Level 2 Webinar CMT Tutorial

Chartered Market Technician
(CMT) Program spring 2014
LEVEL 2
Siddhali Desai. CMT.
Exam structure
Exam time length: 4 hours, 15 minutes
Exam format: Multiple Choice .

No. Of questions: 170.
Immediate scoring will be available this

exams.
Exam structure
CMT Level II candidates are responsible for the theory and

application of concepts and techniques covered by the assigned
readings.
The CMT Level II Exam requires the candidate to demonstrate a
greater depth of competency and proficiency by applying more
advanced analytical techniques.
Basic points of study

Point & Figure
Price Patterns
Candlestick Patterns
Elliot Wave Theory
Momentum Indicators
Sentiment Indicators
Volume, Open Interest & Breadth
Cycles
Diversification & Portfolio Allocation
Investment Psychology
Relative Strength
Ethics
What we will cover:
1. Expectations, strategies, common questions, important

added chapters and Code of ethics.
2. Usual struggle areas.

3. Quick review of important points.
4. Some sample quiz.
Recommended Reading Lists

MTA Code of Ethics
2. Technical Analysis of Stock Trends
3. Technical Analysis The Complete Resource for Financial
Market
4. Kaufman, Perry J - New Trading Systems and Methods
5. Pring, Martin J.: Technical Analysis Explained,
6. The Definitive Guide to Point and Figure
7. Japanese Candlestick Charting Techniques - Nison, Steve
8. Pring, Martin J., Investment Psychology Explained
9. Evidence-Based Technical Analysis
10. Elliott Wave Principle by Frost and Prechter.
1.
Elliot wave
Movements in the direction of the trend develop into five wave
patterns.
Counter-trend movements display three wave structures.
Elliott Wave Analysis assesses probable outcomes by
determining the current position within the larger pattern.
Impulse Waves aka motive or actionary waves are

movements in the direction of the trend of one larger degree
Corrective Waves aka reactionary waves are movements
against the trend of one larger degree
Wave 2 CANNOT retrace more than 100% of Wave 1.

Wave 3 can NEVER be the shortest.
Wave 4 NEVER ends in the price territory of Wave 1.
Wave 2 CANNOT retrace more than 100% of Wave 1.

5
3
4
1
2
3
4
1
5
3
4
2
EQUALITY
When 3 is longest, 5 will approximate 1
ALTERNATION
If 2 is sharp, 4 will be sideways
If 2 is sideways, 4 will be sharp
CORRECTIONS
Usually end in the area of the previous wave 4
Guideline of Alternation
5
Four is sideways
4
Two is sharp
2
Guideline of Alternation
5
3
Four is sharp
4
1
Two is sideways
2
Guideline of previous fourth wave support
(1) 5
b
Span of 4th wave

of previous degree
4
1
(2)
Previous 4th wave
2
(alf are a basing process

Heavily corrected by Wave 2
Lots of short selling
Crowd convinced trend is down

One more rally to short
Distribution is in full force
Technically more constructive to past bear market rallies.

Breadth and volume increases, momentum turns
Accumulation is beginning
Erodes much of Wave 1 advance

Particularly true in leveraged market
Crowd convinced Bear is Back

One last chance to sell!
Fundamental conditions are as bad or worse than the those
at the previous bottom

Often end of very low volume
Plenty of Fear among traders
Evidence of drying up selling pressure
Strong and Bold

Breakouts on significant volume
Battle of shorts v/s longs
High liquidity in play
Continuation gaps possible

Expanding breadth
Increasingly favorable fundamentals, investor confidence returns
Wave 3 holds the most valuable keys to personality of move
Predictable in depth and form
Guideline of alternation is critical

Reference Wave 2!
More often move sideways due to Wave 3 strength

Powerful base for Wave 5 move
Lagging stocks build their tops

Moved on Wave
of like securities
Initial deterioration sets the stage for non-confirmations and
weakness during fifth wave
Less dynamic than other waves

Lower Breadth, Declining Volume
Boring, confusing, aggravating
Most position traders are gone
Distributed, selling into strength
Despite weakening internals, optimism runs at extreme highs
Remember post Wave 5 targets!
Zone between Wave 3 and Wave 4 extreme price terminations
First real damage to individual equities or index components
Most important Corrective Wave!

