FIN555 (TEST 2)

PART A (2 MARKS EACH ANSWER)

1. How many times must a line be touched to qualify as a trendline?

A. Once
B. Three times
C. Twice
D. None of the above

2. Which is generally the strongest and more reliable signal?

A. A selling climax
B. Record volume
C. Declining volume
D. Rising volume

3.

Copy the above chart and construct a down trendline with a valid breakout.

4. If price rises and volume contracts and then price falls and volume
expands:
A. This is bearish.
B. This is bullish.
C. This is normal action.
D. There is no indication of whether this is bullish or bearish.
5. A head-and-shoulders top consists of:
A. A final rally and two smaller rallies
B. A final rally and at least three smaller rallies
C. A final rally separated by two smaller rallies
D. Two small rallies that precede a large rally

6.

Which trendline that is most significant?

7. A pennant is formed with:

A. Two converging trendlines
B. Two diverging trendlines
C. Two parallel lines
D. Two parallel lines that slope down in a downtrend and up in
an uptrend

8. Once a trendline has been violated:

A. You can forget about it
B. Draw another line
C. Extend it to look for future support/resistance levels
D. None of the above
9. Trendlines obtain their significance from three things. What are they? (Fill in the blank)
A. The l_____ of the line
B. The number of times it has been t_____ or approached
C. The a_____ of ascent or descent

10. Please fill in the blanks: A gap is an e_____ point on a chart. The upper and lower points of a gap
often become future s_____ and r_____points.

11. True or false: To qualify as an outside bar, it must contain all of the following elements:
i. It should be preceded by a strong price trend.
ii. It should totally encompass the previous bar’s trading range.
iii. It should gap up or down on the previous bar.

A. True
B. False

PART B

1. Why one and two bar patterns should be interpreted as shades of gray instead of black and white?
(4 marks)
2. What factors that may improve the significance of trendlines?
(6 marks)
3. Write any six (6) Principles of Volume Interpretation.
(12 marks)
4. Discuss the criteria that used to confirm the valid breakout.
(8 marks)
5. Draw a:
a) Rectangle formation that breaks during bearish to bullish.
b) Pennant formation that breaks from bullish to bearish.
c) Inside one and two bar formation that reverse from bearish to bullish.
d) Wedges formation that breaks during sideways movement.
e) Outside one and two bar formation that reverse from bullish to bearish.
(20 marks)