Chapter 05 – Efficient Capital Markets, Behavioral Finance, and Technical Analysis
139. A price range at which technicians would expect a substantial increase in the demand for a stock is called
a.
demand threshold.
b.
resistance level.
c.
support level.
d.
resistance limit.
e.
technical restraint.
140. A price range at which technicians feel that a significant increase in the price of the stock will be resisted is referred
to as
a.
supply threshold.
b.
support level.
c.
short interest level.
d.
advancement level.
e.
resistance level.
141. Advances and declines are associated with market
a.
b.
Chapter 05 – Efficient Capital Markets, Behavioral Finance, and Technical Analysis
c.
d.
e.
142. To a technician that believed in the importance of volume, a bullish signal would occur when
a.
prices increase on light volume.
b.
prices decrease on light volume.
c.
prices increase on heavy volume.
d.
prices decrease on heavy volume.
e.
prices increase on declining volume.
143. A chart used to show only significant price changes, regardless of their timing, is the
a.
candlestick chart.
b.
multiple indicator chart.
c.
bar chart.
d.
point-and-figure chart.
e.
point-and-click chart.
144. A divergence between an increase in a stock market series and the rest of the stock market can be detected using
a.
debit balances in brokerage accounts.
b.
short interest.
c.
the advance-decline line.
d.
confidence index.
e.
investor sentiment.
145. When the 50-day moving average crosses the 200-day moving average from ____ on ____ volume, this would be a
____ signal.
a.
above, low, bullish.
b.
below, high, bearish.
c.
below, low, bullish.
d.
above, high, bullish.
e.
below, high, bullish.
146. When ____ of stocks are trading above the 200-day moving average, the market is considered ____ and subject to a
____.
a.
20 percent, oversold, negative correction
b.
80 percent, overbought, negative correction
c.
80 percent, oversold, positive correction
d.
20 percent, overbought, positive correction
e.
0 percent, overbought, positive correction
147. When the 50-day moving average crosses the 200-day moving average from below on good volume,
a.
this would be a bearish indicator because it signals a change to a negative trend.
b.
this would be a bullish indicator because it signals a change to a negative trend.
c.
this would be a bullish indicator because it signals a change to a positive trend.
d.
this would be a bearish indicator because it signals a change to a positive trend.
e.
this would be a neutral indicator because it signals a change to a trend.
148. Technicians believe that an industry or stock that is outperforming the market will tend to
a.
continue to outperform the market.
b.
return to normal.
c.
reverse trend.
d.
meet a resistance level.
e.
form head and shoulder patterns.
149. The ratio of the price of a stock or an industry group to the value of the market index is called the
Chapter 05 – Efficient Capital Markets, Behavioral Finance, and Technical Analysis
a.
company to market ratio.
b.
composite stock ratio.
c.
relational proportion ratio.
d.
stock to market ratio.
e.
relative strength ratio.
150. ____ charts show time series of price, while ____ charts only reflect change regardless of time.
a.
Relative strength, bar
b.
Relative strength, advance/decline
c.
Point and bar, figure
d.
Bar, point and figure
e.
Bar, multiple indicator
151. Technicians believe that when the relative strength index is stable or ____ during a ____ market, the stock should do
well during a ____ market.
a.
decreases, bull, bear
b.
increases, bear, bull
c.
decreases, bear, bull
d.
increases, bull, bear
e.
crosses, bull, bear
152. The relative strength index for a stock is equal to the price of the stock
a.
divided by the value of a stock-market index.
b.
multiplied by the value of a stock-market index.
c.
divided by the value of a group of industry stocks.
d.
multiplied by an industry peer group and divided by a market index.
e.
divided by the 30-day moving average of prior stock movements.
153. The market is considered to be overbought and subject to a negative correction when more than
a.
60 percent of the stocks are selling above their 90-day average.
b.
70 percent of the stocks are selling above their 100-day average.
c.
80 percent of the stocks are selling above their 200-day average.
d.
70 percent of the stocks are selling above their 150-day average.
e.
90 percent of the stocks are selling above their 150-day average.
154. A technical analyst would consider the following a strong buy signal:
a.
a graph of declining prices ends in a trough followed by an upward trend that breaks through the declining
trend channel.
b.
a graph of increasing prices ends in a peak followed by a downward trend that breaks through the rising trend
channel.
c.
a graph begins to trade in a flat trend after it breaks out of its rising trend channel.
d.
a graph begins to trade in a declining trend after it breaks out of its flat trend channel.
e.
a graph begins to trade in a flat trend with high volume.
Chapter 05 – Efficient Capital Markets, Behavioral Finance, and Technical Analysis
155. 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.
Day
Price
1
10500
2
10025
3
10125
4
10210
a.
10,500
b.
10,210
c.
10,215
d.
10,000
e.
11,000
156. 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?
Issues
Day
Traded
Advances
Declines
Unchanged
1
8540
6500
1500
540
2
7535
5500
1230
805
3
6545
4554
1324
667
a.
5,000
b.
9,270
Chapter 05 – Efficient Capital Markets, Behavioral Finance, and Technical Analysis
c.
12,500
d.
13,250
e.
11,667
Exhibit 5.7
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Daily closings for the Dow Jones Industrial Average are given in the table below.
Day
Price
1
9867
2
10025
3
10524
4
10210
5
10104
6
9925
157. Refer to Exhibit 5.7. Calculate a 5-day moving average for day 6.
a.
10,102.3
b.
9905.6
c.
9875.4
d.
10,215.7
e.
10,157.6
158. Refer to Exhibit 5.7. Calculate a four-day moving average for day 5.
Chapter 05 – Efficient Capital Markets, Behavioral Finance, and Technical Analysis
a.
10,102.3
b.
9905.6
c.
9875.4
d.
10,215.7
e.
10,157.6
Exhibit 5.8
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
The table below provides five days of trade data.
Issues
Day
Traded
Advances
Declines
Unchanged
1
22456
15698
6158
600
2
23013
14560
8210
243
3
23124
10324
12678
122
4
22678
9867
11567
1244
5
21897
8678
12561
658
159. Refer to Exhibit 5.8. Calculate the net advance-decline for day 5.
a.
−3,883
b.
9,540
c.
−2,354
d.
13,356
e.
7,953
160. Refer to Exhibit 5.8. Calculate the final value of the cumulative advance-decline line at the end of the fifth day.
a.
−3,883
b.
9,540
c.
−2,354
d.
13,356
e.
7,953
161. Daily closings for the Dow Jones Industrial Average are provided in the table below.
Day
DJIA
1
13,500
2
13,395
3
13,505
4
13,750
5
13,820
6
13,910
Calculate a five-day moving average for day 6.
a.
11,397
b.
13,565
c.
13,594
d.
13,647
e.
13,676
162. Calculate the net advance-decline for day 5 using the trade data in the table below.
Issues
Day
Traded
Advances
Declines
Unchanged
1
32456
25698
6058
700
2
43013
24560
17210
1243
3
33124
20324
12378
422
4
32678
19867
11367
1444
5
31897
18678
12278
941
a.
−5,459
b.
941
c.
5,459
d.
6,400
e.
7,853