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To take the CMT-Level-I exam, candidates must be members of the CMT Association and have at least one year of professional experience in the financial industry. CMT-Level-I exam is computer-based and consists of 132 multiple choice questions, which must be completed in four hours. The questions cover a wide range of topics including charting, trend analysis, pattern recognition, and risk management.
NEW QUESTION # 10
Open interest in a futures contract represents:
- A. The number of contracts traded in a day
- B. The sum of total volume and open interest
- C. The number of outstanding contracts on any given day
- D. The number of outstanding contracts on the first day of the month
Answer: C
Explanation:
Detailed Explanation:
Open Interest is the total number of futures contracts that have been entered into and not yet closed out (offset or delivered). It represents the number of outstanding contracts.
NEW QUESTION # 11
The chart formation highlighted below (Chart showing two distinct lows at similar level with peak in between) is:
- A. An island bottom
- B. A triple bottom
- C. A double bottom
- D. A three Buddha pattern
Answer: C
Explanation:
Detailed Explanation:
The chart clearly displays a "W" shape with two troughs at approximately the same price level, separated by a peak. This is the classic Double Bottom reversal pattern.
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NEW QUESTION # 12
Identify the type of pattern marked with a circle in the given chart:
- A. Bearish reversal
- B. Bullish continuation
- C. Bearish continuation
- D. Bullish reversal
Answer: C
Explanation:
Detailed Explanation:
The chart shows a sharp downward trend (pole) followed by a brief sideways consolidation (flag/pennant) marked by the circle. This pause typically refreshes the downtrend. Therefore, it is a Bearish Continuation pattern.
NEW QUESTION # 13
Using intraday 1x1 point and figure charts, which breakout is MOST significant?
- A. A breakout from a 15 column congestion zone
- B. A breakout from a 10 column congestion zone
- C. The breakouts are of equal significance
- D. A breakout from a 5 column congestion zone
Answer: A
Explanation:
Detailed Explanation:
In P&F analysis, the width of the base (congestion zone) determines the potential strength and distance of the subsequent move (Cause and Effect). A 15-column wide base represents more energy built up (more cause) than a 5 or 10-column base, making the breakout more significant.
NEW QUESTION # 14
Identify the candlestick pattern highlighted in the chart (Chart showing a small body with long lower shadow after a decline):
- A. Inverted hammer
- B. Hanging man
- C. Hammer
- D. Evening star
Answer: C
Explanation:
Detailed Explanation:
The highlighted candle appears at the bottom of a downtrend. It has a small real body at the top of the range and a long lower shadow (tail). This is a Hammer, a bullish reversal signal.
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NEW QUESTION # 15
What is indicated when Bollinger Bands narrow?
- A. A stock is ready for a decline
- B. A stock's volatility has increased
- C. A stock's volatility has decreased
- D. A stock is ready for a rally
Answer: C
Explanation:
Detailed Explanation:
Bollinger Bands are based on standard deviation. When the bands narrow (contract), it indicates that the standard deviation of the price is shrinking, meaning the stock's volatility has decreased. This condition is often called "The Squeeze" and typically precedes a sharp increase in volatility and a significant price move (breakout).
NEW QUESTION # 16
Which of the following is TRUE regarding moving averages?
- A. Moving averages lead price action
- B. Moving averages usually provide more valid trade signals than oscillators
- C. Moving averages are more likely to provide the most valid trade signals in trending markets
- D. Oscillators usually provide more valid trade signals than moving averages
Answer: C
Explanation:
Detailed Explanation:
Moving averages are trend-following indicators. They work best and provide profitable signals when the market is trending. In sideways markets, they fail (whipsaw). Oscillators are the opposite (best in sideways)28.
NEW QUESTION # 17
The VIX index measures:
- A. The implied volatility of the S&P 100 index options
- B. The historical volatility of the S&P 500 index options
- C. The implied volatility of the S&P 500 index options
- D. The historical volatility of the S&P 100 index options
Answer: C
Explanation:
Detailed Explanation:
The CBOE Volatility Index (VIX) estimates the market's expectation of near-term volatility. It is calculated from the implied volatility of a wide range of S&P 500 index options.
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NEW QUESTION # 18
In EMH, technical traders can be thought of as a specific type of noise trader because:
- A. A positive feedback loop can lead to pronounced bubbles
- B. Technical traders are rational traders
- C. Technical traders are not rational traders
- D. The cancel-out phenomenon will apply to a large number of trend following strategies
Answer: C
Explanation:
Detailed Explanation:
According to Efficient Market Hypothesis (EMH) proponents, trading based on charts (past prices) is futile because that information is already priced in. Therefore, technicians are considered "noise traders"- participants who trade on noise rather than fundamental information, implying they are not rational in the economic sense.
