CMT Level 2 Exams ( Updates STUDY BUNDLE
PACKAGE) The Integration of Technical Analysis |
Questions and Verified Answers| Grade A| 100%
Correct
Schabacker's Rules: End of Bull Market - ANSWER1. Volume increases sharply
2. Popular stocks rise significantly while others collapse
3. Interest rates are high
4. Stocks are popular topic of conversation
5. Warnings of overheated mkt. are on the news
Schabacker's Rules: End of Bear Market - ANSWER1. Low Volume
2. Commodity prices have declined
3. Interest rates have declined
4. Corporate earnings are low
5. Stock prices have steadily declined and bad news everywhere
Reason for a correction in a bull market - ANSWERPrudent investors are taking
profits
Resumption of a bull market - ANSWERWhen markets make new highs and longs can
be entered after a correction.
Major price moves are most important when they are confirmed by...... -
ANSWERVolume
Markets trend _____% of the time. - ANSWER20%
Purpose of creating channels - ANSWERTo define volatility of price moves and
establish reasonable entry/exit points.
1. Common Gap
2. Breakaway Gap
3. Runaway/Measuring Gap
4. Exhaustion Gap - ANSWERPrimary gap formations
Take position counter to direction of gap and close position once gap is filled or in a
few days if not filled. - ANSWERTrading Common Gap
Trading Breakaway Gap - ANSWERWait for a pullback to make sure gap doesn't fill
then enter trade in direction of gap with stop at point where the gap would be filled.
Trading Runaway Gap - ANSWERBuy on gap higher and set stop at lower part of gap.
,Trading Exhaustion Gap - ANSWERVery risky, sell during move upward and place stop
above previous high.
Spike - ANSWERSingle highly volatile day where prices move much higher or lower
than recent past. Intraday gaps show look lik this on a daily chart.
Upward spike - ANSWERHighly volatile day seen as local top with day before and day
after having lower highs. Can draw resistance line at high of the 3 days.
Swing high or pivot point - ANSWERPrice bar that has a high that is higher than the
two days before and two days after. Not an island or a spike.
Swing low or pivot point - ANSWERPrice bar that has a low that is lower than the two
days before and two days after. Not an island or a spike.
Pivot Point Reverse Trading System - ANSWER1. Buy (and close shorts) when a pivot
point bottom occurs and the close is higher than the previous close.
2. Sell (and close longs) when a pivot point top occurs and the close is lower than the
previous close.
Cup Pattern - ANSWERThree bar pattern that is a set up for a sell signal in an
uptrend. Middle bar must have the lowest low or lowest close of the 3 day pattern.
Sell on break of lowest low
Cap Pattern - ANSWERThree bar pattern that is a set up for a buy signal in a
downtrend. Middle bar must have the highest high or highest close of the 3 day
pattern. Buy on break of high of middle bar.
Trading Cup Pattern - ANSWERSell if:
1. Formation is highest point of uptrend.
2. Sell signal occurs within 3 days of formation.
3. Current prices close below lowest low (middle bar) of formation.
Signal is false if prices reverse and close above high of the formation and resume
uptrend.
Trading Cap Pattern - ANSWERBuy if:
1. Formation is lowest point of downtrend
2. Buy signal occurs within 3 days of formation
3. Current prices close above highest high (middle bar) of formation.
Signal is false if prices reverse and close below low of formation and resume
downtrend.
Bearish key reversal day - ANSWEROne day bar that makes a new high in uptrend,
reversing to make a low that is lower than the previous low and then closing below
the previous close. (outside day)
, Bullish key reversal day - ANSWEROne day bar that makes new low in downtrend,
reversing to make a high that is higher than the previous high and then closing above
previous close. (outside day)
When is a symmetrical triangle most likely to form? - ANSWERSymmetrical triangle
most likely forms at beginning of trend when there is greater uncertainty about
direction. Breakout often marks beginning of longer-term trend.
Accumulation phase - ANSWERPhase when prices are low and cautious investors
build positions most often in utilities and high yielding stocks
Distribution phase - ANSWERPhase where prices are high and investors sell
positions. Stocks are sold from "strong to weak hands"
3 Phases of Bull Market - ANSWER1. Accumulation
2 Increased public participation
3. Final explosive move
3 Phases of Bear Market - ANSWER1. Distribution
2. Panic - prices fall faster than at anytime during bull mkt.
3. Lack of buying interest - all news is negative and pessimism prevails.
V-Top characteristics - ANSWERPreceded by critical shortage and demand which is
magnified by constant news coverage. Demand then suddenly disappears causing
prices to reverse sharply.
V-Bottom - ANSWERSharp decline followed by quick rebound and then a period of
sideways movement.
Confirmation of double bottom - ANSWERPrice crosses the high price between the
two bottom formations.
Danger of trading Double and Triple tops - ANSWERDuring bull markets prices
usually break higher and the trend resumes.
Trading Extended Rectangle bottom - ANSWER1. Find long consolidating base with
low volatility
2. Buy on test of major support level, with stop-loss to liquidate whole position on a
new-low price.
3. After initial breakout, add to position on pullback to original resistance. Close out
if prices break back into consolidation area.
4. Buy whenever there is a major price correction in a bull move.
5. Liquidate at prior major resistance point, a top formation or the breaking of a
major bullish support line.
