Technical Analysis Chapter 7

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Questions and Answers

What is the primary benefit of analyzing volume trends in technical analysis?

  • To confirm the strength of a trend (correct)
  • To identify price patterns
  • To measure the enthusiasm of buyers and sellers
  • To provide a more accurate measurement of price movements

What happens to volume in a rising market according to the principles of volume interpretation?

  • It contracts as the market rises
  • It is unpredictable in a rising market
  • It remains constant as the market rises
  • It expands as the market rises (correct)

What can volume patterns reveal that price patterns may not?

  • A strengthening trend
  • A random price movement
  • A reversal of the trend (correct)
  • A weakening trend

What is the significance of price and volume patterns disagreeing?

<p>The underlying trend is not as strong as it looks (B)</p>
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What is the weight-of-the-evidence approach in technical analysis?

<p>A comprehensive approach that incorporates multiple forms of analysis (B)</p>
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What is the interpretation of high volume accompanying an anemic rally?

<p>A bearish factor indicating churning action (C)</p>
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What is the significance of record volume coming off a major low?

<p>It is a very reliable signal that a significant bottom has been seen (B)</p>
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What does a volume crescendo followed by a slight contraction indicate?

<p>A temporary exhaustion of buying power, leading to a pause (A)</p>
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What is the interpretation of a small rounding top in price accompanied by a rounding bottom in volume?

<p>A doubly abnormal situation, indicating a potential top (B)</p>
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What is the significance of heavy volume with little price change following a decline?

<p>It is a bullish factor indicating accumulation (A)</p>
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What is the primary indication of a rising price accompanied by a trend of falling volume?

<p>A weak and suspect rally (B)</p>
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What is the significance of a new high in price that is not confirmed by volume?

<p>A sign of a potential trend reversal (C)</p>
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What does volume typically do during a bull move?

<p>It leads price (B)</p>
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What is the combination of rising volume and rising price indicative of?

<p>A normal and healthy market (C)</p>
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What does volume measure in relation to price movements?

<p>The relative enthusiasm of buyers and sellers (B)</p>
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What can be inferred from a significant increase in activity as the price starts to decline?

<p>The price is confirming a trend reversal. (D)</p>
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What is characteristic of an exhaustion move in a price pattern?

<p>A rapid increase in volume followed by a sharp decline in price. (B)</p>
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What does a bullish sign indicate when a previous low is being tested with low volume?

<p>A complete lack of selling pressure. (B)</p>
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What does a downside breakout from a price pattern on heavy volume indicate?

<p>A reversal in trend. (A)</p>
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What is the significance of a reversal dependent on?

<p>The extent of the previous advance and the degree of volume expansion. (A)</p>
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Chapter 7 Basic Characteristics Of Volume PDF

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