Wave A tells us the pattern
3 Waves = Flat/Triangle, 5 = Zig Zag
Public convinced it s a pullback
Trade counter to technical cracks

Ignores revealing stock patterns
Bargain hunters come out in droves
Sucker wave
Deceptive
False return to previous direction
Breadth is narrow, momentum is shallow and often diverging
Retracement depth says a lot

Shallow retracements can lead to deep and powerful C Waves
Can be devastating
Don t get caught in B Waves!
(ave many properties of Wave
Strength,
etc
Breadth and volume, secondary market indicators are strong

Fundamentals conditions collapse and fear reigns supreme
The key to Elliott Wave
Corrections are never 5 s!

Corrections take form of
Come in 2 styles
Sharp, Sideways
Come in 4 categories
Zig Zag, Flat, Triangle, Combination
Zig Zag
Flat
Triangle
3 wave correction labeled A, B, C

Sub-wave sequence is 5-3-5
3
5
A
C
Sideways market correction
5
Coiling, sideways correction
D
E
3
3
3
Characteristics
D Wave
Must have the 3-3-3 in Waves A-C
Accompanied by expanding volume
E Wave
Falls short of well thought out targets
Volume continues
to expand into breakout
Which of the following is NOT a valid trading rule using

Elliott Wave Theory?
a.
Identify a main trend
b. Determine the current status of the main trend by locating the major
peaks and bottoms
c. Look for five wave corrections and three wave sub-trends or extensions
d. Draw trendlines to determine direction
Which of the following BEST describes the rule of alternation?

a.
Downtrends follow uptrends
b. Complex patterns follow simple patterns

C. Price follows volume
d. Prices alternate in Fibonacci sequences
Which of the following is a true statement according to

Elliott Wave Theory?
a.
Wave four should not overlap wave one
b. The theory is composed of time, ratios and wave forms, in that order of
importance
c. The theory was originally applied to individual stocks and does not
work as well for indices
d. The theory works best in commodity markets traded primarily by
professional traders such agricultural futures
This chapter is about the automating of popular technical

tactics, and those that have been left out, over the years due to
the evolution of technology
Eg: there are many programs out there that have indicators to perform
Elliott Wave analysis, which is quite complex, but those same
programs lack a study to draw automated trendlines.
Dunnigan and the Thurst MethodA downswing is a decline in which the current days high and low
are both lower than the corresponding high and low of the
highest day of the prior upswing
Buy Signals
Test of the bottom - when price gets within a certain percent

of a prior low
Closing-price reversal a new low for the swing followed by a
higher close than the prior day
Narrow Range the current days range is less than half of the
largest range for the swing
Inside Range both the high and low fall within the prior
range
Penetration of the top by any amount.
Sell: Second bar has a

range less than half the
largest in upswing.
Buy: New low with
close greater than
yesterday
Trap Forecasting taking a quick or calculated profit

Continuous Forecasting letting the trend (profits) run its
course until a sell signal is generated
Square Root Theory a market trading at 81 (92) would move
to 64 (82) or 100 (102)
Nofri s Congestion-Phase System
- Markets spend the greater part of their time in nontrending motions.
- Basis of system is a three or four day reversal
-Should only be used in trading ranges.
The outside day WITH and outside close is a successful reversal

pattern.
An outside day has the high and low outside the range of the
previous day. The high is higher and the low is lower. An outside
close is when the close of bar two is higher or lower than the high
or low of bar 1.
Buy (Sell) on the close of an outside day if the close is above the
prior high (low)
If buying (selling), place a stop-loss just below (above) the low

