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CMT-Level-II CMT Level II Exam Questions and Answers

Questions 4

Which of the following method is used to plot sequential trading data? Choose the best possible answer.

Options:

A.

Point-and-figure charts

B.

Line charts

C.

Japanese candlestick charts

D.

Bar charts

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Questions 5

When using a two moving averages (MA. system, which of the following rules can be utilized to generate a buy signal?

Options:

A.

Buy when the faster moving average crosses the slower moving average from above.

B.

Buy when the faster moving average hooks the slower moving average from above.

C.

Buy when the faster moving average hooks the slower moving average from below.

D.

Buy when the current price crosses above both moving averages.

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Questions 6

Which of the following is one of the disadvantages of computerized trading systems?

Options:

A.

Trading decisions are less consistent

B.

Most computerized systems are unprofitable in non-trending markets

C.

Profit trades are exited too early

D.

Computerized systems miss many market trends

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Questions 7

Which of the following is an INCORRECT definition of cycle terminology?

Options:

A.

Amplitude - the height of the wave (cycle)

B.

Period - the time needed to finish one wave (cycle)

C.

Frequency - the number of cycles that repeat every 360°

D.

Phase - a measure of separation between the top and bottom of a wave (cycle)

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Questions 8

How might one detrend data to determine if a cycle exists?

Options:

A.

Divide the current prices by a moving average of those prices

B.

Create an oscillator that plots a standard deviation of the period lows

C.

Apply volume weighting to both high and lows in the data

D.

Plot a linear regression line through the data midpoin

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Questions 9

What is the position of the MTA Code of Ethics as it pertains to trading on inside information?

Options:

A.

Under no circumstances is insider trading allowed

B.

The Code of Ethics takes no position on insider trading

C.

Insider trading which violates the laws/regulations of any governmental or regulatory agency is prohibited

D.

Inside information may be disseminated but not acted upon

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Questions 10

_____________ captures an increasing part of the profits as price moves in a favorable direction.

Options:

A.

Initial Stop

B.

Trailing stop

C.

Sell stop

D.

Standard deviation stop

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Questions 11

Which of the following is most likely to occur when the overall market is deeply oversold and on the verge of reversing?

Options:

A.

Lagging groups fail to confirm new lows

B.

Leading groups fail to confirm new lows

C.

Relative strength of lagging groups begins to improve

D.

Leading groups make new lows and accelerate to the downside

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Questions 12

What is the reason behind time being an important aspect of point-and-figure chart analysis?

Options:

A.

To reduce errors in a system

B.

To improve the efficiency of the system

C.

To see how long a pattern takes to form

D.

All of the above statements

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Questions 13

What is the measuring objective for flags and pennants?

Options:

A.

There is a different measuring objective for each

B.

Flags fly at half mast and pennants are considered reversal patterns

C.

The move after the pattern will be equal to the move before the pattern

D.

Half the distance of the preceding move from breakout to the flag or pennant

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Questions 14

Which of the following pieces of information is NOT contained in the CFTC's Commitment of Traders report?

Options:

A.

Positions of hedgers and speculators

B.

Historical open interest of each contract

C.

Current open interest of each contract

D.

Reportable and non-reportable positions

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Questions 15

Which of the following is a valid guideline in using technical analysis to make investment decisions among stock market sectors?

Options:

A.

Relative strength analysis allows for identification of the strongest and weakest sectors

B.

Charting tools such as trendlines and moving averages should not be employed with relative strength lines

C.

Sectors whose relative strength lines are just turning up after a downtrend should be sold

D.

This analysis does not hold for options or mutual funds due to the unique characteristics of these securities

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Questions 16

Based on the chart given below; identify the best course of action:

Options:

A.

Shares are losing momentum which can be confirmed by negative divergence between price and ROC; trader should be cautious and be quick to reduce position on a violation of trendline.

B.

Shares are making a series of higher highs and higher lows; ROC has turned negative which is confirming the price action; should use current pullback to add to position.

C.

ROC has turned negative which is a sell signal; should initiate a short position.

D.

Negative divergence observed between price and ROC should be ignored as prices are near life time highs.

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Questions 17

On which of the following factors will the analyst choose the scale for the trend analysis?

Options:

A.

It depends upon the type of analysis only

B.

It depends upon the period being explored only

C.

It depends upon the type of analysis or the period being explored

D.

