Homework Assignment #1 - Based on the MTAEF Glossary of Technical Terms

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1 Homework Assignment #1 - Based on the MTAEF Glossary of Technical Terms Each block of 3 question is preceded by 5 technical terms. Fill in the blank and make the statement complete. There is only one correct answer of each block of questions. B. Accumulation C. Breakout D. Confirm E. Diverge 1. Two or more trend or momentum measures extending their trends at the same time are said to 2. The process by which an excess supply is absorbed by expanding demand over a period of time, generally a period of equilibrium following a decline, and has a favorable effect on price is called 3. When a security s price or volume exceeds previously recorded high or low or some other predetermined criteria is known as a A. Churning B. Continuation Pattern D. Divergence E. Support 4. A phase, usually of short duration, that interprets an up or down move is called 5. One measure does not move to a new high or low, while another measure does is said to have made a 6. A price level at which buying is expected to increase enough to temporarily stop or reverse a decline is B. Bull Trap C. Wedge D. Bear Trap E. Diverge 7. A pattern of rising highs and rising lows in a trend where only marginal progress is made usually leading to some kind of reversal is called a 8. A false move to the downside that is actually the final reaction prior to a sustained advance is called a 9. A sudden end to a trend, accompanied by high volatility and high relative volume is known as a A. Churning B. Shakeout D. Reflex move E. Correction 10. A movement in the opposite direction of a trend that does not break or reverse that trend and is usually longer in time than a few days or weeks is called a 11. A sharp reaction (usually in an uptrend or base) that temporarily violates a trendline or support level, but quickly reverses to the original trend is known as a 12. Movement against a stock s trend but merely corrects an overbought or oversold is known as a B. Reversal C. Rising Wedge D. Consolidation E. Pennant 13. A pattern of rising highs and rising lows in a trend when only marginal progress is made, usually leading to some kind of reversal is called a 14. A pattern that is formed over a matter of days that consists of a sharp advance or decline, followed by an ever narrowing of intra-day ranges to an apex-like point is called a 15. A characteristic pattern that signals the end of an up or down move is known as A. Oversold B. Secular D. Overbought E. Churning 16. Hesitation in a trend with high volume (after the advance) with limited price progress is called 17. Recently extended or exceeded trend parameters on the downside is known as 18. A period of time that encompasses two or more cyclical movements and often lasts 10+ years is known as A. Distribution B. Blow Off C. Fail Safe Point D. Apex E. Gap 19. When a stock s high & low prices on a given day do not overlap the stock s high & low of the previous day a is said to have occurred. 20. The final phase of an uptrend, ending a mark-up phase, when prices rise very rapidly, usually on high volume, leading to a sharp reaction is called 21. The point of intersection of two trendlines, the usual connotation is that some new trend may evolve as prices approach it is called a A. Liquidation B. Semi Log Chart C. Oscillator D. Point & Figure E. Relative Strength 22. An indicator that measures the strength of momentum or sentiment activity by moving to a positive or negative extreme around zero is called 23. The phase following distribution, when prices decline relatively easily is called 24. A method of recording price activity without reference to time that is concerned only with price trends and changes in price trends is called

2 Homework Assignment #2 Based on Chapters 1-3 of the Kirkpatrick-Dahlquist textbook 1. Technical analysis is rooted in the basic premise that a. price behavior in the financial markets is random b. price behavior in the financial markets moves in trends that can be measured c. price behavior in the financial markets can only be understood by analysis of the underlying economic conditions surrounding the markets d. price behavior in the financial markets is cyclically based 2. A step used in the construction of a typical advance-decline line is a. accumulating daily trading volume on the New York Stock Exchange b. adding the difference between the number of stocks moving up in price and down in price for a specific period to a cumulative index c. measuring the 52-week rate of change of advances-declines d. counting the number of industry groups setting new price highs in a given period 3. Charts constructed using an arithmetic scale show a. equal dollar price moves cover the same amount of space b. equal dollar price moves cover a different amount of space depending on the percentage magnitude of the price movement c. price and volume d. the interval between time and price 4. Market breadth usually relates to a. the advancing volume observed during a market rally b. the number of issues participating in a market move c. the divergence between price and volume in the market d. the number of issues hitting new highs or new lows 5. During an uptrend, one normally observes a pattern of a. higher lows followed by higher highs b. higher price peaks and lower price troughs c. lower price peaks and higher price troughs d. higher prices without significant price corrections 6. The objective of the Dow Theory is to determine a. changes in market psychology b. the likelihood of volume reversals c. the primary direction of the stock market d. timing of market bottoms 7. A point and figure chart a. ignores time b. gives a clear picture of volume distribution c. is limited by a four-year time horizon d. cannot be used to project price targets 8. The resistance level of a price trend refers to a. the level under the market where buying interest is sufficiently strong to overcome selling pressure b. the level over the market where selling pressure is sufficiently strong to overcome buying pressure and a price advance is expected to be turned back c. the boundaries of the trading range of the trend d. the largest price indicated by the count 9. In a rising marking, trendlines are normally constructed a. by connecting the opening prices of successive reactions b. by connecting the troughs of successive rallies c. by connecting rally peaks d. by drawing a line 5% above the 200-day moving average 10. A point and figure chart differs from a bar chart as a. a new plot on a point and figure chart is made only when the price changes by a given amount b. time intervals are clearly shown in a point and figure chart c. point and figure charts are only concerned with measuring price momentum d. a new plot on a bar chart is made only when the price changes by a given amount

