CMT Level I – Practice Exam Verified Questions,
Correct Answers, and Detailed Explanations for
Students||Already Graded A+
1. Technical analysis primarily focuses on:
A) Company financial statements
B) Economic indicators
C) Price and volume data
D) Management quality
Technical analysis studies price movements and trading volume
rather than fundamentals.
2. Which of the following is considered a lagging indicator?
A) Moving averages
B) Relative Strength Index (RSI)
C) MACD histogram
D) Bollinger Bands
A) Moving averages
Moving averages are based on past prices, so they lag current market
conditions.
3. The Dow Theory emphasizes:
A) Fundamental earnings analysis
B) Trend identification
C) Market sentiment surveys
D) Option pricing
Dow Theory focuses on analyzing market trends to determine
primary, secondary, and minor movements.
4. In technical analysis, a “head and shoulders” pattern is typically
considered:
,A) Continuation pattern
B) Reversal pattern
C) Momentum indicator
D) Volume signal
Head and shoulders signal a trend reversal, usually from bullish to
bearish.
5. Which type of chart uses open, high, low, and close prices?
A) Line chart
B) Point & figure chart
C) Candlestick chart
D) Market profile
Candlestick charts display the OHLC prices for each period.
6. Relative strength compares:
A) A stock’s volume to its price
B) Current price to moving average
C) Performance of one security vs. another
D) Highs and lows of a single security
Relative strength measures how a security performs relative to
another security or index.
7. Bollinger Bands are based on:
A) Moving average and standard deviation
B) Fibonacci retracement
C) Momentum oscillator
D) Volume
A) Moving average and standard deviation
Bollinger Bands plot a moving average and bands typically set 2
standard deviations away.
8. Support is defined as:
A) Price level where selling pressure dominates
B) Price level where buying interest prevents further decline
, C) Average price over a period
D) Indicator of volume change
Support represents a price area where demand outweighs supply.
9. Resistance represents:
A) A lagging indicator
B) Market trend direction
C) Price level where selling pressure prevents price increase
D) Momentum measure
Resistance is a price level where selling exceeds buying, often causing
a reversal.
10. The purpose of a trendline is to:
A) Predict exact price targets
B) Measure volatility
C) Identify direction of the trend
D) Calculate moving averages
Trendlines help identify support and resistance and overall market
direction.
11. Which is true about the Efficient Market Hypothesis (EMH)?
A) Technical analysis consistently outperforms
B) Fundamental analysis is useless
C) Prices reflect all available information
D) Trends are predictable
EMH asserts that all known information is already reflected in prices.
12. Volume analysis helps confirm:
A) Fundamental valuation
B) Trend strength
C) Earnings reports
D) Dividend payments
Increasing volume during a trend signals that the trend is likely
strong and sustainable.
Correct Answers, and Detailed Explanations for
Students||Already Graded A+
1. Technical analysis primarily focuses on:
A) Company financial statements
B) Economic indicators
C) Price and volume data
D) Management quality
Technical analysis studies price movements and trading volume
rather than fundamentals.
2. Which of the following is considered a lagging indicator?
A) Moving averages
B) Relative Strength Index (RSI)
C) MACD histogram
D) Bollinger Bands
A) Moving averages
Moving averages are based on past prices, so they lag current market
conditions.
3. The Dow Theory emphasizes:
A) Fundamental earnings analysis
B) Trend identification
C) Market sentiment surveys
D) Option pricing
Dow Theory focuses on analyzing market trends to determine
primary, secondary, and minor movements.
4. In technical analysis, a “head and shoulders” pattern is typically
considered:
,A) Continuation pattern
B) Reversal pattern
C) Momentum indicator
D) Volume signal
Head and shoulders signal a trend reversal, usually from bullish to
bearish.
5. Which type of chart uses open, high, low, and close prices?
A) Line chart
B) Point & figure chart
C) Candlestick chart
D) Market profile
Candlestick charts display the OHLC prices for each period.
6. Relative strength compares:
A) A stock’s volume to its price
B) Current price to moving average
C) Performance of one security vs. another
D) Highs and lows of a single security
Relative strength measures how a security performs relative to
another security or index.
7. Bollinger Bands are based on:
A) Moving average and standard deviation
B) Fibonacci retracement
C) Momentum oscillator
D) Volume
A) Moving average and standard deviation
Bollinger Bands plot a moving average and bands typically set 2
standard deviations away.
8. Support is defined as:
A) Price level where selling pressure dominates
B) Price level where buying interest prevents further decline
, C) Average price over a period
D) Indicator of volume change
Support represents a price area where demand outweighs supply.
9. Resistance represents:
A) A lagging indicator
B) Market trend direction
C) Price level where selling pressure prevents price increase
D) Momentum measure
Resistance is a price level where selling exceeds buying, often causing
a reversal.
10. The purpose of a trendline is to:
A) Predict exact price targets
B) Measure volatility
C) Identify direction of the trend
D) Calculate moving averages
Trendlines help identify support and resistance and overall market
direction.
11. Which is true about the Efficient Market Hypothesis (EMH)?
A) Technical analysis consistently outperforms
B) Fundamental analysis is useless
C) Prices reflect all available information
D) Trends are predictable
EMH asserts that all known information is already reflected in prices.
12. Volume analysis helps confirm:
A) Fundamental valuation
B) Trend strength
C) Earnings reports
D) Dividend payments
Increasing volume during a trend signals that the trend is likely
strong and sustainable.