It depends upon the type of analysis and the period being explored

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Questions 18

Which of the following is one of the advantages of computerized trading systems?

Options:

A.

Computerized trend following systems are profitable in all types of markets

B.

Computerized systems improve the interpretation of complex trading patterns

C.

Computerized trading systems remove the human emotion element

D.

All of the above

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Questions 19

Which of the following is the calculation for price objective using the horizontal count method?

(Note: X is the multiplication symbol in this question)

Options:

A.

Price level of the lowest box (for up counts) + (number of boxes in the reversal columns X reversal size)

B.

Price level of the lowest box (for up counts) X number of boxes in the reversal columns X reversal size

C.

Price level of the lowest box (for up counts) of the base X number of columns of the base X reversal size

D.

Price level of the lowest box (for up counts) of the base + (number of columns of the base X reversal size)

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Questions 20

Interpret the relationship between the S&P 500 and the NASDAQ 100 indexes based on the chart shown below, if the Pearson's coefficient of correlation is 0.45:

Options:

A.

Linear relationship, as the Best Fit line is curvilinear.

B.

Linear relationship, as points fall generally along a straight line.

C.

Non-linear relationship, as points fall generally along a straight line.

D.

Non-linear relationship, as the Best Fit line is curvilinear.

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Questions 21

_______moving average uses reverse linear weights:

Options:

A.

The pivot-point

B.

The simple

C.

The weighted

D.

The exponential

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Questions 22

Why doesn't the doji candle have a real body?

Options:

A.

The doji is an abbreviated method of drawing candles

B.

The open and close are the same

C.

The high and low are the same

D.

Buyers are stronger than sellers

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Questions 23

In some point-and-figure charts, what is the actual representation of the new price recorded on the chart?

Options:

A.

The first letter or the number of the month is plotted

B.

The number of the month is plotted

C.

The first letter of the month is plotted

D.

The name or the number of the month is plotted

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Questions 24

Which of the following figures can not be plotted on a point and figure chart when we have to plot months and years together? Choose the best possible answer.

Options:

A.

The year is displayed at the bottom of the column and the month is not plotted

B.

The year is displayed at the bottom of the column and the number of the month is plotted instead of the X or O

C.

The month is displayed at the bottom of the column and the year is not plotted

D.

The month is displayed at the bottom of the column and the number of the year is plotted instead of the X or O

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Questions 25

Identify the following assumption under the correlation coefficient:

Options:

A.

Linearity

B.

Normality

C.

Outliers and homoscedasticity

D.

All of the above

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Questions 26

Which of the following is true of the window pattern?

Options:

A.

It is a reversal pattern

B.

It occurs when the real bodies of two consecutive candles do not overlap

C.

It occurs when the shadows of two consecutive candles do not overlap

D.

One should buy on dips after a falling window

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Questions 27

According to Kirkpatrick and Dahlquist, during emotional times, flow of funds signals:

Options:

A.

Appear to work poorly because price seems to divorce itself from economics.

B.

Appear to work exceptionally well because of the market's flight to safety.

C.

Function no differently than at any other time in the market cycle because of shortcomings in the measurement procedures.

D.

Suggests the duration of the next downleg in the market cycle

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Questions 28

Which of the following is NOT a valid trading rule using Elliott Wave Theory?

Options:

A.

Identify a main trend

B.

Determine the current status of the main trend by locating the major peaks and bottoms

C.

Look for five wave corrections and three wave sub-trends or extensions

D.

Draw trendlines to determine direction

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Questions 29

Which of the following is NOT a proper interpretation of volume and trend in the futures markets?

Options:

A.

Volume rising and open interest rising = trend reversal

B.

Volume rising and open interest falling = position liquidation

C.

Volume falling and open interest rising = slow accumulation

D.

Volume falling and open interest falling = congestion phase

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Questions 30

Which of the following would not be a violation of the Code of Ethics in a published research report or statement?

Options:

A.

Estimates which are subject to change

B.

Inaccurate information

C.

Statements inconsistent with the accumulated knowledge of technical analysis

D.

Statements which disparage the work of other analysts

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Questions 31

Which of the following is one of the key rules for traders?

Options:

A.

Take profits but be patient with losing positions and give them time to rebound

B.

Buy low, sell high

C.

Be a contrarian and trade against the trend

D.

Always meet margin calls promptly

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Questions 32

Which of the following is a true statement according to Elliott Wave Theory?

Options:

A.