(high) of the outside day.
Close out position on the close three days after entry
The Fibonacci Ratios the comparison of one number to the next larger
number in the following sequence
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144
Key comparative ratios of explaining human behavior are 61.8% 38.2% 50%
and 100%
A 100% retracement means the prior move was on false information. A 61.8%
retracement is deep and usually occurs earlier in the trend cycle.
Application of Fibonacci:
1. Used to generate levels of support and resistance
2. Used to generate targets
Identify two significant turning points of price, top and bottom.
Price pattern back-testing results
It is arguable that price patterns are formed by participants,

not by random events. (They testing a synthetic data series)
Nine of the ten price patterns were profitable three days after
signal. The triangular top was not.
When formations were conditioned on rising or declining

volume, the results changed for some of the patterns. Overall,
rising volume improved results.
1.
2.
3.
Standard deviation is the most commonly used measurement of price

distribution. In simple terms it represents the average distance of all data
points from the mean.
+/- 1 standard deviation = 68% of the price movement
+/- 2 standard deviations = 95% of the price movement
+/- 3 standard deviations = 99% of the price movement

It is more likely for price to reach 1sd than it is 2sd then it is 3sd
The most frequent method of deploying such analysis is through the
Bollinger Band study.
A typical period is 20 bars with 2sd.
Per the book, signals from larger periods tend to be more reliable.
Bollinger Bands also describe market volatility. Narrow equates low

volatility and wide high volatility.
4.
Analysis of Zones
Zone analysis divides price into 20% sections over the last 3
years. It works best in markets with abnormal distribution.
5.
Long Term Price Distributions
6.
Markets in physical commodities such as soybeans and coffee

have a cost of production that forms a practical lower bound
to price movement.
Median middle value of a data set

Mode most common occurrence in data set
Kurtosis the peakedness of the distribution (how high or flat)
Skew the position of the mode.
Market Profile the ultimate chart for distribution analysis

- Developed by J. Peter Steidlmayer
The shape of your distribution tells you the type of day that
occurred.
MTA code of ethics

One needs to know the MTA code of ethics and
understand its applications to the real world
situations.
The code of ethics is available with the list of
recommended readings for each level.
The
candidate must pass the ethics

portion of the exam in order to pass
the exam.
Four Asset Classes 1. Currencies

2. Commodities
3. Bonds
4. Stocks
USD and Commodities - Inverse Relationship

USD Commodities
Falling USD could be bearish for Bonds and Stocks ONLY IF
Commodities are rising
Falling USD can co-exist with rising Bonds and Stocks as long
as Commodities are stable
Commodities and Bonds Inverse Relationship
Commodities Interest rate (yield) Bonds
Interest Rates Stocks Bonds
Bonds and Stocks Direct Relationship

Bonds Stocks
Exception major turning points
In deflation they decouple bonds rise and stocks fall
Commodities and Stocks Inverse Relationship
Commodities Stocks
Depends on the position of economic cycle
Stocks change direction before commodities
USD and US Stocks/Bonds Direct Relationship

Oil & Stocks Inverse Relationship
Crude Oil Stocks
Oil shares are a leading indicator of oil they top and
bottom first
Currencies:
USD Drug Stocks Multinational Stocks
Since major revenue comes from global markets
USD Small Cap Stocks
Since major revenue comes from domestic markets
Australian & Canadian dollars commodity based currencies
directly correlated to commodity prices
Commodities / Bond ratio - Inflation

Gold/energy/aluminum/copper/ paper & forest products
Commodities / Bond ratio - Inflation

Interest rate sensitive stocks/ consumer staples/financial &
utilities
Global Interest Rates always rise and fall together.

Stock sectors have a tendency to perform globally.
Eg- Auto sector in US - Auto sector in Japan
Inflation prices of goods rise at a fast rate - Commodities are strongest

Disinflation - prices of goods rise at a slower rate Stocks are strongest
Deflation - prices of goods fall Bonds are strongest
Inflation
Commodities
Disinflation - Commodities
Deflation Commodities
strong, Stocks & Bonds weak

weak, Stocks & Bonds strong
weak, Stocks weak,Bonds strong
Normally Bonds and Stocks tend to move in same

direction.
But in deflation they decouple. Bonds rise and stocks fall
(eg as happened in the year 2000)
Bonds top out first

