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CFA Level 1 - Quantitative Methods > Technical Analysis > Flashcards

Flashcards in Technical Analysis Deck (34)
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1
Q

The study of collective market sentiment as expressed in buying and selling of assets

A

Technical Analysis

  • Reports that price and volume reflect the collective behavior of buyers and sellers
  • Uses only the firms share price and trading volume data to project a target price.
2
Q

Analysis which attempts to determine the intrinsic value of an asset

A

Fundamental Analysis

*Uses the firms financial statements and other information to analyze its financial position

3
Q

Chart that maps the high and lows of each period

A

Bar Charts

4
Q

Chart that uses the same data as the bar chart, but displays a box bounded by the opening and closing prices. The box is open if price increases. The box is closed if the price decreases.

A

Candlestick Chart

5
Q

A chart helpful in identifying changes in the direction of price movements. Price is on the y-axis, the number of directional changes is on the x-axis.

A

Print and Figure Chart

6
Q

A calculation of the ratios of an assets closing price to benchmark values, and draws a line chart of the ratios.

A

Relative Strength Analysis

7
Q

When selling is supposed to emerge that prevents further price increases.

A

Resistance levels

8
Q

In an uptrend, the trendline connects

A

the increasing lows in price.

9
Q

If price crosses, trendline by a significant amount, a breakdown occurs, signaling an end to that period of increasing lows. (FOR UPTREND)

A

10
Q

In a downtrend, the trendline connects

A

the decreasing highs in price.

11
Q

If price crosses the trendline by a significant amount, a breakout occurs, signaling the end of that period of decreasing highs. (FOR DOWNTREND)

A

12
Q

When buying is expected to emerge to prevent further price decreases.

A

Support Level

13
Q

The belief that breached resistance levels become support levels and the breached support levels become resistance levels.

A

Change in Polarity

14
Q

Patterns that occur when a trend approaches a range of prices but fails to continue beyond that range.

A

Reversal Patterns

15
Q

A pattern that suggests that demand has been pricing the uptrend is fading, especially if the highs in the pattern occur on declining volume.

A

Head and Shoulders Pattern
*Analysts use the difference in price between the “head”, the highest price reached, and the “neckline”, the support level to which the price retraced after the “left shoulder” and “head” have formed.

16
Q

A pattern that suggests a pause in trend rather than reversal

A

Continuation patterns

  • triangles form when prices reach lower highs, and higher lows over a period of time and converge.
  • Rectangles form when trading temporarily forms a range between a support level and a resistance level.
  • **Flags = ST Rectangles
  • *** Pennants = ST Triangles
17
Q

Moving Average Lines (MALs) are used to smooth fluctuations in a price chart

A

MALs = mean of last n closing prices

18
Q

When the ST average crosses above LT average, signaling buy into uptrend.

A

Golden Cross

19
Q

When ST average crosses below LT average, signals sell into downtrend.

A

Dead Cross

20
Q

Indicators that are constructed based on the standard deviation of closing prices over the last n periods.

A

Bollinger Bands

21
Q

Indicators used to identify overbought or oversold markets. Or convergence and divergence.

A

Oscillators

  • the are indicators based on market prices but scaled so that they “oscillate” around a given value, or between 2 values.
  • Extreme high values signal overbought market
  • *Extreme low values signal oversold market
22
Q

An oscillator calculated as 100 times the difference between the latest closing price and the closing price n periods later.

A

Rate of Change Oscillator (ROC) or momentum oscillator.

  • buy when oscillator goes from - to +, signaling uptrend.
    • sell when oscillator goes from + to -, signaling downtrend
23
Q

An index based on the ratio of total price increases to total price decreases of a selected number of periods.

A

Relative Strength Index (RSI)

  • Oscillates between 0 and 100
    • 70 is overbought. 30 is oversold.
24
Q

Indicators that is drawn using exponentially smoothed moving averages, which place greater weight on more recent observations.

A

Moving Average Convergence / Divergence Lines

  • Oscillates around 0 with no bounds.
    • indicates overbought and oversold markets, as well as convergence / divergence.
25
Q

Indicators found through opinion polls

A

Sentiment Indicators

26
Q

Put/Call Ratios Calculation

A

Put Volume / Call Volume

  • Put options increase value when price decreases
  • Call options decrease value when price increases
  • As the ratio increases, the sentiment is more negative.
27
Q

An index that measures volatility of options on S&P 500 index.

A

Volatility Index (VIX)

*A high VIX suggests investors fear declines.

28
Q

An increase in total margin debt outstanding suggests aggressive buying by bullish margin investors. Which leads to a price decline.

A

Margin Debt

29
Q

A ratio that is the number of shares investors have borrowed and sold short. As this ratio increases, strong negative sentiment is indicated.

A

Short interest ratio (SIR)

SIR = short interest / avg. trading volume

30
Q

= (# of advancing issues / # declining issues) / (volume advancing issues / volume declining issues)

A

ST trading index (TRIN) or Arms Index

  • As TRIN spikes up, it signals a large daily loss.
    • As TRIN spikes down, it signals a large daily gain
31
Q

= Mutual Funds Cash / Mutual Funds Assets

A

Mutual fund cash position

  • increases when failing market
    • decreases when rising market
32
Q

New equity issuance or secondary offerings add to supply of stock. Coincides with market peaks when high.

A

33
Q

The belief that financial market prices can be described by an interconnected set of cycles, ranging from minutes to centuries.

A

Elliot Wave Theory

  • Size of the waves correspond to Fibonacci numbers
  • *Ratios of Fibonacci ratios converge to 0.618 and 1.618
  • Used to set price targets
34
Q

Analysis of the interrelationships among the market values of major asset classes, including stocks, bo nds, commodities and currencies.

A

Intermarket Analysis