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  • Exam Name: CMT Level II Exam
  • Last Update: Sep 12, 2025
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CMT-Level-II Practice Exam Questions with Answers CMT Level II Exam Certification

Question # 6

Which of the following is a CORRECT interpretation of open interest?

A.

Rising open interest in an uptrend is bearish

B.

Declining open interest in an uptrend is bearish

C.

Rising open interest in a downtrend is bullish

D.

Declining open interest in a downtrend is bearish

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Question # 7

Central tendency is:

A.

Statistical jargon for the typical outcome

B.

The midpoint of a trading range

C.

A popular Elliott Wave guideline

D.

A common pitfall of novice traders

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Question # 8

Which of the following is a proper technical usage of MACD indicators?

A.

Trendline analysis can be used with MACD

B.

MACD crossover rules are different than other crossover rules

C.

MACD histograms are best used to initiate new positions contrary to the price trend

D.

When the slower MACD line is above the faster line, the MACD histogram will be above zero

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Question # 9

What is the measuring objective for a symmetrical triangle formation?

A.

A trendline from the top of the pattern parallel to the lower trendline

B.

The height of the base of the triangle

C.

Both A. and B. are valid techniques

D.

Neither A. nor B. is a valid technique

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Question # 10

The only effective method of diversifying a portfolio is by including asset classes with ________ correlation to stocks such as cash, foreign exchange or commodities.

A.

positive

B.

meaningful

C.

low/negative

D.

moderately positive

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Question # 11

Near the end of a recession:

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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Question # 12

Which of the following is the BEST volume indicator for analysis of futures trading?

A.

Open interest

B.

Contract volume

C.

Total volume

D.

Breadth

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Question # 13

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

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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Question # 14

A breakout:

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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Question # 15

A trend-based trading system where the trend is the weighting of the recent closing prices by a smoothing constant:

A.

Point and figure

B.

Simple moving average

C.

Exponential smoothing

D.

N-day break

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Question # 16

What are three common ways that a greed-driven investor can suffer losses, even when his longerterm market forecast is CORRECT?

A.

Options, indexes and pyramiding

B.

Options, indexes and currencies

C.

Options, leveraging and pyramiding

D.

Options, leveraging and currencies

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Question # 17

Which of the following is true of Wilder's Parabolic System?

A.

It is a time/price reversal system

B.

It always in the market

C.

It only works for trending markets

D.

All of the above

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Question # 18

Staying the course in a trading strategy GENERALLY entails?

A.

Meeting margin calls

B.

Not utilizing stops

C.

Not getting sidetracked by single, counter-trend news events

D.

Most valid buy signals in trading systems occur in the opposite direction of the prevailing trend

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Question # 19

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.

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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Question # 20

Which of the following are true of futures volume and open interest?

A.

Open interest increases during a trending period

B.

Volume may decline but open interest builds during an accumulation phase

C.

Rising prices and declining volume/open interest indicate a pending change of direction

D.

All of the above

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Question # 21

How can one identify the existence of a cycle?

A.

Remove price trend

B.

Switch time frames

C.

Use only period extremes

D.

None of the above

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Question # 22

Technicians refer to the speed of price movement as:

A.

Volume

B.

Trend

C.

Slope or momentum

D.

Ratio of two prices

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Question # 23

In regards to cycle analysis, translation is:

A.

Distance between troughs

B.

Distance between peaks

C.

Useful in checking where the trend direction is headed or if it is changing

D.

To the left when the peak is beyond the halfway point

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Question # 24

What is the general term for rate-of-change momentum indicators:

A.

RSI

B.

Stochastic

C.

Oscillators

D.

MACD

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Question # 25

Which of the following is not an example of initial decision taken into consideration in the field of system testing?

A.

Set the time-routine

B.

You need a Risk Management Plan

C.

You need to configure the machine time horizon

D.

Determine what markets to concentrate can be delayed initially

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Question # 26

Which is the CORRECT interpretation of the candlestick umbrella pattern?

A.

They can be bullish or bearish depending on the market

B.

They are bearish after a rally

C.

They are called hammers after a downtrend

D.

All of the above

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Question # 27

Which of the following graphical representation is used to plot a single statistic?

A.

Point-and-figure charts

B.

Candlestick charts

C.

Bar charts

D.

Line charts

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Question # 28

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

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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Question # 29

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

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

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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Question # 30

How can one identify the existence of a cycle?

A.

Switch time frames

B.

Remove price trend

C.

Remove volume trend

D.

Use n period extremes

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Question # 31

Which of the following would normally be considered a sentiment indicator that is most useful to traders?

A.

Corporate buy backs

B.

Price/earnings ratio

C.

Insider buying

D.

Put/call ratio

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Question # 32

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

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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Question # 33

Protective stops that are placed too far away can result in which of the following factors?

A.

Small frequent elections

B.

Large losses

C.

Too many trades

D.