Episodic pattern - ANSWERTransition of price from one major level to another.
PACKAGE) The Integration of Technical Analysis |
Questions and Verified Answers| Grade A| 100%
Correct
Schabacker's Rules: End of Bull Market - ANSWER1. Volume increases sharply
2. Popular stocks rise significantly while others collapse
3. Interest rates are high
4. Stocks are popular topic of conversation
5. Warnings of overheated mkt. are on the news
Schabacker's Rules: End of Bear Market - ANSWER1. Low Volume
2. Commodity prices have declined
3. Interest rates have declined
4. Corporate earnings are low
5. Stock prices have steadily declined and bad news everywhere
Reason for a correction in a bull market - ANSWERPrudent investors are taking
profits
Resumption of a bull market - ANSWERWhen markets make new highs and longs can
be entered after a correction.
Major price moves are most important when they are confirmed by...... -
ANSWERVolume
Markets trend _____% of the time. - ANSWER20%
Purpose of creating channels - ANSWERTo define volatility of price moves and
establish reasonable entry/exit points.
1. Common Gap
2. Breakaway Gap
3. Runaway/Measuring Gap
4. Exhaustion Gap - ANSWERPrimary gap formations
Take position counter to direction of gap and close position once gap is filled or in a
few days if not filled. - ANSWERTrading Common Gap
Trading Breakaway Gap - ANSWERWait for a pullback to make sure gap doesn't fill
then enter trade in direction of gap with stop at point where the gap would be filled.
Trading Runaway Gap - ANSWERBuy on gap higher and set stop at lower part of gap.
,Trading Exhaustion Gap - ANSWERVery risky, sell during move upward and place stop
above previous high.
Spike - ANSWERSingle highly volatile day where prices move much higher or lower
than recent past. Intraday gaps show look lik this on a daily chart.
Upward spike - ANSWERHighly volatile day seen as local top with day before and day
after having lower highs. Can draw resistance line at high of the 3 days.
Swing high or pivot point - ANSWERPrice bar that has a high that is higher than the
two days before and two days after. Not an island or a spike.
Swing low or pivot point - ANSWERPrice bar that has a low that is lower than the two
days before and two days after. Not an island or a spike.
Pivot Point Reverse Trading System - ANSWER1. Buy (and close shorts) when a pivot
point bottom occurs and the close is higher than the previous close.
2. Sell (and close longs) when a pivot point top occurs and the close is lower than the
previous close.
Cup Pattern - ANSWERThree bar pattern that is a set up for a sell signal in an
uptrend. Middle bar must have the lowest low or lowest close of the 3 day pattern.
Sell on break of lowest low
Cap Pattern - ANSWERThree bar pattern that is a set up for a buy signal in a
downtrend. Middle bar must have the highest high or highest close of the 3 day
pattern. Buy on break of high of middle bar.
Trading Cup Pattern - ANSWERSell if:
1. Formation is highest point of uptrend.
2. Sell signal occurs within 3 days of formation.
3. Current prices close below lowest low (middle bar) of formation.
Signal is false if prices reverse and close above high of the formation and resume
uptrend.
Trading Cap Pattern - ANSWERBuy if:
1. Formation is lowest point of downtrend
2. Buy signal occurs within 3 days of formation
3. Current prices close above highest high (middle bar) of formation.
Signal is false if prices reverse and close below low of formation and resume
downtrend.
Bearish key reversal day - ANSWEROne day bar that makes a new high in uptrend,
reversing to make a low that is lower than the previous low and then closing below
the previous close. (outside day)
, Bullish key reversal day - ANSWEROne day bar that makes new low in downtrend,
reversing to make a high that is higher than the previous high and then closing above
previous close. (outside day)
When is a symmetrical triangle most likely to form? - ANSWERSymmetrical triangle
most likely forms at beginning of trend when there is greater uncertainty about
direction. Breakout often marks beginning of longer-term trend.
Accumulation phase - ANSWERPhase when prices are low and cautious investors
build positions most often in utilities and high yielding stocks
Distribution phase - ANSWERPhase where prices are high and investors sell
positions. Stocks are sold from "strong to weak hands"
3 Phases of Bull Market - ANSWER1. Accumulation
2 Increased public participation
3. Final explosive move
3 Phases of Bear Market - ANSWER1. Distribution
2. Panic - prices fall faster than at anytime during bull mkt.
3. Lack of buying interest - all news is negative and pessimism prevails.
V-Top characteristics - ANSWERPreceded by critical shortage and demand which is
magnified by constant news coverage. Demand then suddenly disappears causing
prices to reverse sharply.
V-Bottom - ANSWERSharp decline followed by quick rebound and then a period of
sideways movement.
Confirmation of double bottom - ANSWERPrice crosses the high price between the
two bottom formations.
Danger of trading Double and Triple tops - ANSWERDuring bull markets prices
usually break higher and the trend resumes.
Trading Extended Rectangle bottom - ANSWER1. Find long consolidating base with
low volatility
2. Buy on test of major support level, with stop-loss to liquidate whole position on a
new-low price.
3. After initial breakout, add to position on pullback to original resistance. Close out
if prices break back into consolidation area.
4. Buy whenever there is a major price correction in a bull move.
5. Liquidate at prior major resistance point, a top formation or the breaking of a
major bullish support line.
Episodic pattern - ANSWERTransition of price from one major level to another.
