cmt1-sampleques-bookb

Sample Questions for CMT

Level 1 Booklet B

CMT Level 1 Sample Questi ons

These sample questions are used to provide the candidate with examples of how the questions may appear on the CMT exam. The actual CMT exam does not have any true/false questions. These sample questions cover much of the material listed in the Body of Knowledge, while the actual exam questions may be more difficult. In addition, these sample questions cover a variety of topics; however, the actual exam weighting may vary. The actual exam consists of 132 of 132 questions of which of which 120 are scored items. Please note that this sample question booklet was prepared entirely separately from the actual exam to ensure the security of the of the actual exam questions. In some aspects, these sample questions are designed differently from the actual exam so as to better serve as a review for candidates. For example, many questions and/or answers may be longer than in the actual exam so that the questions and answers serve as a review of the of the material. The MTA maintains a discussion group forum for CMT candidates on its web site. Candidates are encouraged to utilize this resource and to discuss any areas of the of the Body of Knowledge with which they are not familiar. This book of practice of practice exams is produced by: Market Technicians Association, Inc., 61 Broadway, Suite 514 New York, NY 10006 All material is believed to be reliable at time of publication, of publication, but not guaranteed. The Market Technicians Association, Inc., and its officers, assumes no responsibility for errors or omissions.

Copyright © 2011 Market Technicians Association, Inc. All rights are reserved.

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CMT Level 1 Sample Questions – Answer Sheet

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CMT Level 1 Sample Questions 1. Moving average crossovers can be used to indicate: a. Buy and sell signals b. Positive relative strength c. Negative volume d. Trend divergence 2. Which of the following can be considered a sentiment indicator: a. Specialist Short Sales Ratio b. Mutual Fund Cash/Asset Ratio c. Odd Lot Purchase/Sales Ratio d. All of the above 3. Speed resistance lines: a. Divide a trend in thirds b. Measure the rate of ascent or descent of a trend c. Are used to measure percentage retracements d. All of the above 4. An exhaustion gap is observed: a. In the beginning stage of a bear market b. After prices have moved sideways for an extended period of time c. Near the end of a major price move d. With light trading volume 5. On a daily bar chart: a. Each day’s price action is represented by a vertical bar; the daily high, low and close are plotted b. Prices are plotted vertically, time horizontally c. The price scale may be either arithmetic or logarithmic d. All of the above 6. An appropriate time interval selection for a bar chart which is designed to show very long‐term trends would be: a. Daily b. Weekly c. Monthly d. Annually 7. On a bar chart, volume is NORMALLY shown: a. To the right of the price time series b. Under the price time series c. Above the price time series d. To the left of the price time series 8. A Point and Figure chart DIFFERS from a bar chart as: a. A new plot on a point and figure chart is made only when the price changes by a given amount b. Time intervals are clearly shown in a point and figure chart


Page 5 c. Point and figure charts are only concerned with measuring price momentum d. A new plot on a bar chart is made only when the price changes by a given amount 9. Point and Figure charts display: a. Daily high‐low‐close b. Daily close reversals c. Sequential reversals of price in unit increments d. Daily price and volume data 10. In constructing a Point and Figure chart, a new box is added ONLY when: a. The price has moved by less than the specified box size b. The price has moved by equal to or more than the specified box size c. The volume confirms the price movement d. The price has moved to a new high 11. As the price unit of a reversal on a Point and Figure chart is decreased: a. Time analysis becomes more critical for interpretation b. The detail of price movement graphically displayed is decreased c. The detail of price movement graphically displayed is increased d. The possibility of whipsaws decreases 12. Which chart type is more commonly used for displaying relative strength between a stock and the market? a. Line chart b. Bar chart c. Point and Figure chart d. Reversal chart 13. The body of the candlestick line displays the relationship between: a. The current session’s high and low b. The current session’s close and the prior session’s close c. The current session’s open and high d. The current session’s open and close 14. A black real body in candle charting means that: a. The close is higher than the open b. The close is lower than the open c. The open is higher than the low d. The current session’s close is lower than the prior session’s close 15. Which Western technical tools can be used on candle charts: a. Trend lines b. Moving averages c. Fibonacci retracements d. All of the above 16. A trend line is helpful in determining: a. Overbought or oversold market conditions