Unwanted liquidation

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Question # 34

Which of the following perfectly describes the pattern of a standard broadening formation with regards to pattern analysis?

A.

The upper trend line goes downwards and must have two peaks, the latter higher than the former

B.

The upper trend line goes upwards and must have two peaks, the latter higher than the former

C.

The upper trend line goes upwards and must have a single peak

D.

The upper trend line goes upwards and must have two peaks, the latter lower than the former

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Question # 35

An analyst has several groups of clients who are categorized according to their specific needs. Compared to research reports distributed to all of the clients, reports for a specific group:

A.

will definitely include more basic facts.

B.

may generally exclude more basic facts.

C.

cannot be selectively distributed.

D.

will not be allowed because it violates the Standard III(B), Fair Dealing.

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Question # 36

For a swing trader, which of the following is valid stochastic sell signal except:

A.

A

B.

B

C.

C

D.

D

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Question # 37

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

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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Question # 38

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:

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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Question # 39

Using the Point-and-Figure method what is the standard method used to portray the volume on the chart?

A.

This is to multiply the volume occurring when each box was in operation

B.

This is to sum up the volume occurring when each box was in operation

C.

This is to divide up the volume occurring by each box was in operation

D.

It is, to sum up, the volume that occurs when every box is not in use

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Question # 40

Standard deviation is:

A.

A descriptive statistic which defines the central tendency

B.

The square root of the variance

C.

The covariance of two securities

D.

An inferential statistic which measures symmetry around the mean

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Question # 41

Which of the following is the MOST likely use of an oscillator in a trading system:

A.

To forecast future price levels

B.

As a timing tool

C.

To hedge other positions

D.

To determine position sizes

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Question # 42

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

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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Question # 43

From a contrarian's perspective, which of the following would be considered a bullish indicator?

A.

A Business Week cover with a story on "The Death of Equities"

B.

The vast majority of professional financial letter writers are bullish

C.

CNBC is on the television at the local bar, and everyone is paying attention

D.

Sales of investment books are increasingly dramatically

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Question # 44

Which of the following is the formula for calculating RSI?

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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Question # 45

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

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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Question # 46

A Harami most closely resembles what "western" charting pattern?

A.

Inside day

B.

Outside day

C.

Gap

D.

Andrew's Pitchfork

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Question # 47

Which of the following is the CORRECT order of the Industrial Life Cycle?

A.

Innovation, Maturity, Consolidation and Decay

B.

Innovation, Consolidation, Decay and Maturity

C.

Innovation, Consolidation, Maturity and Decay

D.

Innovation, Maturity, Decay and Consolidation

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Question # 48

Reversals in point and figure charts:

A.

Are set by convention as all point and figure charts have the same reversals

B.

Depend on the investment time horizon of the holder

C.

Can change within the same chart

D.

Should be less than a week

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Question # 49

An MTA Member or Affiliate using the MTA mailing list to send _____________ would not be in violation of the Code of Ethics:

A.

Research reports

B.

A free membership to a club

C.

Charting discount coupons

D.

CMT Newsletter

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Question # 50

Which of the following patterns resonate with the price action highlighted within the black box marked 'A' & 'B'?

A.

Piercing Line & hammer

B.

Piercing Line & Evening Star

C.

Bullish Engulfing & Shooting Star

D.

Bullish Engulfing & Hanging Man

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Question # 51

A technical analyst was at a convention in which a long-term point and figure stock chart was being discusseD. He noticed that low-price action did not appear as active as high-price action on the chart. One suggestion the technical analyst could provide, to clear up this apparent distortion, would be to:

A.

Change the charting scale to logarithmic

B.

Increase the time frame on the chart

C.

Change the scale to arithmetic

D.

Add the daily opening prices to provide a more visual benchmark of price changes

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Question # 52

__________ is used to calculate the relative volatility of the current portfolio compared to the benchmark by calculating the annualized return less the risk-free return and then divided by beta.

A.

Sharpe ratio

B.

Calmar ratio

C.

Sortino ratio

D.

Treynor ratio

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Question # 53

The "Rising 3 Methods" candlestick pattern is:

I. Bullish

II. Bearish

III. Long White Body followed by a series of smaller falling candles

IV. Long Black Body followed by a series of smaller rising candles

A.

I & III

B.

I & IV

C.

II & III

D.

II & IV

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Question # 54

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

A.

Smoothing technique used

B.

Distance between bands

C.

Selection of trend speed

D.

Use of a scaling factor

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Question # 55

Beta measures:

A.

the relation between a portfolio's return and market return.

B.

the relation between a portfolio's volatility and market volatility.

C.

how much an individual stock's return is related to the market return.

D.

how much an individual stock's volatility is related to the market volatility.

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Question # 56

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?

A.

1, 2, 3

B.

1, 2, 4

C.

½, 1, 2

D.

