Chartered Market Technician (CMT) – Level II Practice Exam Questions
And Correct Answers (Verified Answers) Plus Rationales 2026/2027
Q&A | Instant Download Pdf
Question 1: In classic chart pattern analysis, what specific volume
characteristic typically accompanies the formation and breakout of a
valid "Cup and Handle" pattern?
• A) Extremely high volume during the entire rounding bottom (cup)
and near-zero volume on the handle breakout.
• B) High volume at the left lip, drying up significantly during the
rounding bottom (cup), expanding moderately as the right lip
forms, and contracting during the handle formation before
expanding sharply on the breakout.
• C) Uniformly high volume across every single trading session of
the pattern.
• D) Zero volume throughout the formation, followed by massive
volume only on the day after the breakout.
Correct Answer: B
Rationale: A classic cup and handle features high volume on the initial
decline and left peak, decreasing volume as the base rounds out
(showing exhaustion of sellers), an increase in volume on the right rim,
and a contraction of volume (consolidation) in the handle before a high-
volume breakout.
Question 2: When utilizing the Moving Average Convergence
Divergence (MACD) indicator, what does a "histogram zero-line
crossover" signal to a technical analyst?
, • A) The fast exponential moving average (EMA) has crossed above
or below the slow exponential moving average, indicating a shift in
momentum direction.
• B) The asset price has reached an absolute top or bottom.
• C) The volume has dropped to zero.
• D) The relative strength index has reached 50.
Correct Answer: A
Rationale: The MACD histogram measures the distance between the
MACD line (fast EMA minus slow EMA) and its signal line. When the
histogram crosses the zero line, it signifies that the fast EMA has
crossed the slow EMA, confirming a momentum shift.
Question 3: In Market Profile terminology, what distinguishes a "Trend
Day" from a "Normal Day"?
• A) A Trend Day features a wide initial balance and heavy
overlapping TPOs, whereas a Normal Day features a very small
initial balance.
• B) A Trend Day exhibits a very small Initial Balance followed by
directional price movement that continues away from the open all
day with minimal overlap, whereas a Normal Day features a wide
Initial Balance and balanced value migration.
• C) A Trend Day occurs only on market holidays, while Normal Days
occur during options expiration weeks.
• D) There is no structural distinction between the two session
types.
,Correct Answer: B
Rationale: A Trend Day is characterized by a narrow Initial Balance and
continuous, non-overlapping directional auction printing single prints all
day. A Normal Day features a wide Initial Balance that encompasses
most of the day's total range.
Question 4: In Point and Figure chart construction, what does a "3-box
reversal" chart require to trigger a column change from an existing
column of X's (advancing) to a column of O's (declining)?
• A) A price decline equal to or exceeding three times the
designated box size from the highest X in the current column.
• B) A single-box decline in price.
• C) A 50% retracement of the entire preceding year's trading range.
• D) An increase in trading volume of at least 200%.
Correct Answer: A
Rationale: On a 3-box reversal P&F chart, prices must reverse by a
distance equal to three box sizes to reverse from a rising column of X's
into a declining column of O's (or vice versa).
Question 5: According to J.M. Hurst's cyclic theory, what is the principle
of "Varying Amplitude" regarding market cycles?
• A) All cycles maintain the exact same price amplitude and volatility
magnitude permanently.
• B) While cycle periods (lengths) remain constant and harmonic,
the amplitude (height/strength) of a cycle varies over time in
response to prevailing trend and macroeconomic conditions.
, • C) Cycle amplitudes can only be calculated using cryptocurrency
tick data.
• D) Amplitude dictates the exact calendar date of market crashes.
Correct Answer: B
Rationale: Hurst noted that while cycle frequency (wavelength) is
strictly harmonic and stable, the amplitude (the magnitude of the price
swing) varies dynamically as underlying trends and market conditions
fluctuate.
Question 6: How is the "Smart Money Index" (sometimes called the
Smart Money Flow Index) constructed and interpreted in sentiment
analysis?
• A) It tracks odd-lot short sales exclusively.
• B) It measures the behavior of market participants by comparing
price action during the early open (representing emotional retail
trading) versus the final hour of trading (representing institutional
"smart money" activity).
• C) It aggregates central bank interest rate decisions.
• D) It calculates the moving average of index options volume.
Correct Answer: B
Rationale: The Smart Money Index assumes retail participants trade
heavily at the open based on overnight news, while institutional
investors execute larger blocks near the close. It isolates the final hour
of trading to track institutional accumulation or distribution.
