Chapter 14 class quiz

___ is a momentum indicator, or oscillator, that measures how well a stock is performing against itself by comparing the strength of the up days versus the down days.

• relative strength indicator (RSI)

• moving average (MA)

• rate of change (ROC)

___ = 100 - [100]/[1+RS].

The above formula is used to compute____

• relative strength index (RSI)

• rate of change (ROC)

• moving average (MA)

Momentum indicators are dependent indicators as they are best used with other indicators. Which one of the following is the correct reason for this?

• momentum indicators tell the traders about the magnitude and direction of price movement.

• momentum indicators tell about the volume of trade.

• momentum indicators do not tell the traders the potential direction of the price.

• momentum indicators measure the rates of rises of price.

RSI is a leading type of indicator.

• True

• False

the RSI graph is divided into three zones or regions which are the zone below 30, the zone between 30 to 70, and the zone above 70. Zone X in the figure shown is called _____

• oversold

• overbought

• neutral

traders can wait until the RSI falls below the 70 level to take a ____ position.

• sell

• buy

• neutral

when the RSI is above the 30 level, the share price is going to ____

• increase

• decrease

• be constant

a reading above 70 is considered ____, while a reading below 30 is considered as ____.

• bullish; bearish

• bearish; bullish

• oversold; overbought

• primary; secondary

RSI can be plotted for any time span. But, the most widely used time span is _____

• 28-day

• 24-month

• 14-day

• 18-month

generally speaking, the longer-term spans offer slower and more deliberate movements that enable easier trendline construction.

• true

• false