Stock Trading Stock Trading Technical Analysis & Chart Patterns 1

Question 1

What does a 'head and shoulders' chart pattern typically signal?

Accepted Answer

A bearish reversal

Answer

The head and shoulders pattern consists of three peaks—the middle being highest—and signals that an uptrend may be reversing to a downtrend.

Question 2

What does the Relative Strength Index (RSI) measure?

Accepted Answer

The speed and magnitude of price changes

Answer

RSI is a momentum oscillator that measures the speed and change of price movements on a scale of 0 to 100, identifying overbought or oversold conditions.

Question 3

What is a 'support level' in technical analysis?

Accepted Answer

A price floor where buying interest tends to prevent further decline

Answer

A support level is a price point where demand is strong enough to prevent the stock from falling further, often acting as a 'floor.'

Question 4

What does a 'golden cross' indicate in technical analysis?

Accepted Answer

The 50-day moving average crosses above the 200-day moving average

Answer

A golden cross occurs when the short-term 50-day moving average crosses above the longer-term 200-day moving average, signaling potential bullish momentum.

Question 5

What does high trading volume during a price breakout suggest?

Accepted Answer

The breakout has stronger conviction and is more reliable

Answer

High volume during a breakout confirms strong buying or selling conviction, making the move more likely to be sustained rather than a false breakout.

Stock Trading Practice Test

Stock Trading Practice Test

Stock Trading Stock Trading Technical Analysis & Chart Patterns 1