Level 1 — RecognitionCharts, Trends & Dow Theory

Charts, Trends & Dow Theory

⏱ 20 minutes30 marksprintable — key stays hidden on paper

Level: 1 — Recognition Time Limit: 20 minutes Total Marks: 30

Section A — Multiple Choice (1 mark each) — 10 marks

Choose the single best answer.

Q1. Which chart type displays only the closing price connected across time?

(a) Bar chart
(b) Candlestick chart
(c) Line chart
(d) Point & figure chart

Q2. In OHLC data, the letters stand for:

(a) Open, High, Low, Close
(b) Order, High, Low, Cost
(c) Open, Half, Long, Close
(d) Overbought, High, Low, Confirm

Q3. A green (bullish) candlestick means:

(a) Close is below Open
(b) Close is above Open
(c) High equals Low
(d) Volume increased

Q4. According to Dow Theory, a trend is confirmed when:

(a) Only one average moves
(b) Both major averages confirm each other
(c) Volume decreases
(d) The price gaps up

Q5. The longest-lasting trend in Dow Theory is the:

(a) Minor trend
(b) Secondary trend
(c) Primary trend
(d) Intraday trend

Q6. An uptrend is characterised by:

(a) Lower highs and lower lows
(b) Higher highs and higher lows
(c) Equal highs and equal lows
(d) Random highs and lows

Q7. A trendline in an uptrend is typically drawn connecting successive:

(a) Highs
(b) Lows
(c) Closing prices only
(d) Volume bars

Q8. In a healthy uptrend, volume should generally:

(a) Rise on rallies, fall on pullbacks
(b) Fall on rallies, rise on pullbacks
(c) Stay perfectly constant
(d) Be ignored entirely

Q9. A logarithmic price scale plots equal ___ as equal distances:

(a) Dollar amounts
(b) Percentage changes
(c) Volume totals
(d) Time intervals

Q10. A sideways market where price bounces between support and resistance is called a:

(a) Uptrend
(b) Downtrend
(c) Range (consolidation)
(d) Breakout

Section B — Matching (1 mark each) — 6 marks

Q11–Q16. Match each term in Column X to its correct description in Column Y. Write the letter.

#	Column X		Column Y
Q11	Candlestick body	A	Trend lasting a few days to weeks, counter to primary
Q12	Secondary trend	B	Range between the Open and Close prices
Q13	Channel	C	Two parallel trendlines containing price
Q14	Higher low	D	A pullback low that is above the previous low
Q15	Volume confirmation	E	Rising participation supporting a price move
Q16	Linear scale	F	Equal dollar amounts as equal vertical distances

Section C — True/False with Justification (2 marks each: 1 for T/F, 1 for reason) — 14 marks

State True or False and give a one-line justification.

Q17. "A candlestick's upper wick shows the highest price traded during the period."

Q18. "Dow Theory holds that the market averages discount all known information."

Q19. "In a downtrend, price forms higher highs and higher lows."

Q20. "Multi-timeframe analysis means checking a stock on several timeframes to align the trend picture."

Q21. "A trend is assumed to continue until a clear reversal signal appears (Dow Theory)."

Q22. "On a bar chart, the left tick marks the Close and the right tick marks the Open."

Q23. "A logarithmic scale is preferred for long-term charts spanning large percentage moves."

Answer keyMark scheme & solutions

Section A — MCQ (1 mark each)

Q1 — (c) Line chart. A line chart connects only closing prices; bar and candlestick show OHLC. (1)

Q2 — (a) Open, High, Low, Close. Standard OHLC definition. (1)

Q3 — (b) Close above Open. A bullish/green candle closes higher than it opened. (1)

Q4 — (b) Both major averages confirm each other. Dow's principle of averages confirming one another. (1)

Q5 — (c) Primary trend. Primary trends last months to years; secondary weeks-months; minor days. (1)

Q6 — (b) Higher highs and higher lows. Core definition of an uptrend. (1)

Q7 — (b) Lows. Uptrend support line connects rising swing lows. (1)

Q8 — (a) Rise on rallies, fall on pullbacks. Volume confirms the dominant direction. (1)

Q9 — (b) Percentage changes. Log scale spaces equal % moves equally. (1)

Q10 — (c) Range (consolidation). Sideways between support/resistance. (1)

Section B — Matching (1 mark each)

Q11 → B (body = Open–Close range) (1)
Q12 → A (secondary = counter-trend of days/weeks) (1)
Q13 → C (channel = two parallel trendlines) (1)
Q14 → D (higher low = pullback above prior low) (1)
Q15 → E (rising volume supports move) (1)
Q16 → F (linear = equal dollars equal distance) (1)

Section C — True/False with Justification (2 marks each)

Q17 — True. (T/F 1) The upper wick/shadow extends to the period's High. (reason 1)

Q18 — True. (1) Dow's first tenet: averages discount everything (all news is priced in). (1)

Q19 — False. (1) A downtrend forms lower highs and lower lows, not higher. (1)

Q20 — True. (1) Multi-timeframe analysis aligns higher and lower timeframes for context. (1)

Q21 — True. (1) Dow's tenet: trends persist until a definitive reversal is confirmed. (1)

Q22 — False. (1) On a bar chart the left tick = Open, right tick = Close. (1)

Q23 — True. (1) Log scale represents percentage changes proportionally, ideal for large long-term moves. (1)

Marks Summary

Section A: 10
Section B: 6
Section C: 14
Total: 30

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  {"claim":"Section A has 10 one-mark questions totalling 10","code":"result = (10*1 == 10)"},
  {"claim":"Section B has 6 one-mark matches totalling 6","code":"result = (6*1 == 6)"},
  {"claim":"Section C has 7 questions at 2 marks each totalling 14","code":"result = (7*2 == 14)"},
  {"claim":"Grand total equals 30","code":"result = (10 + 6 + 7*2 == 30)"},
  {"claim":"Total question count is 23","code":"result = (10 + 6 + 7 == 23)"}
]