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NEW QUESTION # 19
In Elliott wave theory, sub-waves 2 and 4 are called:
- A. Corrective waves
- B. Zigzags
- C. Impulse waves
- D. Motive waves
Answer: A
Explanation:
Detailed Explanation:
In a 5-wave motive sequence, waves 1, 3, and 5 move in the direction of the primary trend (Impulse). Waves
2 and 4 move against the trend and are therefore corrective waves.
NEW QUESTION # 20
The chart formation highlighted below (Chart showing rising lows and flat top) is:
- A. An island bottom
- B. An ascending triangle
- C. A descending triangle
- D. A symmetrical triangle
Answer: B
Explanation:
Detailed Explanation:
The chart shows a horizontal resistance line (flat top) and a rising trendline connecting the lows. This convergence of buyers stepping in at higher prices while sellers hold a fixed level is an Ascending Triangle, a bullish pattern.
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NEW QUESTION # 21
The chart type which integrates volume directly into the price bar is the:
- A. Equivolume chart
- B. Renko chart
- C. Ichimoku Cloud chart
- D. Value Weighted Average Price chart
Answer: A
Explanation:
Detailed Explanation:
Equivolume charts (developed by Richard Arms) replace standard bars with boxes. The height of the box represents the high-low range, and the width of the box represents the volume for that period.
NEW QUESTION # 22
When the stock market direction is to be determined, 60% stocks have closed above their 50 day moving average, whereas 35% have closed below. 5% are just along the line. Which stocks are better candidates for short selling?
- A. Those closing above the line
- B. Those closing below the line
- C. Those closing along the line
- D. Those closing along the line but were recently above the line
Answer: B
Explanation:
Detailed Explanation:
Stocks trading below their 50-day moving average while the majority of the market (60%) is trading above it are demonstrating relative weakness. In technical analysis, the best candidates for short selling are those that are underperforming the general market trend (laggards).
NEW QUESTION # 23
Which of the following is a generally accepted notion regarding the use of futures volume and open interest?
- A. Open interest increases during a trending period
- B. Volume and open interest decrease during an accumulation phase
- C. Falling prices and declining volume/open interest indicate a pending change of direction
- D. Rising prices and falling open interest indicate a strong bull market
Answer: A
Explanation:
Detailed Explanation:
A healthy trend is fueled by new money entering the market. Therefore, it is generally accepted that open interest increases during a strong trending period (whether up or down), validating the move5.
NEW QUESTION # 24
_______ give companies the option to buy them back before maturity.
- A. Convertible bonds
- B. Callable bonds
- C. Treasury bills
- D. Putable bonds
Answer: B
Explanation:
Detailed Explanation:
Callable bonds contain a provision allowing the issuer (company) to "call" (redeem/buy back) the bond from the investor prior to the maturity date, usually when interest rates drop.
NEW QUESTION # 25
An inverse head and shoulders pattern is:
- A. A topping pattern
- B. A reversal pattern2122
- C. Generally unreliable1920
- D. A and B2324
Answer: B
Explanation:
Detailed Explanation:2728
An Inverse Head and Shoulders (Head and Shoulders Bottom) is the mirror image of the standard top. It occurs after a downtrend and signals a transition from bearis29h to bu30llish. It is a highly reliable reversal pattern.
NEW QUESTION # 26
The proper use of long-term charts versus short-term price charts is that:
- A. Long-term charts allow for a better assessment of the price trend
- B. Daily price charts allow for a thorough trend analysis
- C. Daily price charts allow for a better assessment of the price trend
- D. Short-term charts identify the primary trend
Answer: A
Explanation:
Detailed Explanation:
Long-term charts (Weekly/Monthly) filter out daily noise and volatility, providing a clearer perspective on the major trend and significant support/resistance levels. Thus, long-term charts allow for a better assessment of the price trend25.
NEW QUESTION # 27
Which tools could you use in candle pattern filtering?
- A. Dow Theory
- B. Cycles
- C. Point and Figure chart
- D. RSI and MACD
Answer: D
Explanation:
Detailed Explanation:
Oscillators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are excellent tools for filtering. For example, a bullish hammer candle is more reliable if it occurs when the RSI is oversold or showing bullish divergence.
NEW QUESTION # 28
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The CMT-Level-I exam is administered by the CMT Association, a not-for-profit organization that promotes the education and development of technical analysis. The association was founded in 1973 and has since grown to become the leading global organization for technical analysis professionals. The CMT-Level-I exam is the first level of the CMT certification program, which also includes CMT-Level-II and CMT-Level-III exams.
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