Wave four should not overlap wave one

B.

The theory is composed of time, ratios and wave forms, in that order of importance

C.

The theory was originally applied to individual stocks and does not work as well for indices

D.

The theory works best in commodity markets traded primarily by professional traders such agricultural futures

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Questions 33

Which of the following the correct description of the law of percentages in the field of decision making and selection?

Options:

A.

A relative loss of 20% can be made back with a relative gain of 20%, but an absolute 20% loss requires a 25% gain to break even

B.

A relative loss of 20% can be made back with a relative gain of 20%, but an absolute 20% loss don't require a 25% gain to break even

C.

A relative loss of 20% can be made back with a relative gain of 20%, but an absolute 10% loss requires a 25% gain to break even

D.

A relative gain of 20% can be made back with a relative loss of 20%, but an absolute 20% loss requires a 25% gain to break even

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Questions 34

Abandoned baby patterns:

Options:

A.

appear upon completion of star patterns

B.

appear nowhere in star patterns, only in box ranges

C.

ideally has a doji as second real bottom

D.

can only be formed over long periods of time

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Questions 35

A correlation coefficient of 0.75 between two variables suggests ______ relationship:

Options:

A.

extremely strong

B.

strong

C.

low

D.

non-existent

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Questions 36

Based on the chart below, interpret the on balance volume (OBV) indicator with respect to price action:

Options:

A.

Prices are consolidating but OBV direction has turned higher which indicates accumulation by long term traders.

B.

Negative divergence between price and indicator suggest distribution is taking place at top.

C.

Prices are higher but OBV is sideways which can't be interpreted.

D.

Positive divergence between price and indicator suggest uptrend is weak and near reversal.

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Questions 37

When analyzing macro trends, which of the following indicators can provide an insight into the intensity of bullish or bearish camps?

Options:

A.

On-balance volume

B.

Accumulation/Distribution

C.

New High/New Low index

D.

Slope of the 200 day moving average

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Questions 38

Which of the following describes the McClellan Oscillator?

Options:

A.

On days when prices close higher, it is assumed that all volume is represented by sellers

B.

It is a breadth momentum oscillator

C.

It is the sum of two exponential moving averages

D.

It is used for longer-range trading compared to the McClellan Summation Index which is more useful for short term trading

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Questions 39

To calculate moving averages for a point-and-figure chart:

Options:

A.

First, make a decision as to how many columns to average.

B.

First, re-draw the chart as a 1X1 chart,

C.

First, find the longest column, and count the number of filled boxes.

D.

First, convert the chart to a conventional line chart.

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Questions 40

Which of the following is a diversification technique in trading?

Options:

A.

Trade multiple securities in markets with high correlation

B.

Stick to a single trading system

C.

Balance risk across multiple markets and trading systems

D.

All of the above

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Questions 41

Which of the following are the three basic tenets of Elliott Wave Theory, in the CORRECT order of importance?

Options:

A.

Price, momentum and volume

B.

Price, pattern and volume

C.

Waves, alternation and reversals

D.

Pattern, ratio and time

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Questions 42

What would be the price objective for a head and shoulders pattern with a neckline at 63, top of the first shoulder at 72, top of the head at 96 and top of the second shoulder at 78?

Options:

A.

10

B.

96

C.

48

D.

30

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Questions 43

In a point and figure chart, what are the typical box sizes for a stock trading between 20 and 100, between 100 and 200, and then above 200?

Options:

A.

1, 2, 3

B.

1, 2, 4

C.

½, 1, 2

D.

1, 3, 5

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Questions 44

Which of the following is the formula for calculating RSI?

Options:

A.

RSI = 100 - (100/(1 X RS))

B.

RSI = 100 - (100/(100 + RS))

C.

RSI = 100 - (100/(1 + RS))

D.

RSI = 100 + (100/(1 + RS))

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Questions 45

What percentage of return should be earned if you have $100 in the capital and sustain a 20% loss to return to the break-even level of $100?

Options:

A.

Return 30 percent to the $80 to return to the $100 break-even level

B.

Return 25 percent to the $70 to return to the $100 break-even level

C.

Return 30 percent to the $70 to return to the $100 break-even level

D.

Return 25 percent to the $80 to return to the $100 break-even level

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Questions 46

Which of the following is true of the separating lines pattern?

Options:

A.

The top of the upper shadow of one candle is at the same price as the bottom of the lower shadow of the other candle

B.

