CPT Technical Analysis & Chart Patterns 2 — Questions and Answers
Question 1: A rising wedge pattern that forms after a sustained uptrend typically signals what outcome?
- Continuation of the uptrend
- Bearish reversal (Correct answer)
- Neutral consolidation
- Bullish breakout
Correct answer: Bearish reversal
A rising wedge in an uptrend is a bearish reversal pattern because converging trendlines show weakening buying pressure.
Question 2: Which volume behavior is most typical during the formation of a symmetric triangle?
- Volume expands steadily throughout
- Volume contracts as the pattern develops (Correct answer)
- Volume spikes on every test of support
- Volume is irrelevant to triangle analysis
Correct answer: Volume contracts as the pattern develops
Volume typically contracts during a symmetrical triangle as traders await resolution of the indecision pattern.
Question 3: The Fibonacci retracement level most commonly used as a 'golden ratio' support/resistance zone is:
- 38.2%
- 50.0%
- 61.8% (Correct answer)
- 78.6%
Correct answer: 61.8%
The 61.8% level, derived from dividing a number by the next in the Fibonacci sequence, is known as the golden ratio.
Question 4: In candlestick analysis, a 'doji' candle is best characterized by:
- A long upper shadow and no lower shadow
- Open and close prices that are nearly equal (Correct answer)
- A close significantly above the open
- A gap between consecutive sessions
Correct answer: Open and close prices that are nearly equal
A doji has nearly identical open and close prices, forming a cross shape that signals market indecision.
Question 5: When the MACD line crosses above the signal line, this event is interpreted as:
- A bearish divergence signal
- A bullish momentum signal (Correct answer)
- Overbought market conditions
- A confirmation of a downtrend
Correct answer: A bullish momentum signal
A MACD line crossing above the signal line is a classic bullish crossover indicating upward momentum is strengthening.
Question 6: A 'cup and handle' pattern breakout target is typically calculated by:
- Adding the handle depth to the breakout point
- Adding the cup depth to the breakout point (Correct answer)
- Subtracting the cup depth from the rim
- Multiplying the cup width by 1.618
Correct answer: Adding the cup depth to the breakout point
The measured move for a cup and handle is the depth of the cup added to the breakout price level.
Question 7: Which candlestick pattern consists of three consecutive declining candles, each closing lower, and signals continued bearish momentum?
- Three white soldiers
- Evening star
- Three black crows (Correct answer)
- Dark cloud cover
Correct answer: Three black crows
Three black crows is a bearish pattern of three consecutive long-bodied candles each closing at or near the session low.
CPT Technical Analysis & Chart Patterns 2
A rising wedge pattern that forms after a sustained uptrend typically signals what outcome?