Then Stocks top out
Commodities top last
Bonds bottom first

Then Stocks bottom
Commodities bottom last
Steep yield curve prerequisite for an early recovery

Flattening yield curve sign of an economy that is in recovery
Inverted yield curve sign of economic weakness
Inverted Yield Curve (IYC)
1. IYC is a situation where short term rates are higher than long term
rates
2. Stocks with high PE ratios become vulnerable (eg-dot com stocks in
2000)
3. IYC positive for Bonds, negative for stocks
4. All recessions were preceded by IYCs
5. Ideal thing to do while an IYC develops sit on cash
Affected by long term interest rates rates REITs

Are counter cyclical move opposite to business cycle
REITs are an ideal investment in bear market because
High dividend yield
Low correlation to stocks provide diversification
Negative correlation to tech stocks (like in 2000)
Real estate & housing both inflation as well as deflation sensitive
Real estate cycle 18 years called The Long Cycle combination
of Kondratieff & business cycles.
3 stages of economic expansion

1. Early Expansion Transportation
2. Middle Expansion Technology / Service
3. Late Expansion Energy
2 stages of economic contraction
1. Early Contraction Consumer Staples
2. Late Contraction Financials & consumer cyclicals
Which intermarket relationship may NOT hold when

commodity prices decline (during periods of deflation)?
a. The link between the dollar and commodities
b. The link between commodities and bonds
c. Intermarket analysis is unaffected by deflation
d. The link between the equity and bond markets
Which of the following is a CORRECT inter-market

relationship?
a. Bond prices move inversely to equities
b. Bonds prices trend in the same direction as commodities
c. The U.S. dollar moves inversely to commodities
d. Financial stocks trend inversely to bonds
1. Very different from Bar & Candle Charts
- Time is not a factor, account for price only

2. Terminology
- Point: refers to the location of the price plot
- Figure: the ability to figure target prices from the points
3. Relatively simple to employ, only prices that meet the box
and reversal size are used
4. The Chart reflects the High and Low, whenever important,
which many feel is a better measure of supply and demand,
rather than the open and close, which many feel to be
arbitrary times
Can be expanded or contracted depending on personal preference

The larger the box size, the less noise
The smaller the box size, the greater the detail
Two Types One Box Reversal - Outdated
Multi - Box Reversal
Reversal can be different from box size

3 Box Reversal the most popular
X: used in columns when price is increasing
O: used in columns when price is decreasing
1.
Box & Point are used interchangeably
2.
P&F does not take into account time or volume
3.
Requires continuous time flow
4.
Analyzes all price action
5.
Disregards inactive period, concentrates on active period
6.
Screens out price action that has little predictive ability
1.
No longer very popular
2.
Patterns are not precise and require and experienced analyst to

interpret
3.
One advantage: The Count
Anticipating the expected move is done by measuring the

width of the observed base
4.
Trendlines are drawn in the same manner as with bar charts
5.
Trendline breaks negate earlier observation
-Point and Figure uses both traditional and unique patterns -
Traditional: Head and Shoulders Top

Unique: Semi-catapult and Fulcrum
-Semi-Catapult
It is a continuation pattern
-Fulcrum
It is a reversal pattern
Easily recognized
Holds a reliable count as it is contained by distinct walls
More popular than one point predecessor

2.
Can be plotted from prices found in the newspaper. Two Methods
used 1.
Close only method
2.
High/Low method
3.
Requires the knowledge of only a few basic patterns
4.
Academics like it because these patterns can be tested
5.
Can have only X s or O s in each column
6.
Due to asymmetry, reversals can be used as trailing stops
1.
Less ambiguous and easier than 1 box charts
Two Methods:
1.
The Vertical Count
2. The Horizontal Count
Much price action is lost in 3 box reversal.
The Vertical Count
The Horizontal Count
1.
2.
3.
4.
5.
6.
7.
8.
Double Top and Double Bottom

