

report it in a way that makes comparisons difficult. Which of the following does not

constitute a problem?

Answer:

Question: The following are classified as contrary trading rules, except the

Answer:

Question: According to contrary opinion technicians, the ratio of mutual funds cash to total

assets ____ near troughs in the market cycle and ____ near peaks.

Answer:

Question: Analysts following what the smart, sophisticated investor is doing would

examine

Answer:

Question: Indicators that tell what smart investors are doing include

Answer:

Question: The confidence index published by Barrons is the ratio of the average yield on

10 top grade corporate bonds to the

Answer:

Question: The cumulative number of shares that have been sold short by investors and not

covered is called

Answer:

Question: The short interest ratio is the ratio between the number of shares sold short and

not covered, and the

Answer:

Question: Technicians believe that an industry or stock that is outperforming the market

will tend to

Answer:

Question: The ratio of the price of a stock or an industry group to the value of the market

index is called the

Answer:

Question: ____ charts show time series of price while ____ charts only reflect change

regardless of time.

Answer:

Question: A type of charting which normally disregards both time and volume is the

Answer:

Question: A price range at which technicians would expect a substantial increase in the

demand for a stock is called

Answer:

Question: A price range at which technicians feel that a significant increase in the price of

the stock will be resisted is referred to as

Answer:

Question: Advances and declines are associated with market

Answer:

Question: In examining the properties of world market currencies or the spreads between

currencies, an analyst is most likely to use time series properties to determine all the

following, except

Answer:

Question: Technicians believe, when the relative strength index is stable or ____, during a

____ market, the stock should do well during a ____ market.

Answer:

Question: When the 50 day moving average crosses the 200 day moving average from

____ on ____ volume, this would be a ____ signal.

Answer:

Question: When ____ of stocks are trading above the 200-day moving average, the market

is considered ____, and subject to a ____.

Answer:

Question: A divergence between an increase in a stock market series and the rest of the

stock market can be detected using

Answer:

Question: A narrowing of the T-bill-Eurodollar and ____ signal, because ____.

Answer:

Question: A technical analyst might consider the following as a bearish signal

Answer:

Question: A technical analyst might use credit balances in brokerage accounts as follows

Answer:

Question: A technical analyst might use mutual fund cash positions as follows

Answer:

Question: The ratio of OTC volume versus NYSE volume a measure of ____. This ratio

typically ____ at a market ____.

Answer:

Question: A technical analyst might consider the following a bearish signal.

Answer:

Question: To technician that believed in the importance of volume, a bullish signal would

occur when

Answer:

Question: Which of the following is not a technical trading rule category?

Answer:

Question: Which of the following is not considered a contrary trading rules?

Answer:

Question: According to technical analysts using mutual fund cash positions to guide

investment decisions

Answer:

Question: Technicians using the confidence index published by Barrons to make

investment decisions

Answer:

Question: When the 50-day moving average crosses the 200-day moving average from

below on good volume

Answer:

Question: The Dow Theory describes stock prices as moving in trends analogous to the

movement of water. Which of the following statements is not true?

Answer:

Question: Which of the following statements is true?

Answer:

Question: A resistance level differs from a support level in that

Answer:

Question: Which of the following assumptions regarding price movements summarized by

Levy (1966) are controversial?

Answer:

Question: Which of the following is not an advantage of technical analysis identified by

technicians?

Answer:

Question: According to Dow theory, a major market

Answer:

Question: The relative strength index for a stock is equal to the price of the stock

Answer:

Question: A chart used to show only significant price changes, regardless of their timing, is

the

Answer:

Question: The market is considered to be overbought and subject to a negative correction

when more than

Answer:

Question: Based on the daily closings for the Dow Jones Industrial Average given in the

table below, calculate a four-day moving average for Day 4.

Answer:

Question: Given the following three days of data, compute the daily net advance-decline

line and cumulative advance-decline line for each day. What is the final value at the end of

the third day?

Answer:

Question: Refer to Exhibit 15-1. Calculate a 5-day moving average for day 6.

Answer:

Question: Refer to Exhibit 15-1. Calculate a 4-day moving average for day 5.

Answer:

Question: Refer to Exhibit 15-2. Calculate the net advance-decline for day 5.

Answer:

Question: Refer to Exhibit 15-2. Calculate the final value of the cumulative

advance-decline line at the end of the fifth day.

Answer:

Question: Daily closings for the Dow Jones Industrial Average are provided in the table

below.

Calculate a 5-day moving average for day 6.

Answer: