CMT Level I
Sample Exam
Answers
1. David, a senior analyst with a brokerage firm, decides to change his recommendation for the
common stock of Pigeon Industries, Inc. from a “buy” to a “sell”. This change in investment
advice is mailed to all the firm’s clients on Wednesday. Next day, a client calls in with a buy
order for 500 shares of Pigeon Industries, Inc. In this circumstance, Johnson should:
c. Advise the customer of the change in recommendation before accepting the order.
This question involves Standard III (B) – Fair Dealing.
Reference: Code of Ethics and Standards of Professional Conduct
2. The mosaic theory holds that an analyst:
b. Can use material public information and nonmaterial nonpublic information in the analyst’s
analysis.
This question involves Standard II (A) – Material Nonpublic Information.
Reference: Code of Ethics and Standards of Professional Conduct
3. Bell is a portfolio manager. One of his firm’s clients has told Bell that he will compensate him
beyond the compensation provided by his firm on the basis of the capital appreciation of his
portfolio each year. Bell should:
b. Obtain permission from his employer prior to accepting the compensation arrangement.
This question involves Standard IV (B) – Additional Compensation Arrangements.
Reference: Code of Ethics and Standards of Professional Conduct
4. Which of the following is a correct statement of a member’s or candidate’s duty under the Code
and Standards?
a. In the absence of specific applicable law or other regulatory requirements, the Code and
Standards govern the member’s or candidate’s actions.
This question involves Standard I (A) – Material Nonpublic Information.
Reference: Code of Ethics and Standards of Professional Conduct
5. Elizabeth is a financial analyst with XYZ Brokerage Firm. She is preparing a purchase
recommendation on JNI Corporation. Which of the following situations is most likely to represent
a conflict of interest for Neely that would have to be disclosed?
c. XYZ holds for its own account a substantial common stock position in JNI.
This question involves Standard VI (A) – Disclosure of Conflicts.
Reference: Code of Ethics and Standards of Professional Conduct
6. To increase the sensitivity of a 5x3 Point and Figure chart, one would:
b. Decrease the box size
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 23
7. A basic Point and Figure buy signal is triggered when:
c. The current column of Xs rises above the previous column of Xs by one box
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 23
8. In constructing a point and Figure chart, a new entry is added only when:
d. Price has moved equal to or more than the specified box size
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 23
9. Identify the Point and Figure pattern highlighted below:
c. Ascending Triple Top
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 23
10. Identify the Point and Figure pattern highlighted below:
c. Spread Triple Top
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 23
11. When the Stochastic indicator crosses below 20, it is signaling
d. The price is vulnerable to a reversal, but no action needs to be taken just yet.
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 15
12. Which of the following principles describes a characteristic of related cycles
a. harmonics
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 23
13. Which of the following formations is often called a coil?
d. Symmetrical Triangle
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 3
14. Bullish support lines on a 3-box reversal P & F chart are drawn at a _____ degree angle:
a. 45
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 23
15. The stock multiplication factor to adjust for a 30% stock dividend on a Point and Figure chart is:
b. 1.3
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 23
16. Which one of the following chart types uses more than one data point to plot a particular time
interval?
c. Candlesticks
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 10
17. __________ mean is the best choice when averaging ratios that can be either fractions or
percentages:
b. Geometric
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 49
18. Kurtosis refers to the:
d. Peakedness or flatness of a distribution
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 49
19. Standard deviation is calculated by taking the square root of:
a. Variance
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 49
20. If the daily returns are constant, they can be converted to annualized risk by multiplying the daily
return with the square root of:
c. 252
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 49
21. The Sharpe ratio is a measure of:
c. Performance
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 49
22. Seasonality is a cycle that occurs:
d. Yearly
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 50
23. Fungibility is:
b. Interchangeability of financial assets on identical terms
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 50
24. The cycle, along with trend and _____________ comprise the three orderly components of price
movement:
c. Seasonality
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 50
25. The global business cycle as identified by the Princeton Economic Institute measures:
c. 8.6 years
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 50
26. Which of the following cycles is the longest by duration:
b. Kondratieff Wave
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 50
27. Typically, the _________ year of a president’s term posts the strongest returns for the market as
per the Presidential Cycle:
c. Third
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 50
28. An effective way of detrending price data to identify cycles is to:
c. Divide the closing prices by a moving average of those prices
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 22
29. The New High-New Low index is calculated by:
d. Subtracting New Lows from New Highs
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 6
30. If the New High-New Low index declines while the broader market stays flat or rallies:
b. It is time to take profits on long positions
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 6
31. As per the theory of contrarian opinion, a high degree of consensus normally precedes:
b. A trend reversal
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 9
32. The Commitment of Traders report summarizes:
c. Buying and selling by commercials and large speculators
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 9
33. Which of the following statements accurately describe a support level?
c. A price level where buying is strong enough to interrupt or reverse a decline
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 31
34. A bear trap occurs when:
a. Prices recapture a violated support level after sell signals are generated
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 31
35. Serial correlation or autocorrelation means
a. There is persistence in the data.
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 49
36. The most important feature of the martingale process that makes it an appropriate model for EMH
is:
a. The absence of future price predictability
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 35
37. Risk aversion refers to the assumption that investors prefer a portfolio with:
b. Higher returns but are averse to higher variance in returns
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 36
38. Beta measures:
c. How much an individual stock’s return is related to the market return
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 36
39. In EMH, technical traders can be thought of as a specific type of noise trader because:
b. Technical traders are not rational traders
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 39
40. When sentiment indicators point to extreme optimism:
a. Liquidity is low
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 40
41. From a sentiment perspective:
b. Liquidity and psychology are inversely related
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 40
42. For short-sellers of a security, market risk refers to the possibility of:
b. An increase in value
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 16
43. Slippage is normally attributed to:
d. Liquidity risk
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 16
44. Political risk refers to:
d. The potential for legislative actions to deter companies from reaching their goals
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 16
45. Yield refers to the projected annual return on a bond based on its:
a. Current market price
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 17
46. Treasury Inflation-Protected Securities (TIPS) are bonds whose _________ is adjusted based on
the level on inflation (change in consumer prices):
a. Principle
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 17
47. An inverted yield curve has historically pointed toward:
d. Economic slowdowns and recessions
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 17
48. Treasury-bill returns come from:
a. Price changes
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 17
49. Which of the following bonds exceed rating thresholds set by S&P, Moody’s and Fitch?
c. Investment-grade bonds
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 18
50. Debentures are a type of:
c. Unsecured loans
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 18
51. Companies can borrow for two years by selling:
d. Medium-term notes
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 18
52. In spot markets, commodities such as gold are sold for:
b. Immediate delivery
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 19
53. Which of the following commodities also acts as a barometer of an economy’s prospects?
c. Copper
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 19
54. The benchmark grade of U.S. crude oil is commonly called:
c. WTI
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 19
55. Which of the following is a trade-weighted geometric index?
b. U.S. dollar index
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 19
56. The CBOE Volatility Index (VIX) is a measure of:
a. 30-day implied volatility as priced by the S&P 500 index option market
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 48
57. Increased buying of options by market participants leads to:
c. An increase in implied volatility
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 47
58. A VIX reading of 20 implies market expectations of a _____ move over the next 30 days:
b. 5.77%
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 48
59. Charles Dow’s first major contribution to the field of technical analysis is:
c. The development and use of indices
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 2
60. The basic five-wave sequence in the Elliott Wave Theory is termed as:
c. Motive wave
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 33
61. As per the Elliott Wave Theory, in an impulse wave:
d. Wave 3 can never be the shortest motive subwave, but may not be the longest.
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 33
62. Which of the following can be classified as a motive wave when analyzing charts as per Elliott’s
Wave Theory?
a. Diagonal
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 33
63. The Elliott Wave pattern highlighted below is a/an:
d. Ending Diagonal
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 34
64. Which of the following is an appropriate scale to analyze long-term price movements with
considerable volatility on a price chart?
d. Logarithmic
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 42
65. Gaps that appear midway in a price trend are:
d. Continuation gaps
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 43
66. Which of the following types of gaps are quickest to close?
a. Area gaps
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 43
67. Breakouts from a rectangle pattern occur when:
b. Price closes outside the boundary of the pattern
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 44
68. Identify the pattern highlighted in the price chart:
b. Ascending triangle
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 44
69. A descending triangle has:
c. A horizontal support line
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 44
70. Symmetrical triangles shorter than three weeks in duration are more likely to be categorized as:
c. Pennants
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 44
71. Flags and pennants always require ___________ leading to them:
a. A strong advance/decline
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 44
72. In a Head & Shoulders bottom formation, volume is generally:
d. Heaviest during the formation of the left shoulder.