The opening price of the second candle equals the opening price of the first candle

C.

The two candles have the same color

D.

It is a reversal pattern

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Questions 47

Which of the following is not a method used by Technical analysts to determine trading systems?

Options:

A.

Pattern recognition,

B.

Trend following

C.

Non-exogenous signal systems

D.

Countertrend

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Questions 48

ALL of the following are standard patterns used with 3-Box reversal point and figure charts, EXCEPT:

Options:

A.

Bullish or Bearish Triangle

B.

Triple Top or Triple Bottom

C.

Double Top or Double Bottom

D.

Bullish or Bearish Fulcrum

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Questions 49

Which of the following would be a valid trading interpretation of head and shoulder chart patterns?

Options:

A.

Sell when the right shoulder penetrates the neckline

B.

Buy when the head forms a higher high

C.

Buy on the first rally after the neckline is penetrated

D.

Buy when the right part of the head is forming

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Questions 50

Near the end of a recession:

Options:

A.

bonds turn up before stocks and commodities.

B.

stocks turn up before bonds and commodities.

C.

commodities turn up before bonds and stocks.

D.

all the asset classes turn up simultaneously.

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Questions 51

A morning star pattern is typically:

Options:

A.

A very small pattern consisting of two candles that is infrequently seen

B.

A continuation consisting of at least five candles

C.

A bottom reversal pattern consisting of three candles

D.

A top reversal pattern consisting of three candles

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Questions 52

What steps must analysts take in introducing new methods of technical analysis under the MTA Code of Ethics?

Options:

A.

All new techniques must be fully documented even if proprietary methods must be disclosed to do so

B.

New procedures must be documented as to procedure and rationale

C.

New procedures must be supported by adequate back testing confirmed by at least technician

D.

New methods need not be consistent with the accumulated knowledge of the field of technical analysis

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Questions 53

Which of the following is NOT true of the rising and falling three methods patterns?

Options:

A.

They are continuation patterns

B.

It starts with a long candle is followed by three short candles of the opposite color

C.

The final day is another long candle of the opposite color of the three preceding small candles

D.

The pattern consists of a single candle

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Questions 54

Intermarket analysis can be used for which investment decisions?

Options:

A.

Decisions among asset classes

B.

Decisions among equity market sectors

C.

Decisions among mutual fund

D.

All of the above

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Questions 55

Technicians refer to the speed of price movement as:

Options:

A.

Volume

B.

Trend

C.

Slope or momentum

D.

Ratio of two prices

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Questions 56

Which of the following is true for the use of the chi square test?

Options:

A.

Used as the main confirmation test in Dow Theory

B.

Compares risk to expected returns

C.

Compares actual returns to expected returns

D.

Signals moving average crossovers

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Questions 57

Which of the following is a CORRECT usage of an oscillator constructed using two moving averages?

Options:

A.

To help identify long-term variations from the short-term trend

B.

To spot confirmations between technical indicators

C.

To pinpoint the crossing of two moving averages

D.

All of the above

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Questions 58

Which of the following is true of W.D. Gann's trading techniques?

Options:

A.

His work is valid for equities but does not apply to commodities

B.

When price meets time, a change is imminent

C.

Gann used 10%, 20%, 30% and 40% as his key resistance and retracement levels

D.

Gann's work is an advanced interpretation of point and figure charts

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Questions 59

Which of the following is a FALSE statement about MACD?

Options:

A.

The signal line is also a moving average

B.

It is most useful in a trending market

C.

The calculation does not use any simple moving averages

D.

If MACD has had a positive value for more than 12 periods, this is predictive of a reversal.

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Questions 60

Which of the following is a CORRECT interpretation of volume?

Options:

A.

In an uptrend, volume should increase on down days

B.

In a downtrend, volume should increase on up days

C.

Price precedes volume

D.

Volume precedes price

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Questions 61

An evening doji star:

Options:

A.

Has a doji in the last position

B.

Has a doji in the middle position

C.

Is completely comprised of dojis

D.

Is completed by dojis leading out of the pattern

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Questions 62

In trend-based trading systems, what is the major determinant of trading activity (i.e., how often buy or sell signals are generated)?

Options:

A.

Smoothing technique used

B.

Distance between bands

C.

Selection of trend speed

D.

Use of a scaling factor

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Questions 63

Which of the following is true of moving averages?

Options:

A.