1, 3, 5

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Question # 57

Which of the following is not a disadvantage of the patterns that are formed by Broadening formations?

A.

They are hard to make the most of the profit

B.

They are often difficult to identify

C.

They are relatively common in occurrence

D.

The breakout lines are moving permanently away from each other

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Question # 58

Which of the following is MOST often a reversal pattern:

A.

Head and shoulders

B.

Wedge

C.

Triangle

D.

Pennant

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Question # 59

Which of the following scale is used where the vertical distance on the graph always represents the same dollar amount?

A.

Logarithmic scale

B.

Linear scale

C.

Exponential scale

D.

Arithmetic scale

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Question # 60

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

A.

Initial Stop

B.

Trailing stop

C.

Sell stop

D.

Standard deviation stop

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Question # 61

Which of the following is true of volume and open interest?

A.

Volume is not used in futures, only open interest

B.

Contract volume and total open interest are used in bonds

C.

Declining volume and open interest suggest the trend will continue

D.

Increasing volume and open interest suggest the trend will continue

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Question # 62

Prior to a market top, what would one expect to see in a VIX reading?

A.

Increasing VIX levels, as more investors are adding protective measures

B.

An overbought VIX level, given an increase in long term S&P futures contracts.

C.

Generally low VIX levels, as there is often complacency among traders prior to tops

D.

An oversold VIX level, given a decrease in long term S&P futures contracts.

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Question # 63

Which of the following BEST describes the rule of alternation?

A.

Downtrends follow uptrends

B.

Complex patterns follow simple patterns

C.

Price follows volume

D.

Prices alternate in Fibonacci sequences

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Question # 64

Which intermarket relationship may NOT hold when commodity prices decline (i.e., during periods of deflation)?

A.

The link between the dollar and commodities

B.

The link between commodities and bonds

C.

Intermarket analysis is unaffected by deflation

D.

The link between the equity and bond markets

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Question # 65

Allen Johnson, CMT, is working in the Singapore office of German Investment Corporation. From an informal conversation, Allen learns that the company's most recent annual report contains misappropriated

information. No one at the Singapore office expresses concern, however, because there has been no breach of Singapore's law. Barrett should:

A.

do nothing because the branch is outside of German jurisdiction.

B.

seek advice from the company counsel to determine appropriate action.

C.

do nothing because the branch is outside of Singapore's jurisdiction.

D.

disassociate himself from the case with a written report to his supervisor.

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Question # 66

Which of the following is true of the window pattern?

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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Question # 67

Which of the following is true of volume and open interest?

A.

Volume precedes price

B.

On-balance volume is not as accurate measure of volume as basic volume column charts

C.

Within an uptrend, a sudden leveling off or decline in open interest often signals that the current trend will accelerate

D.

Decreases in volume and open interest help confirm the resolution of price patterns

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Question # 68

Which of the following is true of the harami pattern?

A.

It is the opposite of the engulfing pattern

B.

It is considered a continuation pattern

C.

The color of the real body is of utmost importance to its significance

D.

All of the above

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Question # 69

Intermarket analysis can be used for which investment decisions?

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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Question # 70

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:

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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Question # 71

Which of the following is the MOST important thing to keep in mind in attempting to find a perfect indicator?

A.

Indicators do not take into account trading costs

B.

Indicators optimized for the past often do not work in the present

C.

Indicators are frequently so complex to create as to be of little use in making trading decision

D.

Indicators usually give conflicting trading advice

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Question # 72

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?

A.

10

B.

96

C.

48

D.

30

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Question # 73

What is the bearish counterpart to the Piercing Line candlestick pattern?

A.

3 Black Crows

B.

Dark Cloud Cover

C.

Hanging Man

D.

Shooting Star followed by an Inverted Hammer

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Question # 74

Which one of the following most accurately describes the CFA Institute Standard about using material nonpublic information?

A.

An analyst cannot use nonmaterial nonpublic information.

B.

An analyst may use material nonpublic information as long as it is for his personal use.

C.

An analyst may use material nonpublic information if it is legal in his country to do so.

D.

An analyst may use nonmaterial nonpublic information as long as it has been developed under the Mosaic Theory.

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Question # 75

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

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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Question # 76

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

A.

The number of waves follows the Pythagorean theorem

B.

Ratios are used to define price objectives

C.

The rule of alternation states that up waves follow down waves

D.

Bear markets do not fall below the top of the prior fourth wave

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Question # 77

When small cap stocks have abnormal strength, this can be attributed to the:

A.

The January Barometer

B.

The January Effect

C.

Kondratieff K-Wave

D.

Hindenburg Omen

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Question # 78

Which of the following statement is not true about the Diamond Top with regards to pattern analysis?

A.

It is a profitable pattern

B.

It consists of a combination of a broadening pattern and a symmetrical triangle

C.

It occurs at the top of a very sharp upward rise in prices

D.

It is not rare at price bottoms

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