Series 3 — National Commodity Futures Exam — All Questions
9 questions
An analyst who forecasts commodity prices by studying crop weather, inventory reports, and industrial demand is primarily using:
- a.Technical analysis
- b.Fundamental analysis✓
- c.Chart pattern analysis
- d.Moving-average analysis
Fundamental analysis studies the real supply-and-demand forces behind a commodity, such as weather, stocks, and usage, to judge whether prices are too high or too low. Technical methods instead study price charts.
Which tool is characteristic of technical analysis rather than fundamental analysis?
- a.USDA crop production reports
- b.Interest-rate forecasts
- c.Industrial consumption data
- d.Support and resistance levels✓
Support and resistance levels are drawn from past price behavior and are hallmarks of technical analysis. Crop reports, rate forecasts, and consumption data are fundamental inputs that describe supply and demand.
An order to buy or sell at whatever price is available when it reaches the market is a:
- a.Market order✓
- b.Fill-or-kill order
- c.Stop-limit order
- d.Limit order
A market order is an order to buy or sell a futures contract at whatever price is obtainable at the time it is entered. A limit order specifies a maximum purchase or minimum sale price.
Where is a sell stop order placed relative to the current market price?
- a.At the market
- b.Above the market
- c.Below the market✓
- d.Anywhere, since it becomes a limit order
A sell stop is placed below the market and a buy stop above it; a stop becomes a market order when its price is reached.
An order that must be executed at the end of the session within the closing range of prices is a:
- a.Market-on-close order✓
- b.Fill-or-kill order
- c.Stop order
- d.Good-till-canceled order
A market-on-close order is an order to buy or sell at the end of the trading session at a price within the closing range.
A technical analyst studying price charts, volume and open interest is trying to forecast prices:
- a.From interest rate policy
- b.Without regard to supply-and-demand fundamentals✓
- c.From crop and inventory reports
- d.By surveying commercial hedgers
Technical analysis forecasts prices by examining patterns of price change and changes in volume and open interest, without regard to underlying fundamental factors. Crop and inventory reports are the domain of fundamental analysis.
In technical analysis, a price area where new selling tends to emerge and halt a rise is called:
- a.A trendline
- b.Support level
- c.Resistance level✓
- d.A gap
Resistance is a price area where new selling will emerge to dampen a continued rise; support is the corresponding area where buying stems a decline.
A yield curve on which short-term rates are higher than long-term rates is:
- a.Inverted✓
- b.Normal
- c.Flat
- d.Positive
The CFTC describes the yield curve as positive when long-term rates are higher than short-term rates; the reverse shape, with short-term rates above long-term rates, is inverted.
The Federal Reserve's primary means of adjusting monetary policy is to change its target for the:
- a.30-year Treasury bond yield
- b.Discount on Treasury bills
- c.Federal funds rate✓
- d.Reserve requirement on futures margin
The FOMC's primary means of adjusting the stance of monetary policy is changing its target for the federal funds rate, and changes in that rate are rapidly reflected in short-term rates such as Treasury bill returns.