CTA Volume Analysis & Market Breadth 3

Question 1

What is 'distribution' in the context of volume and market structure?

Accepted Answer

Heavy volume on declining days suggesting institutional selling into rallies

Answer

Distribution occurs when institutions sell large holdings into market strength, typically showing up as high volume on declining days and low volume on advancing days.

Question 2

Chaikin Money Flow (CMF) primarily measures:

Accepted Answer

The volume-weighted average of buying and selling pressure over a set period

Answer

CMF uses the close location value multiplied by volume to create a volume-weighted measure of buying versus selling pressure over a specified lookback period.

Question 3

What does a 'volume dry-up' near a support level suggest?

Accepted Answer

Sellers are becoming exhausted and a bounce or consolidation may follow

Answer

When volume dries up as price tests support, it indicates that selling pressure is diminishing, which can be a constructive sign that support may hold and a reversal could develop.

Question 4

In market breadth analysis, what does a 'bearish breadth divergence' mean?

Accepted Answer

The market index achieves new highs while the A/D Line fails to confirm by making lower highs

Answer

Bearish breadth divergence is a warning signal where fewer and fewer stocks participate in an index's new highs, suggesting the rally is narrowing and vulnerable to reversal.

Question 5

The 'volume-price trend (VPT)' indicator differs from OBV in that it:

Accepted Answer

Multiplies the percentage price change by volume rather than using the full day's volume

Answer

VPT weights volume by the percentage price change rather than adding the full volume amount as OBV does, making it more sensitive to the magnitude of price moves.

CTA - Certified Technical Analyst Practice Test

CTA - Certified Technical Analyst Practice Test

CTA Volume Analysis & Market Breadth 3