CSC - Canadian Securities Course Fundamental and Technical Analysis Questions and Answers

Question 1

An analyst observes a stock's price repeatedly falling to a certain level and then bouncing back up. In technical analysis, what is this price level called?

Accepted Answer

A support level

Answer

A resistance level

Answer

An accumulation zone

Answer

A moving average

Question 2

Which of the following statements aligns with the semi-strong form of the Efficient Market Hypothesis (EMH)?

Accepted Answer

All publicly available information, including financial statements and news, is already reflected in a stock's current price.

Answer

It is possible to consistently outperform the market using only historical price and volume data.

Answer

Even inside, non-public information is fully reflected in the current stock price, making abnormal returns impossible.

Answer

Only past price movements are reflected in the stock price, so fundamental analysis can still yield superior returns.

Question 3

A fundamental analyst is evaluating a company's financial health and its ability to meet long-term obligations. Which ratio would be MOST relevant for this assessment?

Accepted Answer

Debt-to-Equity Ratio

Answer

Price-to-Earnings (P/E) Ratio

Answer

Current Ratio

Answer

Dividend Payout Ratio

Question 4

According to Dow Theory, which of the following is considered a confirmation of a primary market trend?

Accepted Answer

Both the industrial and transportation averages move in the same direction, confirming each other's new highs or lows.

Answer

The Dow Jones Industrial Average (DJIA) reaches a new high while the Dow Jones Transportation Average (DJTA) diverges and makes a new low.

Answer

Trading volume decreases as the price moves in the direction of the primary trend.

Answer

A minor trend reverses, signaling a change in the primary bull or bear market.

Question 5

A technical analyst identifies a chart pattern for a stock that has been in a strong uptrend. The pattern consists of a peak (left shoulder), followed by a higher peak (the head), and then a lower peak (right shoulder). What does this 'head and shoulders' pattern typically signify?

Accepted Answer

A potential reversal of the uptrend to a downtrend

Answer

A continuation of the current uptrend

Answer

A period of low volatility and consolidation

Answer

A strong buy signal for the security

Question 6

An investor is using a combined approach to select stocks. They first screen for companies with low debt-to-equity ratios and consistent earnings growth. Then, they analyze the charts of these selected companies to identify optimal entry points based on support levels and trend lines. This investor is using:

Accepted Answer

A combination of fundamental and technical analysis.

Answer

Primarily technical analysis, with a minor fundamental overlay.

Answer

The principles of the strong-form Efficient Market Hypothesis.

Answer

Exclusively fundamental analysis to determine intrinsic value.