Moving averages provide the most valid trade signals in sideways markets

B.

Moving averages provide the most valid trade signals in trending markets

C.

Moving averages always provide more valid trade signals than oscillators

D.

Oscillators always provide more valid trade signals than moving averages

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Questions 64

Which of the following factors would increase the predictive power of the evening star pattern?

Options:

A.

If there is no overlap among the real bodies of the candles in the pattern

B.

If the last candle closes deeply into the body of the first candle

C.

If there is light volume on the first candle of the pattern and heavy volume on the last candle of the pattern

D.

All of the above

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Questions 65

Most of these indicators measure what uninformed investors are doing.

Options:

A.

Sentiment indicators

B.

Breadth indicators

C.

Flow of Funds indicators

D.

Cycle indicators

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Questions 66

Paul Jones is a chemical industry research analyst for a large brokerage company. That industry is currently seeing an increase in mergers and acquisitions. While flying through Chicago, Jones sees several senior

officers who she knows are from the largest and fourth largest chemical companies walk into a conference room. She concludes that negotiations for an acquisition might be taking place. Jones:

Options:

A.

may not act or cause others to act on this information.

B.

may not act but advise others to act on this information.

C.

may use this information to support an investment recommendation.

D.

should inform her compliance officer that she has material nonpublic information on firms she covers.

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Questions 67

Which crossover in MACD-Histogram is the strongest signal generated in the following chart of Alphabet Inc.

C ABD

Options:

A.

A

B.

B

C.

C

D.

D

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Questions 68

Which of the following BEST describes the rule of alternation?

Options:

A.

Downtrends follow uptrends

B.

Complex patterns follow simple patterns

C.

Price follows volume

D.

Prices alternate in Fibonacci sequences

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Questions 69

Which of the following indicator combines price, volume and open interest?

Options:

A.

TRIX

B.

Moneyflow Index

C.

True Strength Index

D.

Herrick Payoff Index

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Questions 70

When a market exceeds the high of the previous 4 weeks, cycle logic indicates that which of the following cycles has bottomed and turned up?

Options:

A.

Seasonal

B.

Long-term

C.

Short-term

D.

Intermediate-term

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Questions 71

Which of the following is true of moving average construction?

Options:

A.

In the exponential moving average more weight is given to volume on higher volume days

B.

The simple moving average is the geometric mean of previous prices

C.

The linear weighted average addresses the problem of including only the price action covered by the length of the average itself

D.

A shorter term moving average more closely tracks price action

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Questions 72

What is the proper use of long-term charts versus daily price charts?

Options:

A.

Long-term charts are more useful for making trading decisions

B.

Daily price charts allow for a thorough trend analysis

C.

Long-term charts allow for a better assessment of the price trend

D.

Daily price charts allow for a better assessment of the price trend

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Questions 73

Which of the following is typically a period of heavier volume?

Options:

A.

First day of the week

B.

Day before a holiday

C.

Triple witching days

D.

Summer days

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Questions 74

_______uses the distribution of daily trading range to create a new indicator.

Options:

A.

TRIX

B.

Money Flow Index

C.

True Strength Index

D.

Intraday Intensity

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Questions 75

A breakout:

Options:

A.

Is a minor pattern which is rarely seen and has no real significance on either the near or long term

B.

Occurs when price passes through specific levels

C.

Has no significance to a trader of investor

D.

Needs to be confirmed by other indicators

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Questions 76

Which of the following are valid interpretations of the put-call ratio?

Options:

A.

It is the major sentiment index used for options trading

B.

It is used as a contrary indicator

C.

Extreme levels are trading signals

D.

All of the above

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Questions 77

Which of the following is a CORRECT point and figure chart pattern interpretation?

Options:

A.

Upside breakout above an ascending triple top signals sell

B.

Upside breakout above a bullish resistance line signals sell

C.

Downside breakout of a bearish triangle signals sell

D.

Downside breakout below a bearish support line signals buy

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Questions 78

Which of the following BEST characterizes the Theory of Contrary Opinion?

Options:

A.

When virtually everyone takes the position that the market is headed in a certain direction, there is no one left to push the trend any further

B.

Always trade against the prevailing trend

C.

The future can be extrapolated based on present trends

D.

Fundamental analysis is always wrong

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Exam Code: CMT-Level-II
Exam Name: CMT Level II Exam
Last Update: Mar 26, 2024
Questions: 262

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