CMT Level 1 Sample Questi ons b. When a price reversal has taken place c. The cyclical interval between bull and bear markets d. A probable price target for the extent of the price move 17. The basic concept behind the use of a trend line is that: a. Price and volume tend to confirm each other b. Prices rise and fall in cyclical patterns c. Prices follow a natural rhythm d. A trend in motion will remain in motion until it reverses 18. Technical analysts GENERALLY believe: a. That trend line analysis cannot be applied to point and figure charts b. A price close beyond the trend line is more significant than an intra‐day penetration c. Trend lines are useful for validation of price gaps d. Price whipsaws can be avoided using trend lines 19. In general, market technicians believe: a. That trend line analysis can be used in conjunction with volume to predict money flows b. That the more times a trend line has been successfully tested, the greater the significance of its violation c. Trend lines are not helpful in gauging support and resistance points d. Trend lines are an art form which do not lend themselves to computer construction 20. In a head and shoulders pattern, volume USUALLY: a. Is greatest in the middle leg b. Increases with each successive peak c. Decreases with each successive peak d. Is constant throughout the pattern 21. The characteristics of a cycle are: a. Length, width and breadth b. Price, volume and flow c. Amplitude, breadth and width d. Amplitude, period and phase 22. A moving average: a. Is a leading price indicator b. Amplifies the data c. Smoothes out data fluctuations d. Is not appropriate for use on bar charts 23. Moving averages are MOST often used to signal: a. A reversal in price trend b. Price cycles c. Volume confirmation d. Price targets


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24. A simple moving average is often criticized because: a. The most recent events are given extra weight b. The entire price time series is used in its calculation c. Equal weight is given to each point included in the calculation d. It is difficult to calculate 25. An exponentially smoothed moving average: a. Excludes older price points in the calculation b. Gives more weight to more recent observations c. Cannot be plotted on a bar chart d. None of the above 26. A sell signal is NORMALLY given when: a. A shorter length moving average crosses a longer length moving average from above b. A longer length moving average crosses a shorter length moving average from above c. A shorter length moving average remains above a longer length moving average d. A longer length moving average remains above a shorter length moving average 27. Oscillators are used to alert the analyst to: a. Volume divergences b. Continuation patterns c. Extended rallies d. Overbought or oversold price conditions 28. All the following are momentum oscillators EXCEPT: a. Advance/decline line b. Relative Strength Index (RSI) c. Stochastic d. Moving Average Convergence/Divergence (MACD) 29. MOST oscillators are constructed: a. So that the mid‐point goes through zero b. On a semi‐logarithmic scale to highlight momentum c. So that all points are positive in value d. Without an upper boundary 30. Oscillators are MOST helpful to gauge price behavior in: a. Sharply rising markets b. Sharply falling markets c. Sharply rising and sharply falling markets d. Non‐trending markets where prices fluctuate in a well defined trading range


