honeycfa

The point where technicians expect a substantial increase in the demand for a stock to occur is called a:

A) resistance level.

B) support level.

C) break-out point.

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Support and resistance levels. Most stock prices remain relatively stable and fluctuate up and down from their true value. The lower limit to these fluctuations is called a support level – the price range where a stock appears cheap and attracts buyers. The upper limit is called a resistance level – the price range where a stock appears expensive and initiates selling.

Generally, a support level will develop after a stock has increased in price and profit taking occurs. Technicians believe that, at some price below the recent high, other investors will buy who did not buy prior to the first price increase and have been waiting for a small price decline to buy. When the price reaches this support price, demand increases substantially and price and volume begin to increase yet again.

honeycfa

Following the "smart money" implies expectation of a bullish market when the:

A) yield differential between high-and low-quality bonds narrows.

B) confidence index is declining.

C) CBOE put/call ratio is high.

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When the spread between high and low quality bond narrows, the confidence index increases, indicating a bullish market.

An increasing CBOE put/call ratio is a bullish sign to a contrarian.

Smart-money technicians look at:

• Confidence index (yield on high-quality bond/yield on average-quality bonds)
• T-bill – Eurodollar yield spreads
• Debit (margin) balances in brokerage accounts

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