CTA Market Structure & Price Theory 2

Question 1

In Wyckoff analysis, what does the 'Spring' represent?

Accepted Answer

A false breakdown below support designed to shake out weak holders

Answer

The Spring is a Wyckoff event where price briefly dips below a trading range's support to trigger stop-losses before reversing sharply higher, signaling institutional buying.

Question 2

The concept of 'price memory' in technical analysis refers to:

Accepted Answer

The tendency of price to react to previously established levels

Answer

Price memory describes the market's tendency to react at prior support/resistance zones because traders remember and place orders at those historically significant levels.

Question 3

Which type of gap occurs within an established trend and signals trend continuation?

Accepted Answer

Runaway (continuation) gap

Answer

A runaway or measuring gap appears in the middle of a strong trend on high volume, confirming that the trend has momentum and is likely to continue.

Question 4

In Elliott Wave Theory, how many waves make up a complete motive (impulse) wave sequence?

Accepted Answer

5

Answer

An Elliott Wave impulse sequence consists of five waves: three in the direction of the trend (waves 1, 3, 5) and two corrective waves (waves 2, 4).

Question 5

What does 'price discovery' mean in the context of technical analysis?

Accepted Answer

The market process of determining an asset's fair price through supply and demand

Answer

Price discovery is the market mechanism where buyers and sellers interact to establish an asset's current price, which technicians track through chart patterns and price action.

CTA - Certified Technical Analyst Practice Test

CTA - Certified Technical Analyst Practice Test

CTA Market Structure & Price Theory 2