CMT Level 1 Sample Questi ons 31. Oscillators are MOST valuable when: a. They are confirmed by relative strength measures b. They are accelerating in trend c. Their value reaches an extreme reading near the upper or lower end of their boundaries d. Evaluated using multiple moving averages 32. Using an oscillator, one MOST often observes: a. A peak in momentum in a bull market before a peak in the price trend b. An acceleration in price momentum prior to a major market bottom c. Constant price momentum throughout a price rally extending for at least one year d. Significant change in price momentum throughout a typical four year cycle 33. A typical momentum index is constructed by: a. Plotting the change in price between the beginning and end of a time interval b. Plotting the difference in volume between the daily high price and the daily low price c. Plotting cumulative price between two points d. Connecting the boxes on a point and figure chart 34. In gauging the importance of a potential support or resistance level, the analyst must consider: a. The amount of time that has elapsed between the formation of the original congestion and the nature of general market developments in the meantime b. The volume of stock that has traded in the support or resistance zone c. The speed and extent of the previous price move d. All of the above 35. Violated support levels typically: a. Become support levels as prices fall lower b. Are associated with declining price projections c. Become resistance levels on price bounces d. Indicate an imminent price reversal 36. As with trend lines, speed resistance lines: a. Can be used in conjunction with sentiment indicators b. Indicate the potential for immediate price reversals c. Must be confirmed with volume d. Reverse roles once they are broken 37. The MINIMUM downside projection from a head and shoulders top pattern is derived: a. By estimating the length of the primary price cycle b. By measuring the distance from the penetration of the neckline by the left shoulder to the penetration of the neckline by the right shoulder and extending down from the point of penetration of the right shoulder c. By measuring the width of the left shoulder and subtracting that distance from the neckline d. By projecting downward from the neckline the vertical distance from the top of the head to the neckline


Page 9 38. A moving average crossover system is an accepted method of generating buy and sell signals. An oscillator can be created from such a system that utilizes an histogram to measure the distance between the two moving averages. Which of the following would NOT be an application of such an oscillator? a. Identifying areas of accumulation and distribution b. Identifying divergences c. Identifying short‐term variations from the long‐term trend when the shorter average moves too far above the longer average d. Identify points where the two moving averages cross 39. Which of the following oscillators is considered to be of MOST use in analyzing trending markets? a. Stochastic b. RSI c. MACD d. None are especially useful in trending markets 40. A rising relative strength line for a stock in a falling market indicates: a. That price and volume are diverging b. That the stock is performing worse than the market c. That the stock is performing better than the market d. That the stock’s price is rising despite the falling market 41. Which set of indicators would be MOST helpful in analyzing trading range markets? a. Moving averages b. Oscillators c. Cycles d. Elliott Wave 42. If one is studying a cycle of 8 weeks the assumption is that the next longest cycle: a. 10 weeks b. 12 weeks c. 16 weeks d. 24 weeks 43. The Dead Cat Bounce USUALLY occurs: a. At market bottoms b. At market tops c. During a pause in trend d. Once a week 44. The four year cycle, also known as the Presidential cycle, realizes BEST returns in the stock market to be: a. Election and pre‐election b. Midterm and election c. Pre‐election and post election d. Post election and midterm



45. The idea that all price movement is the addition of all active cycles is the basis for the principle of: a. Synchronicity b. Summation c. Proportionality d. Harmonicity 46. Which of the following indicators is used to measure market breadth? a. Cumulative breadth line b. Advance/Decline ratio c. McClellan oscillator d. All of the above The following three questions refer to relative strength analysis as applied to equity technical analysis (not Welles Wilder RSI) 47. Relative strength is USUALLY calculated by: a. Determining the money flows of two securities b. Dividing the price of a security by the price of another security, index or subgroup c. Dividing a security’s price by its trading volume d. Calculating the 14‐day price change of the security 48. Rising relative strength indicates: a. Lack of investor conviction b. The security is performing better than the market or the entity being compared c. The market is performing better than the security d. Positive price momentum 49. Relative strength analysis is useful in identifying: a. Declining volume trends b. Reversal in price momentum c. Significant price gaps d. Industry group rotation 50. To spot weakness in an uptrend, volume should be: a. Rising b. Falling c. Greater than the average volume d. a and c 51. Which of the following is NOT an underlying assumption of technical analysis? a. Prices move in trends b. Price discounts everything c. The consensus is always wrong d. Supply and demand determines price 52. When Bollinger Bands contract (get closer together) it USUALLY means: a. A stock is ready to rally