Rising Bottom and Declining Top
Triple Top and Triple Bottom
Ascending Triple Top and Descending Triple Bottom
Spread Triple Top and Spread Triple Bottom
Bullish/Bearish Triangle
Above Bullish Resistance/Bearish Support Line
Below Bearish Resistance/Bearish Support Line
Drawn at 45 degree angles for multi-box reversal, subjectively for 1x1
)f price can t maintain a rise of at least the value of box every time it makes
a reversal, it can no longer be considered a bull trend
Bullish Support Line

- Drawn from one box below the last observable column (always an O
column)
- Bearish Resistance Line
exact opposite
-
General Rules:
One should never buy unless price is greater than trendline support
One should never sell unless price is less than trendline resistance
Trendline breaks only valid if they coincide with a pattern break as well
A pattern completes as expected, but then reverses and breaks out to

the other side
Bull Trap
Bear Trap
Always a reversal pattern

Predominantly 3-box chart
patterns.
Occurs when price breaks above
previous price action by 3 or
more boxes and then reverses in
the next column by at least 50%.
Confirmed when price breaks to
the other side.
Represent a complete reversal of
market psychology
In 3-box point and figure charts

a. A double-bottom and double top can be continuation patterns
b. Only a double-bottom can be a continuation pattern
c. Only a double-top can be a continuation pattern
d. Neither can be continuation patterns. They do not exist in Point and Figure
In a point and figure chart, what are the typical

box sizes for a stock trading between 20 and 100,
between 100 and 200, and then above 200?
a. 1, 2, 3
b. 1, 2, 4
c. , 1, 2
d. 1, 3, 5
Amplitude Height of the cycle from base up to peak = price at

peak price at base
Period Length of cycle measured from trough to trough ie: 20
days
Phase Difference between the troughs of different cycles ie: # of
days between the trough of cycle A and the trough of cycle B
Inversions when a peak occurs when we would expect a trough.
Look for the next larger cycle and see if that is peaking, if so then
its accepted because larger cycles dominate
Translation a term used to describe where the peak of a cycle
falls in regards to the midpoint
Right translation when a peak occurs after the halfway point of
the cycle
Left translation when a peak occurs before the halfway point of
the cycle
Principle of Harmonics cycles tend to have lengths a multiple of
two or three longer or shorter than the next series of cycles.

Principle of Nominality cycles are rarely equal therefore an
average or nominal period is calculated
Principle of Commonality securities of similar nature tend to
have similar cycles, ie: stocks tend to have similar cycles to indices
Principle of Proportionality periods of rising prices are followed
equally by periods of falling prices (or of even multiples)
Principle of Variation price magnitudes and duration of cycles
will be different because of fundamental and psychological
considerations
Principle of Summation combining two cycles can produce peaks
and troughs
Long Period Cycles 1. Kondratieff Cycle

2. 34-year Historical Cycle
3. 18 year and 9.2 year cycle
4. Decennial Patterns
Short Period Cycles 1. Four year (presidential cycle)
2. Seasonal Pattern
3. January Barometer / January Effect
Many different cycles affecting markets
The only ones with forecasting value are the DOMINANT CYCLES
Most futures markets have at least 5 dominant cycles
Use Top Down approach
Determine long term dominant cycle (years)
Then intermediate dominant cycle (weeks to months)
Finally the short term dominant cycle (several hours to days)
Long Term (> 2 years)

Seasonal (approximately 1 year)
Primary / Intermediate (12 24 weeks) determines which
side to trade
Trading Cycle (4 weeks) entry & exit points
Alpha and Beta Cycles (2 weeks)
Figure 14.13, page 358 Murphy
Considered the most useful aspect of cycle analysis

Refers to the shifting of cycle peaks to the left or right of the
ideal mid-point
Most cycle variations occur at the crest
If Trend is UP: Crest shifts to the RIGHT
If Trend is DOWN: Crest shifts to the LEFT
RIGHT Translation: BULLISH
LEFT Translation: BEARISH
In a bull trend, price spends more time rising
In a bear trend, price spends more time falling
Figure 14.15, page 364 Murphy
Left & Right Translation
Most promising are of overlap between cycles and technical

analysis:
Moving Averages
Momentum Oscillators
Both indicators can be enhanced if they are tied to the

dominant trading cycle
Oscillators should be the length of the appropriate cycle
Chief problem: determining the dominant cycle
Did the observed outcome occur purely by chance?

