Level I Learning Objectives by chapter 1. Introduction to the Evolution of Technical Analysis Describe the development of modern technical analysis Describe the origins of technical analysis 2. A New Age for Technical Analysis Describe the history of the original Dow indexes Identify the basic principles of Dow Theory 3. Technical Analysis Today Discuss the assumptions of technical analysis List the characteristics of markets where technical analysis is most effectively used Discuss the pragmatic criticisms of technical analysis 4. A Brief History of Randomness and Efficient Markets Identify the basic concept of the Efficient Market Hypothesis (EMH) 5. Academic Approaches to Technical Analysis Contrast Efficient Market Hypothesis with Adaptive Market Hypothesis Describe how technical analysis remains relevant despite the EMH 6. The New High-New Low Index Describe the New High-New Low Index as a breadth indicator Identify signals from the New High-New Low Index 7. Stocks above 50-day MA Describe the Stocks above 50-day MA as a market or breadth indicator Identify signals from Stocks above 50-day MA
8. Other Stock Market Indicators Describe the concept of breadth (See also Chapter 11 on Breadth of Trading) Explain what changes in breadth may signal about the markets Identify proper use of the A/D line indicator 9. Consensus and Commitment Indicators Recognize signals from Commitment of Traders report, Advisory Opinions, press headline stories, advertisements, and short interest 10. Basic Candlestick Chartings Compare and contrast candlestick charts with other chart types (bar chart, line chart, point and figure chart) Describe the construction of a candlestick chart Describe the advantages of a candlestick chart Define real body and shadow/wick Identify confirmation signals with candlesticks Recognize the basic six candlesticks: Long, Short, Doji, Long Shadows, Long upper shadow only, Long lower shadow only 11. Basic Indicators Reference A to C Identify basic characteristics, usage, and key points of the following: o A/D Indicator o Breadth indicators o Average True Range o Bollinger Bands o Breadth of Trading o Breakaway Gap o Breakout o Chaikin Money Flow o Channel Lines o Common Gap o Consolidation o Continuation
12. Basic Indicators Reference D to H Identify basic characteristics, usage and key points of the following: o Double Bottom o Double Top o Downtrend o Entry and Exit Signals o Exhaustion Gap o EMA o Failed Pattern o Falling Wedge o Fibonnaci Retracement o Head and Shoulders 13. Basic Indicators Reference I to O Identify basic characteristics, usage and key points of the following: o Ichimoku Cloud o Inverse Head and Shoulders o Momentum o Money Flow o Money Flow Index o Moving Average o MACD o Narrow-Range Day o On-Balance Volume 14. Basic Indicators Reference P to R Identify basic characteristics, usage and key points of the following: o Price Oscillator o Primary Trend o Rectangle (top/bottom) o RSI o Resistance o Rising Wedge o Runaway Gaps
15. Basic Indicators Reference S to Z Identify basic characteristics, usage and key points of the following: o SMA o Stochastic Oscillator o Support o Trading Range o Trend o Trendline o Triangle (Ascending/Descending/Symmetrical) o True Range o Uptrend o Weighted Moving Average 11-15. Learning objectives general to all indicators Identify whether a technical study falls into one of three categories: trendfollowing indicators, oscillators, and sentiment indicators. Identify the category of usage for the following indicators: o ADX o Moving Averages o MACD o RSI o Stochastics o CCI 16. Overview (of Financial Markets) Identify basic definition, concepts and key points of the following: o Debt vs. Equity o Quotations o Returns, Risk and Relative Value 17. Government (as related to the Financial Markets) Recognize the differences between the forex market and other markets. Recognize relative values between various currencies. Identify basic definition, concepts and key points of the following: o Government securities o Currencies o Notes o Bills o Bonds o Quotations o Returns, Risk and Relative Value o Yield Curve
18. Companies Describe how market prices are quoted and how they change in various market conditions Identify basic definition, concepts and key points of the following: o Company securities (Stocks and Bonds) o Money markets o Quotations o Returns, Risk and Relative Value 19. Hard Assets Describe how commodity market prices are quoted and how they change in various market conditions Describe leverage in the context of futures markets versus cash markets. Identify basic definition, concepts and key points of the following: o Commodities and Futures o Gold o Oil o Real Estate o Quotations o Returns, Risk and Relative Value 20. Indexes Identify the different weightings that may be used in an index. Identify the specific weightings used for commonly followed indexes. Explain how stock price changes impact price weighted, market capitalization-weighted and equally weighted indexes. 21. Basic Concepts and Calculations Identify components that need to be considered when back testing, or conducting quantitative, statistical analysis Recognize how the relationship between variables is demonstrated Identify the characteristics of a statistically normal distribution Define variance, skewness and kurtosis Recognize proper calculation of returns Recognize proper application of Beta Recognize annualized daily and monthly returns adjusted for target volatility Recognize standard measurements of performance such as: Information ratio, Sharpe Ratio, Treynor Ratio, Calmar Ratio, Sortino Ratio.