P a g e 11 b. A stock is ready to decline c. Volatility has increased d. Volatility has decreased 53. Point and Figure charts are MOST useful in identifying: a. Trends b. Areas of accumulation and distribution c. Reversal points d. Areas of support and resistance 54. Which of the following would NOT be considered a means of identifying a trend? a. Regression lines b. Trend lines c. Relative strength lines d. Moving averages 55. Which of the following does NOT describe standard deviation lines: a. Two standard deviations represents about 95% of the trading range b. Consists of two variables, starting point and slope c. The center line is a best fit line d. A buy is generated when price crosses the ‐1 standard deviation line from above 56. Candlestick charts can be used to identify: a. Price patterns b. Trend reversals c. Pauses in trends d. All of the above 57. Which of the following would NOT be considered an important factor in determining the significance of a trend line? a. Duration b. Distance from price c. Number of times touched d. Angle of ascent or descent 58. Which moving average gives equal weight to each day’s price? a. Exponential b. Weighted c. Simple d. a and c 59. Which is the LEAST significant penetration of a rising trend line? a. A 1% penetration above the trend line b. A close above the trend line c. Two successive intraday penetrations of trend line d. All the above are equally significant



60. Which are considered important in determining the validity of a trend line break? a. Time b. Price c. Volume d. All the above 61. Moving averages tend to change direction well after a peak or trough in price and therefore are considered “late” in changing direction. Which of the following is generally considered the MOST effective way to offset this tendency to lag? a. Using a weighted moving average b. Using an un‐weighted moving average c. Using moving average crossovers d. None of the above 62. Which of the following would NOT be considered a support level? a. Previous high b. Previous low c. Trading range d. All the above are considered as potential support levels 63. What is meant by the statement “volume precedes price”? a. Buying pressure usually precedes selling pressure b. Selling pressure is greater than buying pressure c. Price is less important than volume d. Changes in supply and demand are often apparent in volume before price 64. A complete Elliott wave is made up of: a. Five motive impulse waves b. Three corrective waves c. An extended 3rd wave d. a and b 65. A descending triangle that forms in a downtrend would probably be considered a: a. Reversal pattern b. Continuation pattern c. Either a or b d. Probably wouldn’t be useful in forecasting the future direction of the trend 66. Which of the following is LEAST reliable? a. Broadening formations b. Wedges c. Triangles d. Pennants 67. Which of the following is NOT true about volume? a. A rally that develops on declining volume is suspect b. A rally that occurs on rising volume points to a probable trend reversal


P a g e 13 c. Both price and volume can fall off sharply after a buying climax d. A downside break of a moving average or trend line should occur on heavy volume to qualify as a bearish signal 68. Which of the following is LEAST true of a doji pattern? a. It represents indecision b. It is usually a continuation pattern c. It is usually a reversal pattern d. The opening and closing prices are at identical levels 69. Which of the following is NOT true about gaps? a. Common gaps are of little or no forecasting value b. Breakaway gaps usually occur on heavy volume c. Gaps are almost always filled d. When exhaustion gaps are filled it is often the sign of a trend reversal 70. Which of the following would MOST likely be a continuation pattern? a. Engulfing pattern b. Head and shoulders c. Double bottom d. Flag 71. Risk can be defined as: a. Variability of returns b. Amount of loss per trade c. Beta d. All of the above 72. In a 10‐day rate of change indicator, if the latest (more recent) price is higher than the price 10 days ago: a. The ratio would be between +1 and ‐1 b. The ratio would be positive c. The ratio would be negative d. The ratio would be constant until the market changes trend 73. An extreme overbought reading on a momentum indicator in the early stages of a rally: a. Shows that the market is ready to correct b. Indicates that the rally is strong and will probably carry further c. Is a clear indication that the pace of the rally is about to slow down d. Is a clear indication that the pace of the rally is about to accelerate 74. Which statement is TRUE of an up‐trending market? a. Momentum indicators will tend to hit greater oversold extremes b. Momentum indicators will tend to stay overbought longer c. Momentum indicators will tend to hit greater overbought extremes than in a down‐trending market d. b and c