Are securities prices random or deterministic?
The importance of Independence
The outcome of the 1st event does not effect the probability
of the outcome for the second event
Technicians do not believe in independence,
Proponents of Random Walk Hypothesis do
Mean aka the average

Median the value that splits the distribution of
observations in half
Mode the outcome that occurs with the highest frequency

Geometric Mean aka the compound rate of return
Dispersion a very common measure of risk

the greater the variability of an investment outcome, the greater the risk
Range Difference between the maximum and minimum values of a sample.
Drawbacks:
2 values from the sample are used, the rest are ignored
Does not say how close the observations are to the mean and the media
Variance the average of the squared differences between each observation of a
sample and the mean of a sample
Does not measure spread or dispersion, but dispersion about the mean
Standard Deviation the positive square root of the variance
Standardized measure from the mean
Aka Gaussian distribution or Bell Curve

A continuous probability distribution
A reasonable approximation of investment returns
2 very special properties
An excellent approximation of the random variation of natural phenomena
It can be described fully by only 2 values
The mean of the observations, measuring central tendency
The variance of the observations, which measures dispersion
Additional Characteristics
Its symmetric about its mean
mean = mode = median
68% of data fall between mean 1
95.5% fall between mean 2
99.7% fall between mean 3
Chi-Square Distribution
2. Student s T Distribution
3. F Distribution
1.
All 3 use The Standard Normal Variable
Used to help predict the value of an uncertain dependent variable from

some known (independent) variable
Plot the intersects of the observations in a scatter diagram
Create a Regression Line using least squares
Regression equation = y = a + bx
a is the y-intercept
b is the slope
The slope of the straight line explains the relationship between daily
price changes of the S&P500 and US Two Year Yields
Upward sloping = positive relationship
Downward sloping = negative relationship
r = coefficient of determination
Value between 0 & 1
Covariance: The 2 variable version of variance

Answers the question (ow similar are these prices or returns?
Cov(x1, x2) = 1/n * (x1 i - x1 avg) * (x2 i - x2 avg)
r = Cov(x1, x
/ x x aka correlation cofficient
When .5 < r
then a strong positive correlation
When near zero, then not correlated no relationship between the two
When -
r > -.50 then a strong negative correlation

Investment psychology - Mastering Fear and Greed
Fear among investors shows itself in two forms: fear of losing and fear of
missing out.
A Threat to National Security Triggers Fear
All People Fear Losing Money.
Fear of a Never-Ending Bear Market Is a Persistent Myth.

Individuals Retain All Their Past Fears. Once you have had a bad
experience in the market, you will always fear a similar recurrence whether
consciously or subconsciously, or both.
The Fear of Losing Out. Or fear of missing the bus. This phenomenon
often occurs after a sharp price rise.
Greed
Greed is at the other extreme of our emotional makeup.
It results from the combination of overconfidence and a desire
to achieve profitable results in the shortest amount of time.
When profits have been earned with very little effort,
they are not appreciated as much as when you have to sweat
out painful corrections
Overtrading, or "Marketitis - Many traders feel they need to
play the market all the time.
Hope
Hope, the Most Subtle of Mind Traps
After prices have experienced a significant advance and then
undergo a selling frenzy, the activity often leaves the unwary
investor with a substantial loss. It is natural to hope that prices
will return to their former levels, thereby presenting him with
the opportunity to "get out." This redeeming concept of hope is
one of the greatest obstacles to clear thinking and maintenance
of objectivity.
Pride of opinion has been responsible for the downfall of more
men on Watt Street than any other factor.
Staying the Course
Sticking with the Plan - We set off with a plan and, after awhile, get
diverted by an unexpected news event, a comment by our broker, or a news
story.
Keep Your Eye on the Ball, but Remain Flexible - it is also important to keep
an open mind because underlying financial conditions can and do change.
If we are following a particular approach or methodology, whether it be a
trading system or a longer term fundamental philosophy, it is also
important to stick with it. Otherwise we lose our basis for making sound
decisions.
Theory of contrary opinion.

