CFA Practice Question

There are 221 practice questions for this study session.

CFA Practice Question

In a head-and-shoulders top, the peak of the head is formed at $50 and the neckline is established at $40. The price objective for a technician would be ______.
A. $30
B. $40
C. $45
Explanation: The price objective is calculated by subtracting the price at which the pattern breaks the neckline ($40) by the difference between the head and the neckline ($10). Based on this example, the price objective is $30 ($40 - $10).

This price objective is not an absolute and is used as a guideline to the attractiveness of a trade. The larger the difference between the objective and the price at the neckline, the more worth a trade has, as it will yield greater returns.

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