CMT Level 1 Sample Questi ons 75. Which would normally be considered a sentiment indicator that is MOST useful to traders? a. Corporate buy backs b. Price/earnings ratios c. Insider buying d. Put/call ratios 76. Which type of chart is USUALLY considered BEST suited for establishing price targets based on a horizontal measurement? a. Line charts b. Daily bar charts c. Point and figure charts d. Candlestick charts 77. Contrary opinion is a useful investment tool because: a. The “little guy” is always wrong b. Traders are often most bearish near market tops c. Institutional investors have access to better information d. It is at turning points where people are wrong 78. Which of the following is NOT one of the “essential areas” of technical analysis? a. Business cycle analysis b. Flow of funds c. Sentiment d. Market structure indicators 79. The longest term trend in the market is the: a. Primary b. Cyclical c. Secular d. None of the above 80. In the Dow Theory, the MOST important price is the: a. Open b. High c. Low d. Close 81. The most popular types of market indexes include all the following EXCEPT: a. Logarithmic weighted b. Capitalization weighted c. Un‐weighted d. Price weighted 82. The MOST comprehensive (all‐inclusive) index is: a. Value Line Index b. NY Stock Exchange Composite Index c. Standard & Poor’s Composite 500 Index d. Wilshire 5000 Equity Index


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83. Which is the MOST important in identifying a head & shoulders top pattern? a. The shoulders must be of equal height b. Volume on the right shoulder must decrease substantially from previous rallies c. A head & shoulders with a horizontal neckline is more reliable d. Volume must decrease on the successive rallies from the right shoulder to head to left shoulder 84. The longest‐term cycle is GENERALLY recognized as the: a. Juglar cycle b. Kitchin cycle c. Decennial cycle d. Kondratieff cycle 85. The “January Effect” refers to a seasonal tendency when: a. Large capitalization stocks outperform small capitalization stocks b. Small cap stocks outperform large cap stocks c. Stocks, regardless of size of market caps, bounce back from year‐end tax selling d. Secondary indexes frequently show their largest gains for the year 86. Which of the following is NOT a sentiment indicator? a. Put/call ratio b. Consumer confidence index c. Brokerage firm hiring d. Relative strength The following questions five questions apply to the MTA Code of Ethics: 87. According to the MTA Code of Ethics, Members and Affiliates are held to the same standards of conduct. a. True b. False 88. Members and Affiliates are allowed to use substantially the same language from a report prepared by an author now deceased if the original author receives prominent and adequate credit for the work. a. True b. False 89. A Member or an Affiliate must wait at least a week before acting on any recommendation made by the Member or Affiliate, in order to give both the Members or Affiliates employer and clients adequate time to act on such recommendation first. a. True b. False 90. Members and Affiliates are permitted to use the Association mailing list for commercial purposes provided they obtain prior permission from the MTA. a. True b. False


CMT Level 1 Sample Questi ons 91. If a Member or Affiliate takes a job with a new employer, he or she is then free from the responsibility to keep in confidence knowledge concerning the lawful private affairs of his or her clients, former employer, or the clients of the former employer. a. True b. False 92. A simple moving average is ______ to respond to price changes than a ________ moving average. a. Slower, weighted b. Faster, exponential c. Faster, geometric d. None of the above 93. One reason why price oscillators are useful is because _____________________. a. Momentum tends to lead price b. Price tends to lead momentum c. They give you quick entry and exit points d. They are to be used in isolation and are useful in any market 94. A secondary cycle can be used to determine the major trend of the market. a. True b. False 95. The trend of each cycle is MOST strongly influenced by the trend of the next longest cycle. a. True b. False 96. Divergences and failure swings are MOST useful on an RSI indicator when they occur below the _______________line. a. 70 and above the 30 b. 80 and above the 20 c. 60 and above the 40 d. 90 and above the 10 97. Which of the following describes the Equivolume charting? a. It is a technique which compares market performance on days with equal volume b. It is the sum of two exponential moving averages c. It is a bar chart where the bars vary in width which is determined by volume d. It is a variation of the McClellan Oscillator 98. Which of the following describes on‐balance volume? a. On days when prices close higher, it is assumed that all volume is represented by buyers b. It is a breadth momentum oscillator c. It is a technique which compares market performance on days with equal volume d. It represents advancing issues as a percent of total issues traded 99. Which of the following is NOT true of point and figure charting? a. Due to the complexity in creating these charts, it has only come into common usage with the advent of computers b. It has simple, well‐defined trading rules