Requirements for Contrary Thinking - When all the pieces are more or less
consistent and it is possible to come up with some alternative and credible
scenarios, the chances are that the market or stock in question is about to
reverse its prevailing trend.
Consider the Alternatives

Don't Extrapolate the Future from the Present
Remember That Events, Not People, Control the Future
History Repeats, but Contrarians Must Be Careful
When to Go Contrary timing
Determining Whether the Consensus Is at a Short- or a Long-Term
Turning Point
Headlines, Cover Stories, and the Media
Sentiment Indicators
Seykota's trading rules are:
1. Cut losses.
2. Ride winners.
3. Keep bets small.
4. Follow the rules without question.
5. Know when to break the rules.
(Chapter 11 : What Makes a Great Trader or Investor?)
Psychological Management
1. When in Doubt, Stay Out

2. Never Trade or Invest Based on Hope
3. Act on Your Own Judgment
4. Buy Low (into Weakness), Sell High
5. Don't Overtrade
6. After a Successful and Profitable Campaign, Take a Trading Vacation
7. Take a Periodic Mental Inventory to See How You Are Doing
8. Constantly Analyze Your Mistakes
9. Don't Jump the Gun
10. Don't Try to Call Every Market Turn
(Chpter 12 : Nineteen Trading Rules for Greater Profits)
Sleep well the previous night.

Reach well before the scheduled time.
Bring your ID to the Testing Centre.
Watch the clock and leave time to review your test.
Process of elimination on multiple choice choose the best answer
Allow yourself enough time to study and choose the right time to take the
test.
Use the Mark button.
Focus on challenging topics before the exam and during class.
Read each question well before answering.
Beware of tricky questions, they may appear to be easy.
Think Positive
Thanking You.

Level 2 Webinar CMT Tutorial

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Chartered Market Technician

(CMT) Program spring 2014

Siddhali Desai. CMT.

Exam time length: 4 hours, 15 minutes

Exam format: Multiple Choice .

Immediate scoring will be available this

CMT Level II candidates are responsible for the theory and

Siddhali Desai. CMT.

Basic points of study

What we will cover:

1. Expectations, strategies, common questions, important

2. Usual struggle areas.

Siddhali Desai. CMT.

Recommended Reading Lists

Siddhali Desai. CMT.

Movements in the direction of the trend develop into five wave

determining the current position within the larger pattern.

Siddhali Desai. CMT.

Impulse Waves aka motive or actionary waves are

Siddhali Desai. CMT.

Wave 2 CANNOT retrace more than 100% of Wave 1.

Siddhali Desai. CMT.

Wave 2 CANNOT retrace more than 100% of Wave 1.

Siddhali Desai. CMT.

Siddhali Desai. CMT.

Siddhali Desai. CMT.

Guideline of previous fourth wave support

Span of 4th wave

Previous 4th wave

(alf are a basing process

Crowd convinced trend is down

Technically more constructive to past bear market rallies.

Erodes much of Wave 1 advance

Crowd convinced Bear is Back

Fundamental conditions are as bad or worse than the those

at the previous bottom

Siddhali Desai. CMT.

Strong and Bold

Continuation gaps possible

Siddhali Desai. CMT.

Predictable in depth and form

Guideline of alternation is critical

More often move sideways due to Wave 3 strength

Lagging stocks build their tops

Siddhali Desai. CMT.

Less dynamic than other waves

Siddhali Desai. CMT.

First real damage to individual equities or index components

Most important Corrective Wave!

Public convinced it s a pullback

Trade counter to technical cracks

Retracement depth says a lot

Siddhali Desai. CMT.

Breadth and volume, secondary market indicators are strong

Siddhali Desai. CMT.

The key to Elliott Wave

Corrections are never 5 s!

Siddhali Desai. CMT.

Siddhali Desai. CMT.

3 wave correction labeled A, B, C

Sideways market correction

Coiling, sideways correction

to expand into breakout

Siddhali Desai. CMT.