And Correct Answers (Verified Answers) Plus Rationales 2026/2027
Q&A | Instant Download Pdf
Question 1: In classic chart pattern analysis, what specific volume
characteristic typically accompanies the formation and breakout of a
valid "Cup and Handle" pattern?
• A) Extremely high volume during the entire rounding bottom (cup)
and near-zero volume on the handle breakout.
• B) High volume at the left lip, drying up significantly during the
rounding bottom (cup), expanding moderately as the right lip
forms, and contracting during the handle formation before
expanding sharply on the breakout.
• C) Uniformly high volume across every single trading session of
the pattern.
• D) Zero volume throughout the formation, followed by massive
volume only on the day after the breakout.
Correct Answer: B
Rationale: A classic cup and handle features high volume on the initial
decline and left peak, decreasing volume as the base rounds out
(showing exhaustion of sellers), an increase in volume on the right rim,
and a contraction of volume (consolidation) in the handle before a high-
volume breakout.
Question 2: When utilizing the Moving Average Convergence
Divergence (MACD) indicator, what does a "histogram zero-line
crossover" signal to a technical analyst?
, • A) The fast exponential moving average (EMA) has crossed above
or below the slow exponential moving average, indicating a shift in
momentum direction.
• B) The asset price has reached an absolute top or bottom.
• C) The volume has dropped to zero.
• D) The relative strength index has reached 50.
Correct Answer: A
Rationale: The MACD histogram measures the distance between the
MACD line (fast EMA minus slow EMA) and its signal line. When the
histogram crosses the zero line, it signifies that the fast EMA has
crossed the slow EMA, confirming a momentum shift.
Question 3: In Market Profile terminology, what distinguishes a "Trend
Day" from a "Normal Day"?
• A) A Trend Day features a wide initial balance and heavy
overlapping TPOs, whereas a Normal Day features a very small
initial balance.
• B) A Trend Day exhibits a very small Initial Balance followed by
directional price movement that continues away from the open all
day with minimal overlap, whereas a Normal Day features a wide
Initial Balance and balanced value migration.
• C) A Trend Day occurs only on market holidays, while Normal Days
occur during options expiration weeks.
• D) There is no structural distinction between the two session
types.
,Correct Answer: B
Rationale: A Trend Day is characterized by a narrow Initial Balance and
continuous, non-overlapping directional auction printing single prints all
day. A Normal Day features a wide Initial Balance that encompasses
most of the day's total range.
Question 4: In Point and Figure chart construction, what does a "3-box
reversal" chart require to trigger a column change from an existing
column of X's (advancing) to a column of O's (declining)?
• A) A price decline equal to or exceeding three times the
designated box size from the highest X in the current column.
• B) A single-box decline in price.
• C) A 50% retracement of the entire preceding year's trading range.
• D) An increase in trading volume of at least 200%.
Correct Answer: A
Rationale: On a 3-box reversal P&F chart, prices must reverse by a
distance equal to three box sizes to reverse from a rising column of X's
into a declining column of O's (or vice versa).
Question 5: According to J.M. Hurst's cyclic theory, what is the principle
of "Varying Amplitude" regarding market cycles?
• A) All cycles maintain the exact same price amplitude and volatility
magnitude permanently.
• B) While cycle periods (lengths) remain constant and harmonic,
the amplitude (height/strength) of a cycle varies over time in
response to prevailing trend and macroeconomic conditions.
, • C) Cycle amplitudes can only be calculated using cryptocurrency
tick data.
• D) Amplitude dictates the exact calendar date of market crashes.
Correct Answer: B
Rationale: Hurst noted that while cycle frequency (wavelength) is
strictly harmonic and stable, the amplitude (the magnitude of the price
swing) varies dynamically as underlying trends and market conditions
fluctuate.
Question 6: How is the "Smart Money Index" (sometimes called the
Smart Money Flow Index) constructed and interpreted in sentiment
analysis?
• A) It tracks odd-lot short sales exclusively.
• B) It measures the behavior of market participants by comparing
price action during the early open (representing emotional retail
trading) versus the final hour of trading (representing institutional
"smart money" activity).
• C) It aggregates central bank interest rate decisions.
• D) It calculates the moving average of index options volume.
Correct Answer: B
Rationale: The Smart Money Index assumes retail participants trade
heavily at the open based on overnight news, while institutional
investors execute larger blocks near the close. It isolates the final hour
of trading to track institutional accumulation or distribution.