P a g e 17 c. It eliminates price reversals below a minimum value d. It has no time factor 100. What is the relevance of the box size in point and figure charting? a. Box size represents volume traded at a particular price level b. Box size is the amount the price must change before a new column is created c. Box size determines the sensitivity of frequency of trading d. Box size utilized should be consistent for all securities being analyzed 101. What is the definition of open interest in the futures markets? a. The sum of long and short contracts b. The total number of outstanding long or short contracts c. The difference between long and short contracts d. The volume traded since inception of the contract 102. Which of the following is a difference between point and figure charts and bar charts? a. Point and figure charts more accurately portray time b. Bar charts provide clearer trading signals c. Point and figure charts provide clearer trading signals d. All of the above 103. Which of the following is true of the comparison of candlestick charts to bar charts? a. Candlestick charts are based on more data b. Candlestick charts exhibit different trend patterns c. Candlestick charts produce different support and resistance levels d. Candlestick charts allow for easier visual interpretation 104. In candlestick charts, what is considered the “essence of the price movement?” a. Price trend b. Wick c. Real body d. Shadow 105. What additional interpretation is possible with candlestick charts compared to bar charts? a. Trends b. Closing prices c. Relative strength between bulls and bears d. Support levels



CMT Level 1 Sample Questions – Answer Sheet 1. Moving average crossovers can be used to indicate: a. Buy and sell signals 2. Which of the following can be considered a sentiment indicator: d. All of the above 3. Speed resistance lines: d. All of the above 4. An exhaustion gap is observed: c. Near the end of a major price move 5. On a daily bar chart: d. All of the above 6. An appropriate time interval selection for a bar chart which is designed to show very long‐term trends would be: c. Monthly 7. On a bar chart, volume is NORMALLY shown: b. Under the price time series 8. A Point and Figure chart DIFFERS from a bar chart as: a. A new plot on a point and figure chart is made only when the price changes by a given amount 9. Point and Figure charts display: c. Sequential reversals of price in unit increments 10. In constructing a Point and Figure chart, a new box is added ONLY when: b. The price has moved by equal to or more than the specified box size 11. As the price unit of a reversal on a Point and Figure chart is decreased: c. The detail of price movement graphically displayed is increased 12. Which chart type is more commonly used for displaying relative strength between a stock and the market? a. A line chart 13. The body of the candlestick line displays the relationship between: d. The current session’s open and close 14. A black real body in candle charting means that: b. The close is lower than the open 15. Which Western technical tools can be used on candle charts? d. All of the above


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16. A trend line is helpful in determining: b. When a price reversal has taken place 17. The basic concept behind the use of a trend line is that: d. A trend in motion will remain in motion until it reverses 18. Technical analysts GENERALLY believe: b. A price close beyond the trend line is more significant than an intra‐day penetration 19. In general, market technicians believe: b. That the more times a trend line has been tested, the greater the significance of its violation 20. In a head and shoulders pattern, volume USUALLY: c. Decreases with each successive peak 21. The characteristics of a cycle are: d. Amplitude, period and phase 22. A moving average: c. Smoothes out data fluctuations 23. Moving averages are MOST often used to signal: a. A reversal in price trend 24. A simple moving average is often criticized because: c. Equal weight is given to each point included in the calculation 25. An exponentially smoothed moving average: b. Gives more weight to more recent observations 26. A sell signal is NORMALLY given when: a. A shorter length moving average crosses a longer length moving average from above 27. Oscillators are used to alert the analyst to: d. Overbought or oversold price conditions 28. All the following are momentum oscillators EXCEPT: a. Advance/decline line 29. MOST oscillators are constructed: a. So that the mid‐point goes through zero 30. Oscillators are MOST helpful to gauge price behavior in: d. Non‐trending markets where prices fluctuate in a well defined trading range 31. Oscillators are MOST valuable when: c. Their value reaches an extreme reading near the upper or lower end of their boundaries