3 Homework Assignment #3 Go to bigcharts.com, stockcharts.com (or any other chart service) Make yourself several charts (see below) on a stock or an index or a commodity, etc. Write a short paragraph giving a technical opinion; i.e., make a forecast. A short paragraph means no more than 4-5 sentences. You do not have to comment on every indicator, just the ones that you think are pertinent to your opinion. You can give a short-term opinion or a longer-term opinion, or both. There is no right or wrong answer. The exercise is to show that you know what the technical tools are and how to use them. Among the tools you might consider are price action, pattern recognition, trends, volume, moving averages and momentum indicators. If you want to include other charts of your own, that is fine, too. Draw on the charts if you want and indentify the particular references you make.

4 Homework Assignment #4 Based on Chapter 21 of the Kirkpatrick-Dahlquist textbook 1. If stocks are rising, commodities are rising, and bonds are rising, what trend reversal is most likely?? a. A top in stocks b. A top in bonds c. A top in commodities d. a and c 7. Commodity price trends, such as the CRB Futures Price Index are a. A leading indicator for the economy b. A lagging indicator for the economy c. A coincident indicator for the economy d. Not helpful in analyzing the economy 2. If stocks are declining, commodities are declining, and bonds are declining, what trend reversal is most likely? a. A bottom in stocks b. A bottom in commodities c. A bottom in bonds d. a and b 3. True or False? Stocks are a leading economic indicator. 4. True or False? Bonds are a leading economic indicator. 5. True or False? Bonds and gold usually move in the same direction. 6. True or False? The dollar and gold usually move in the same direction.. 8. In analyzing and investing in foreign equity markets for U.S. investors, we find that b. The Canadian, Australian and South African markets always move in the same direction c. Performance is best measured using the Swiss franc d. The trend of the US dollar is important 9. In analyzing and investing in European equity markets for U.S. investors, we find that: b. Performance is best measured using the US dollar c. The British equity market and the British pound usually move in the same direction d. Performance is best measured using the euro 9. In analyzing and investing in foreign equity markets for U.S. investors, we find that: b. Performance is best measured using the US dollar c. The British equity market and the British pound usually move in the same direction d. When the dollar is strong, it is harder to show performance 10. True or False? Late in an economic (up) cycle, interest rates generally rise.

5 Homework Assignment #5 Questions 1-5 are based on the Cycles lecture; questions 6-10 are based on the Sentiment lecture. 1. In its most basic form, Elliott Wave Theory says a. the stock market follows primary and secondary trading cycles b. financial markets expand on increasing volume and contract on decreasing volume c. financial markets follow a repetitive pattern of a 5-wave advance followed by a 3-wave decline d. financial markets follow a repetitive pattern of a 3-wave advance followed by a 5-wave decline 2. Cyclical analysts prefer to measure cycle lengths a. from cycle mid-point to mid-point b. from cycle peak to trough c. from cycle peak to peak d. from cycle trough to trough 3. The characteristics of a cycle are a. length, width, and breadth b. price, volume, and flow c. amplitude, breadth, and width d. amplitude, period and phase 4. The principle of summation maintains that a. all price movement is the result of increasing buying pressure b. all price movement is accompanied by expanding volume cycles c. all price movement is the simple addition of all active cycles d. all cycles tend to peak and trough at approximately the same time 5. Analysts observe that during January equity prices tend to rise. This is an example of: a. the winter cycle b. seasonality c. the Kisnets effect d. the 39-week cycle 7. Using option premiums, we have information about increasing optimism of option traders when a. put premiums rise b. call premiums rise c. put premiums fall relative to call premiums d. put premiums rise relative to call premiums e. b and c f. b and d 8. An important technical precept is investors make bottoms and traders make tops because a. investors are motivated by price and value, while traders are motivated by trend b. participants with long term time horizons tend to be more correct at major turning points c. participants with short-term horizons tend to be wrong at major turning points d. all of the above 9. Sentiment polls, such as the Consensus, Inc. survey of stock index futures traders are useful psychological indicators because a. futures traders are more knowledgeable than stock traders b. they can be contrary indicators at extremes because futures traders have short-term time horizons c. a and b d. none of the above 10. Contrary opinion theory is a useful investment tool because a. the little guy is always wrong b. traders are most bullish near tops c. institutional investors have access to better information d. when short-term-oriented participants are fully committed to the long side, they are more likely to become sellers than buyers e. a and b f. b and d g. c and d 6. Option participants buy calls because a. they are bullish b. they are expecting the underlying security (stock, bond, etc.) to rise c. they want increased leverage on the long side d. all of the above

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