Quantitative Methods 【Reading 12】Sample supply, demand, technical

torontoanalyst

One of the underlying assumptions of technical analysis is that supply and demand is driven by:

A) rational behavior during calm markets and irrational behavior during volatile markets.

B) rational behavior only.

C) both rational and irrational behavior.

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Successful technical analysis assumes both rational and irrational behavior during all market conditions.

terpsichorefan

thanks for sharing

torontoanalyst

An Elliott wave theorist who forecasts prices based on Fibonacci ratios is most likely to predict that a corrective wave will be:

A) four-ninths the size of the impulse wave.

B) six-elevenths the size of the impulse wave.

C) five-eighths the size of the impulse wave.

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The sequence of Fibonacci numbers is 0, 1, 1, 2, 3, 5, 8, 13... . Five-eighths is a Fibonacci ratio.

torontoanalyst

A technical analyst who identifies a decennial pattern and a Kondratieff wave most likely:

A) believes market prices move in cycles.

B) is analyzing a daily or intraday price chart.

C) associates these phenomena with U.S. presidential elections.

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The decennial pattern and the Kondratieff wave are cycles of ten and 54 years, respectively. A technical analyst would be most likely to use these cycles to interpret long-term charts of monthly or annual data. Presidential elections in the United States are a possible explanation for a four-year cycle.

torontoanalyst

Closing prices for a commodity were 21.4 on Monday, 22.2 on Tuesday, 21.8 on Wednesday, 22.4 on Thursday, and 23.2 on Friday. The five-day standard deviation is 0.7 and the 30-day standard deviation is 1.0. On Friday, five-day Bollinger bands using two standard deviations are closest to:

A) 24.6 and 21.8.

B) 23.6 and 20.8.

C) 24.2 and 20.2.

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Bollinger bands are drawn a chosen number of standard deviations above and below a moving average, where the moving average and the standard deviation are calculated using the same number of periods. The 5-day moving average is (21.4 + 22.2 + 21.8 + 22.4 + 23.2) / 5 = 22.2. Using two 5-day standard deviations, the upper band on Friday is 22.2 + 2(0.7) = 23.6 and the lower band is 22.2 − 2(0.7) = 20.8.

torontoanalyst

A value of 0.8 in the short-term Trading Index (TRIN) most likely indicates that:

A) the market is overbought.

B) more investors expect price decreases than increases in the short term.

C) trading volume is heavier in advancing issues than in declining issues.

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The TRIN or Arms index is a flow of funds indicator. Values less than one indicate more trading volume in advancing stocks than in declining stocks, while values greater than one mean more volume is in declining stocks than in advancing stocks.

torontoanalyst

Bollinger bands are drawn based on the:

A) difference between two smoothed moving averages.

B) high and low prices in a recent period.

C) standard deviation of recent price changes.

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To use Bollinger bands, an analyst will calculate the standard deviation of prices over some number of trading days, and typically will draw the bands two standard deviations above and below a moving average for the same number of days.

torontoanalyst

Which of the following would a technical analyst most likely interpret as a "sell" signal?

A) %K line crosses below the %D line.

B) Signal line crosses below the MACD line.

C) Rate of change oscillator begins decreasing.

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The %K and %D lines refer to stochastic oscillators. The %K line is calculated based on the highest and lowest prices reached in a selected number of days, and the %D line is a moving average of the %K line. Used as trading signals, crossovers of the %K line above the %D line are buy signals and crossovers below the %D line are sell signals.
With a moving average convergence/divergence oscillator, a sell signal is indicated when the MACD line crosses below the signal line, which is a moving average of the MACD line. If a rate of change oscillator is used to generate signals, these would typically be indicated when the oscillator crosses above or below the level around which it fluctuates (either 0 or 100).

torontoanalyst

Which of the following would a technical analyst most likely interpret as a "buy" signal?

A) 10-day moving average crosses above a 60-day moving average.

B) 20-day moving average crosses below a 100-day moving average.

C) 30-day moving average crosses above a 5-day moving average.

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When using moving averages to generate trading signals, a "golden cross" of a shorter-term average above a longer-term average is a buy signal, while a "dead cross" under the longer-term average is a sell signal.

torontoanalyst

After trending upward for several weeks, the price of Vibex, Inc. stock reaches a high of $54 before falling to $48 over the following week. The stock then rallies to $57 but then declines again to $48. The following week, the stock increases to $52 on light volume before ending the week at $46. A technical analyst observing this pattern would be most likely to predict that Vibex stock will:

A) decrease to $37.

B) decrease to $39.

C) increase to $50.

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The pattern described here is a head and shoulders top with the head at $57 and the neckline at $48. The size of the pattern is $57 − $48 = $9. The price target for the ensuing downtrend equals the size of the head and shoulders pattern and is measured from the neckline: $48 − $9 = $39.