32. Using an oscillator, one MOST often observes: a. A peak in momentum in a bull market before a peak in the price trend 33. A typical momentum index is constructed by: a. Plotting the change in price between the beginning and end of time interval 34. In gauging the importance of a potential support or resistance level, the analyst MUST consider: d. All of the above 35. Violated support levels typically: c. Become resistance levels on price bounces 36. As with trend lines, speed resistance lines: d. Reverse roles once they are broken 37. The MINIMUM downside projection from a head and shoulders top pattern is derived: d. By projecting downward from the neckline the vertical distance from the top of the head to the neckline 38. A moving average crossover system is an accepted method of generating buy and sell signals. An oscillator can be created from such a system that utilizes an histogram to measure the distance between the two moving averages. Which of the following would NOT be an application of such an oscillator? a. Identifying areas of accumulation and distribution 39. Which of the following oscillators is considered to be of MOST use in analyzing trending markets? c. MACD 40. A rising relative strength line for a stock in a falling market indicates” c. That the stock is performing better than the market 41. Which set of indicators would be MOST helpful in analyzing trading range markets? b. Oscillators 42. If one is studying a cycle of 8 weeks, the assumption is that the next longest cycle would be: c. 16 weeks 43. The Dead Cat Bounce USUALLY occurs: a. At market bottoms 44. The four year cycle, also known as the Presidential cycle, realizes BEST returns in the stock market to be: a. Election and pre‐election 45. The idea that all price movement is the addition of all active cycles is the basis for the principle of: b. Summation


P a g e 21 46. Which of the following indicators is used to measure market breadth? d. All of the above 47. Relative strength is USUALLY calculated by: b. Dividing the price of a security by the price of another security, index or subgroup 48. Rising relative strength indicates: b. The security is performing better than the market or the entity being compared 49. Relative strength analysis is useful in identifying: d. Industry group rotation 50. To spot weakness in an uptrend, volume should be: b. Falling 51. Which of the following is NOT an underlying assumption of technical analysis? c. The consensus is always wrong 52. When Bollinger Bands contract (get closer together) it USUALLY means: d. Volatility has decreased 53. Point and Figure charts are MOST useful in identifying: d. Areas of support and resistance 54. Which of the following would NOT be considered a means of identifying a trend? c. Relative strength lines 55. Which of the following does NOT describe standard deviation lines: d. A buy is generated when price crosses the ‐1 standard deviation line from above 56. Candlestick charts can be used to identify: d. All of the above 57. Which of the following would NOT be considered an important factor in determining the significance of a trend line? b. Distance from price 58. Which moving average gives equal weight to each day’s price? c. Simple 59. Which is the LEAST significant penetration of a rising trend line? c. Two successive intraday penetrations of trend line 60. Which are considered important in determining the validity of a trend line break? d. All the above 61. Moving averages tend to change direction well after a peak or trough in price and therefore are considered “late” in changing direction. Which of the following is GENERALLY considered the most


