CMT Level 1 Exam Questions And
Answers 2023
What are the basic tenets of Dow Theory - correct answer-1.) The averages discount
everything
2.) The market has three trends
3.) Major trends have three phases
4.) The averages must confirme each other
5.) Volume must confirm trend
6.) A trend is in effect until it gives definitive signals that it has reversed
Technical Analysis by Kirkpatrick - correct answer-The study of prices in freely traded
markets with the intent of making profitable trading or investment decisions.
-Kirkpatrick
Basic Assumptions of Technical Analysis by Edwards & Magee - correct answer--Stock
prices are determined solely by the interaction of demand and supply
-Stock prices tend to move in trends
-Shifts in demand and supply cause reversals in trends
-Shifts in demand and supply can be detected in charts
-Chart patterns tend to repeat themselves
Technical Analysts believe... - correct answer--"the market is always correct"
-that all factors (Fundamental) are already factored into the demand and supply curves
and, thus, the price of the company's stock.
The Art of Technical Analysis by Pring - correct answer--is to identify trend changes at
an early stage and to maintain an investment position until the weight of the evidence
indicates that the trend has reversed, (Pring, 2002)
What is Technical Analysis used for? - correct answer--to determine the trend, when it is
changing, when it has changed, when to enter a position, when to exit a position, and
the analysis is wrong and the position mus be closed.
-Kirkpatrick
Trend - correct answer-- a directional movement of prices that remains in effect long
enough to be identified and still playable
- A trend must be recognized early and be long enough for the technician to profit.
-Kirpatrick
How are trends identified? - correct answer--Linear Least-Square regression
-Moving Averages
-Trend lines
, Accumulation - correct answer-A time when buyers emerge purchasing securities,
generally from distressed sellers. It can be seen as a period when equities are absorbed
by expanding demand over a period of time resulting in a possible favorable effect on
price or a period of price equilibrium following a decline. This can be viewed as the first
phase of a bull trend, or perhaps even the beginning of a bull market.
Advance-Decline Line - correct answer-Number of stocks advancing divided by the
number of stocks declining over a particular time period.
Apex - correct answer-A peak or a point of intersection of two trendlines; the usual
connotation that some new trend may evolve as prices approach that intersection.
Arbitrage - correct answer-Simultaneous buying in one market and selling in another
market in order to take advantage of differences in price. As it relates to stock could be
the purchase of the aquiree and the sale of the acquirer. In futures could relate to
buying one futures contract and selling a like contract to capture price inefficiencies.
Back and Fill - correct answer-Same as Consolidation. See also Stabilization. Trading
back and forth in a narrow range.
Bar Chart - correct answer-Price/time chart that depicts high, low and close data as bars
on the vertical axis and time intervals on the horizontal axis. Volume is usually indicated
also, as vertical bars on the bottom of the chart under the applicable price data.
Base - correct answer-Period of accumulation (see above), also called "Bottom." Can
also be described as price level where buyers continue to buy supporting the market.
Bear Market - correct answer-A long period of time, often a year or more, when the
general trend of securities prices is down.
Bear Trap - correct answer-A false move to the downside that does not initiate a new
downtrend, but is actually the final reaction prior to a sustained advance, hence
"trapping the bears."
Block - correct answer-A single transaction of large number of shares. The NYSE
defines transactions of 10,000 shares or more as blocks.
Blow Off - correct answer-The final phase of an uptrend, ending a mark up phase, when
prices rise very rapidly usually on high volume, leading to a sharp reaction. See
"Climax."
Breadth - correct answer-Net number of stocks advancing versus declining. When
advances exceed declines, breadth is positive; when the reverse is true, breadth is
negative.
Breakdown - correct answer-Like "Breakout," but used to refer to the downside.
Answers 2023
What are the basic tenets of Dow Theory - correct answer-1.) The averages discount
everything
2.) The market has three trends
3.) Major trends have three phases
4.) The averages must confirme each other
5.) Volume must confirm trend
6.) A trend is in effect until it gives definitive signals that it has reversed
Technical Analysis by Kirkpatrick - correct answer-The study of prices in freely traded
markets with the intent of making profitable trading or investment decisions.
-Kirkpatrick
Basic Assumptions of Technical Analysis by Edwards & Magee - correct answer--Stock
prices are determined solely by the interaction of demand and supply
-Stock prices tend to move in trends
-Shifts in demand and supply cause reversals in trends
-Shifts in demand and supply can be detected in charts
-Chart patterns tend to repeat themselves
Technical Analysts believe... - correct answer--"the market is always correct"
-that all factors (Fundamental) are already factored into the demand and supply curves
and, thus, the price of the company's stock.
The Art of Technical Analysis by Pring - correct answer--is to identify trend changes at
an early stage and to maintain an investment position until the weight of the evidence
indicates that the trend has reversed, (Pring, 2002)
What is Technical Analysis used for? - correct answer--to determine the trend, when it is
changing, when it has changed, when to enter a position, when to exit a position, and
the analysis is wrong and the position mus be closed.
-Kirkpatrick
Trend - correct answer-- a directional movement of prices that remains in effect long
enough to be identified and still playable
- A trend must be recognized early and be long enough for the technician to profit.
-Kirpatrick
How are trends identified? - correct answer--Linear Least-Square regression
-Moving Averages
-Trend lines
, Accumulation - correct answer-A time when buyers emerge purchasing securities,
generally from distressed sellers. It can be seen as a period when equities are absorbed
by expanding demand over a period of time resulting in a possible favorable effect on
price or a period of price equilibrium following a decline. This can be viewed as the first
phase of a bull trend, or perhaps even the beginning of a bull market.
Advance-Decline Line - correct answer-Number of stocks advancing divided by the
number of stocks declining over a particular time period.
Apex - correct answer-A peak or a point of intersection of two trendlines; the usual
connotation that some new trend may evolve as prices approach that intersection.
Arbitrage - correct answer-Simultaneous buying in one market and selling in another
market in order to take advantage of differences in price. As it relates to stock could be
the purchase of the aquiree and the sale of the acquirer. In futures could relate to
buying one futures contract and selling a like contract to capture price inefficiencies.
Back and Fill - correct answer-Same as Consolidation. See also Stabilization. Trading
back and forth in a narrow range.
Bar Chart - correct answer-Price/time chart that depicts high, low and close data as bars
on the vertical axis and time intervals on the horizontal axis. Volume is usually indicated
also, as vertical bars on the bottom of the chart under the applicable price data.
Base - correct answer-Period of accumulation (see above), also called "Bottom." Can
also be described as price level where buyers continue to buy supporting the market.
Bear Market - correct answer-A long period of time, often a year or more, when the
general trend of securities prices is down.
Bear Trap - correct answer-A false move to the downside that does not initiate a new
downtrend, but is actually the final reaction prior to a sustained advance, hence
"trapping the bears."
Block - correct answer-A single transaction of large number of shares. The NYSE
defines transactions of 10,000 shares or more as blocks.
Blow Off - correct answer-The final phase of an uptrend, ending a mark up phase, when
prices rise very rapidly usually on high volume, leading to a sharp reaction. See
"Climax."
Breadth - correct answer-Net number of stocks advancing versus declining. When
advances exceed declines, breadth is positive; when the reverse is true, breadth is
negative.
Breakdown - correct answer-Like "Breakout," but used to refer to the downside.
