CTA Candlestick Analysis & Japanese Techniques 3

Question 1

What is the 'Ichimoku Kinko Hyo' system and its primary advantage?

Accepted Answer

A multi-component system providing support/resistance, trend direction, and momentum signals in one view

Answer

Ichimoku Kinko Hyo ('equilibrium at a glance') uses five lines including the Cloud (Kumo) to simultaneously display trend, momentum, and support/resistance on a single chart.

Question 2

In Ichimoku analysis, the 'Kumo' (Cloud) represents:

Accepted Answer

A dynamic support/resistance zone formed by the leading spans, with thickness indicating strength

Answer

The Kumo is plotted 26 periods into the future and its thickness represents the strength of support or resistance — a thick cloud is harder to break than a thin one.

Question 3

The 'Evening Star' candlestick pattern signals:

Accepted Answer

A bearish reversal consisting of a large up candle, a small-body candle (star), and a large down candle

Answer

The Evening Star is a three-candle bearish reversal pattern where buying momentum is lost in the star candle and then confirmed by the following large bearish candle.

Question 4

A 'Piercing Line' pattern is the bullish equivalent of which bearish pattern?

Accepted Answer

Dark Cloud Cover

Answer

The Piercing Line is the bullish counterpart to Dark Cloud Cover — a bullish candle opens below the prior bearish candle's low and closes above its midpoint, signaling a reversal.

Question 5

What does the 'upper shadow' (upper wick) of a candlestick represent?

Accepted Answer

The distance between the high and the body's top, showing the extent to which buyers attempted to push price higher but failed

Answer

The upper shadow shows how far above the body the high reached, representing the buyers' failed attempt to hold those higher prices — longer upper shadows indicate more significant rejection.

CTA - Certified Technical Analyst Practice Test

CTA - Certified Technical Analyst Practice Test

CTA Candlestick Analysis & Japanese Techniques 3