CMT Level 1 Sample Questi ons effective way to offset this tendency to lag? a. Using a weighted moving average 62. Which of the following would NOT be considered a support level? d. All the above are considered as potential support levels 63. What is meant by the statement “volume precedes price”? d. Changes in supply and demand are often apparent in volume before price 64. A complete Elliott wave is made up of: d. a and b 65. A descending triangle that forms in a downtrend would probably be considered a: b. Continuation pattern 66. Which of the following is LEAST reliable? a. Broadening formations 67. Which of the following is NOT TRUE about volume? b. A rally that occurs on rising volume points to a probable trend reversal 68. Which of the following is LEAST TRUE of a doji pattern? b. It is usually a continuation pattern 69. Which of the following is NOT TRUE about gaps? c. Gaps are almost always filled 70. Which of the following would MOST likely be a continuation pattern? d. Flag 71. Risk can be defined as: d. All of the above 72. In a 10‐day rate of change indicator, if the latest (more recent) price is higher than the price 10 days ago: b. The ratio would be positive 73. An extreme overbought reading on a momentum indicator in the early stages of a rally: b. Indicates that the rally is strong and will probably carry further 74. Which statement is TRUE of an up‐trending market? d. b and c 75. Which would normally be considered a sentiment indicator that is MOST useful to traders? d. Put/call ratios


P a g e 23 76. Which type of chart is USUALLY considered BEST suited for establishing price targets based on a horizontal measurement? c. Point and Figure charts 77. Contrary opinion is a useful investment tool because d. It is at turning points where people are wrong 78. Which of the following is NOT one of the “essential areas” of technical analysis? a. Business cycle analysis 79. The longest term trend in the market is the: c. Secular 80. In the Dow Theory, the MOST important price is the: d. Close 81. The MOST popular types of market indexes include all the following EXCEPT: a. Logarithmic weighted 82. The MOST comprehensive (all‐inclusive) index is: d. Wilshire 5000 Equity Index 83. Which is the MOST important in identifying a head & shoulders top pattern? b. Volume on the right shoulder must decrease substantially from previous rallies 84. The longest‐term cycle is GENERALLY recognized as the: d. Kondratieff cycle 85. The “January Effect” refers to a seasonal tendency when: b. Small cap stocks outperform large cap stocks 86. Which of the following is NOT a sentiment indicator? d. Relative strength 87. According to the MTA Code of Ethics, Members and Affiliates are held to the same standards of conduct. a. True 88. Members and Affiliates are allowed to use substantially the same language from a report prepared by an author now deceased if the original author receives prominent and adequate credit for the work. a. True 89. A Member or an Affiliate MUST wait at least a week before acting on any recommendation made by the Member or Affiliate, in order to give both the Members or Affiliates employer and clients adequate time to act on such recommendation first. b. False


CMT Level 1 Sample Questi ons 90. Members and Affiliates are permitted to use the Association mailing list for commercial purposes provided they obtain prior permission from the MTA. b. False 91. If a Member or Affiliate takes a job with a new employer, he or she is then free from the responsibility to keep in confidence knowledge concerning the lawful private affairs of his or her clients, former employer, or the clients of the former employer. b. False 92. A simple moving average is slower to respond to price changes than a weighted moving average. a. Slower, weighted 93. One reason why price oscillators are useful is because momentum tends to lead price. a. Momentum tends to lead price 94. A secondary cycle can be used to determine the major trend of the market. b. False 95. The trend of each cycle is MOST strongly influenced by the trend of the next longest cycle. a. True 96. Divergences and failure swings are MOST useful on an RSI indicator when they occur below the _____________line. b. 70 and above the 30 97. Which of the following describes the Equivolume charting? c. It is a bar chart where the bars vary in width which is determined by volume 98. Which of the following describes on‐balance volume? a. On days when prices close higher, it is assumed that all volume is represented by buyers 99. Which of the following is NOT true of point and figure charting? a. Due to the complexity in creating these charts, it has only come into common usage with the advent of computer 100. What is the relevance of the box size in point and figure charting? c. Box size determines the sensitivity of frequency of trading 101. What is the definition of open interest in the futures markets? b. The total number of outstanding long or short contracts 102. Which of the following is a difference between point and figure charts and bar charts? c. Point and figure charts provide clearer trading signals 103. Which of the following is true of the comparison of candlestick charts to bar charts? d. Candlestick charts allow for easier visual interpretation


P a g e 25 104. In candlestick charts, what is considered the “essence of the price movement?” c. Real body 105. What additional interpretation is possible with candlestick charts compared to bar charts? c. Relative strength between bulls and bears


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