22. Point and Figure Charting Describe how point and figure charts are constructed. Describe the importance of box size on the sensitivity of point and figure charts. Construct various box size reversal point and figure charts. Interpret reversal signals on a point and figure chart. Describe the concept of price targets attained by using a horizontal or vertical count on a point and figure chart. 23. Technical Analysis as a Science Describe the difference between objective and subjective methods in technical analysis Recognize some key findings from academic research on technical analysis 24. Objective Rules and their Evaluation Identify how to distinguish an objective from a subjective rule in technical analysis Describe the use of binary rules and individual or multiple thresholds Recognize the difference between traditional rules and inverse rules Recognize the difference between regular prices and detrended prices 25. Being Right or Making Money Identify the four key characteristics Ned Davis claims are common to successful investors. Identify nine rules to consider when building a timing model Explain the logic of using moving averages as trend indicators. 26. The Model Building Process Describe the use of advisory service opinion as a sentiment indicator. Recognize the difference between sentiment and valuation indicators Describe the main tools that the Federal Reserve uses to adjust the money supply. Interpret the likely results of changes in Fed monetary policy tools on market conditions. Identify the outcome of good economic indicator readings and the likely influence of this news on stock prices Recognize how moving averages of stock prices can be included in a forecasting model. Recognize how momentum indicators can be included in a forecasting model.
27. What is Price? Describe how price is a momentary consensus of value. Describe how chart patterns reflect swings of mass psychology 28. What is the Market? Recognize the market as a mass of varying groups of participants including amateur traders, trading professionals. 29. The Trading Scene Describe characteristics of Institutional Traders Describe how price is a momentary consensus of value. Describe how chart patterns reflect swings of mass psychology 30. The Market Crowd and You Describe why traders join a crowd Describe benefits of maintaining independence from a crowd 31. Psychology of Crowds Describe how human emotion manifests itself in the crowd psychology of the market 32. Managing vs. Forecasting Describe the difference between forecasting and managing positions based on information 33. Charting Compare and contrast bar charts with other chart types. Identify the four key prices of an individual bar on a bar chart Identify the same four key prices on a candle chart
34. Support and Resistance Identify the connection between people s memories and support or resistance prices Identify evidence that suggests support or resistance is strengthening Identify evidence that suggests support or resistance is weakening 35. Trends and Trading Ranges Identify a trends using a pattern of highs and lows Identify a trends using a moving average Identify a trend using an oscillator Describe general concepts using multiple time frame charts effectively 36. Volume-Based Indicators Interpret price and volume charts Describe the role volume and volume spikes play in determining turning points in the market Describe the concept of on-balance volume Interpret a chart containing price and on-balance volume 37. Force Index Describe the construction and use of the Force Index in general terms 38. Open Interest Define the concept of open interest Contrast open interest and daily volume 39. Introduction to the Wave Principle Describe the important elements of the Elliott Wave Theory Differentiate between impulse waves and corrective waves
40. The Anatomy of Elliott Wave Trading Differentiate between impulse waves and corrective waves Identify the count of a given wave in a defined structure Identify whether a technical study falls into one of three categories: trendfollowing indicators, oscillators, and sentiment indicators. 41. What Is the Efficient Market Hypothesis? Identify the basic concept of the Efficient Market Hypothesis (EMH) Recognize the characteristics of stock prices as a martingale 42. The EMH and the Market Model Describe the basic components of the CAPM model Identify valid criticisms of the CAPM model 43. The Forerunners to Behavioral Finance Contrast Momentum strategies and Mean Reversion strategies Define the general concept of value investing Describe why value investing is similar to a mean reversion strategy 44. Noise Traders and the Law of One Price Describe the concept of Fungibility Identify what defines a noise trader 45. Noise Traders as Technical Traders Explain why Technical Traders are considered a specific type of noise trader. Explain the implications of Technical Traders in the market. 46. Understanding Chart Patterns Describe the characteristics and uses of trendlines Recognize what determines the significance of a trendline Describe how trendlines can build patterns
47. Understanding Chart Pattern Breaks Define Overhead resistance Describe the characteristics of support and resistance on trendlines Identify the four types of Gaps Recognize the definition of throwbacks and pullbacks 48. Triangles, Pennants, and Flags (and Rectangles) Identify price pattern formations and their basic characteristics (rectangles, triangles, flags, pennants, wedges) Identify the effect of breakout, price velocity, undershoot and overshoot, on patterns 49. Tops and Bottoms Identify additional price pattern formations and their basic characteristics (double tops, double bottoms, triple tops, triple bottoms) Describe the psychology of investors that is thought to coincide with these patterns 50. Head and Shoulders Patterns Identify Head and Shoulders price pattern formations and their basic characteristics Describe the psychology of investors that is thought to coincide with these patterns 51. Understanding Implied Volatility Describe the difference between historical and implied volatility Identify the concept of put-call parity Calculate single-day implied volatility 52. About the VIX Index Describe the VIX index. Explain the implications of a rising or falling VIX index. 53. Seasonality and Calendar Patterns Describe market cycles and how they differ from mathematical cycles. Describe the basic principles of cycles. Describe seasonal patterns in the markets.
54. Relative Strength as a Criterion for Investment Selection Define relative strength (RS). Describe how relative strength (RS) is used. Describe the value of relative strength study. Identify a correlation coefficient. Update History 1/6/2016 - Initial posting