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 46
73. Which of the following would be a valid confirmation of the Head & Shoulders chart formation?
b. Sell when the right shoulder penetrates the neckline
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 46
74. Which of the following chart types does not show price gaps?
b. Line
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 10
75. The _______ chart includes the same information as that on a candlestick chart::
b. OHLC
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 10
76. A candlestick formation highlighted by a horizontal line (identical opening and closing price) that
replaces the real body is referred to as a:
a. Doji
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 10
77. A breadth indicator measures:
b. Participation of issues in a market trend
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 11
78. Bollinger Bands show variations above and below:
b. A simple moving average of prices
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 11
79. Which of the following can be categorized as an unbound oscillator?
b. MACD
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 13
80. The signal line in the traditional MACD indicator is:
a. A simple moving average
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 13
81. A combination of rising on-balance volume along with declining price action is suggestive of:
b. A bullish divergence
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 13
82. RSI is considered to be a more stable than most measures that calculate momentum because:
b. It uses all the values of the period in its calculation
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 14
83. The stochastic indicator measures:
b. The relative position of the closing price within a past high-low range
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 14
84. The triangle pattern with the highest throwback rate is a(n)
c. ascending triangle
Ref: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 43
85. If someone says that Eastern Technical Analysis and Western Technical Analysis
together augment the overall recognition of trends, what are they likely to be explaining ?
d. That candlestick charts used with oscillators and other technical studies can be
productive
Ref: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 12
86. One commonly used type of chart that represents a blend of Eastern and Western technical
analysis tools is:
a. Ichimoku cloud chart
Ref: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 13
87. Japanese candlestick charting refers to a gap as a:
d. Window
Ref: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 43
88. An engulfing pattern is considered to signal a
a. Short-term Reversal
Ref: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 14
89. A gap up followed by a long upper shadow on a candle chart potentially foreshadows:
b. a bearish reversal signal
Ref: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 10
90. According to past MTA president, Gail Dudack, a major change of trading structure in recent
years requires technicians to be alert to the fact that
d. Volume can no longer be accurately defined
Ref: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 3
91. Of the following, which indicator is most likely to be valuable in determining when to execute a
trend-following trading system
b. Directional Movement Indicator (ADX)
Ref: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 34
92. Most futures contracts are
a. Completely fungible
Ref: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 38
93. Which of the following statements is most accurate with respect to a price-weighted average?
d. A high-priced stock has more influence on the average compared to a low-priced stock
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 20
94. Which of the following is a market-cap weighted index?
c. NASDAQ Composite
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 20
95. Which of the following is a common criticism of technical analysis?
d) Noise traders are not trading on information that is true and relevant for predicting
upcoming earnings of a publically traded company.
Ref: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 34
96. Which of the following statements is an important assumption of the Efficient Market
Hypothesis?
a. Investors as a group will act rationally
Ref: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 34
97. Which of the following trends can be classified as the longest based on duration?
a. Primary trend
Ref: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 44
98. The Elliott Wave Theory subdivides a corrective wave into ________ subwaves:
b. Three
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 33
99. “Truncation” is defined as a:
b. Failure of the 5th wave to surpass the highs of the 3 rd wave
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 33
100. Which of the following is a commonly used tool by the Federal Reserve to set a target
rate that is aimed at containing inflation and maximize employment?
c. Open market operations
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 18
101. Throwbacks:
a. Occur after a bullish breakout
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 43
102. Which of the following would most likely be a continuation pattern?
a. Flag
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 44
103. Which of the following oscillators combines price and volume in its calculation?
d. Money Flow Index
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 13
104. A Narrow-Range day:
d. Indicates a phase of volatility compression
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 13
105. As a continuation variation, the rising wedge pattern would appear in:
b. A downtrend
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 14
106. A _______ gap occurs at a point of clear resistance or support:
c. Breakaway
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 11
107. The basic purpose of a channel line is to:
c. Identify likely reversal points
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 11
108. The Elliott wave pattern highlighted below is a:
b. Running flat
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 33
109. A zigzag, as per the Elliott Wave Theory has a _________ combination of subwaves.
d. 5-3-5
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 33
110. The chart pattern highlighted below (inside the circle) is:
d. A broadening bottom formation
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 42
111. The chart pattern highlighted below (inside the circle) is:
b. A Head & Shoulders top
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 12
112. The chart pattern highlighted below is:
d. An island bottom
Reference: (Implied in) MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 39
113. The chart pattern highlighted (in the smaller box) below is:
b. A falling wedge
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 12
114. When the lower bound is a horizontal support zone and the upper is a downward slanting
trendline, it is called a/an:
c. Descending triangle
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 44
115. In candlestick chart construction, the opening price for a positive session is recorded:
b. At the bottom of the real body
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 10
116. A candlestick that has an unusually long upper shadow suggests that:
a. Buyers have lost momentum
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 10
117. A bullish divergence is the combination of a ______ low in the price at the same time as
a _________ low in an oscillator:
b. Lower, higher
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 14
118. Which of the following can be classified as a one-day candlestick pattern?
c. Marubozu
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 10
119. The Dow Theory uses:
c. Closing prices
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 2
120. A minor high is a peak separated by ________ days from a higher high:
d. Five
Reference: MTA, CMT Level I: An Introduction to Technical Analysis, Chapter 42
