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Practice — Put It to Work · Workbook 2 of 10

Workbook 2: Analysis

Exercises for Technical Analysis A–Z → What Moves Markets — technicals, patterns, fundamentals, catalysts.

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You know what a stock is and how to place an order. This workbook trains the next skill: reading what is in front of you. Charts and indicators, patterns and price action, a company's real financials, and the news forces that move everything.

How to use this workbook:

  • A pencil and a calculator are all you need. Show your steps — the steps are where the learning lives.
  • Each section matches the module with the same number (Technical Analysis A–Z through What Moves Markets). Finish a section before checking it.
  • All answers are in the ## Answers section at the very end, with the arithmetic worked out in full.

Technical Analysis A–Z — Technical Analysis A–Z

Calculations

  1. A stock's last five daily closing prices are $50, $52, $54, $53, and $56. (a) Calculate the 5-period simple moving average (SMA). (b) Today's close is $56 — is it above or below the SMA, and what small sign does that give?
  2. A stock ran from $60 up to $90. Using the Fibonacci retracement levels from Technical Analysis A–Z, where is the 50% retracement level? Show the steps.
  3. A stock's ATR (average true range) is $1.20. A move of $3.60 in one day would equal how many "average daily wiggles"?
  4. A stock breaks above a level it failed at for a month, closing the day on 900,000 shares. Its average daily volume is 1,500,000 shares. (a) Today's volume is what percentage of its average? (b) Does that volume confirm the breakout or make you doubt it? Why?

Fill in the Blank

  1. The average price of a stock for the day so far, weighted by how many shares traded at each price, is called __________.
  2. An indicator that swings back and forth within a set range — like RSI — is called an __________.

Spot the Mistake

  1. Zoe's RSI reading just hit 72, so she immediately sells everything she owns in that stock, saying: "Overbought means it MUST fall now." What is wrong with her reasoning?
  2. Sam loads RSI, MACD, and three other oscillators onto his chart "so all five can confirm each other before I trade." What rule from Technical Analysis A–Z is he breaking, and why?

Scenario

  1. It is noon. A stock trades at $122 while its VWAP sits at $120.50. On the daily chart, price is above both its 50-day and 200-day moving averages, which are sloping up. In one or two sentences, give the honest Technical Analysis A–Z summary: who controls the day so far, what the big picture trend is, and what you still cannot conclude.

Chart Patterns & Price Action — Chart Patterns & Price Action

Reading the Chart

  1. A stock's swings print in this order: swing high of $72, swing low of $64, swing high of $69, swing low of $60, swing high of $66. Is this uptrend, downtrend, or sideways structure? Name the two things you checked.
  2. A stock has bounced between a support zone around $25 and a resistance zone around $31 for three months. (a) How wide is the range in dollars? (b) The width is what percentage of the support price?

Fill in the Blank

  1. In a double top, the low point between the two peaks is called the __________. The pattern only counts once price breaks through it.
  2. An __________ triangle has a flat ceiling (resistance) with rising lows underneath it. Traders watch for a break up through the ceiling.

Spot the Mistake

  1. At 10 AM a stock pokes $0.30 above its resistance level on light volume, then falls back into its range by noon and closes inside it. Jake says: "Textbook breakout — it crossed the line!" What actually happened, and what two things should Jake have waited for?
  2. Mia draws her support as one exact line at $50.00. Price dips to $49.70 for an hour, then bounces and rallies. Mia panics anyway, saying "support broke." What is she misunderstanding about how levels work?

Scenarios

  1. A stock breaks above $60 resistance and closes at $61.20 on double its average volume. Two days later it falls back to $60.40 — and bounces upward instead of breaking down. In Chart Patterns & Price Action's terms, what did that dip just demonstrate?
  2. After a long uptrend, a stock forms a modest peak, then a higher peak, then a second modest peak about the height of the first. Then it breaks below the line connecting the valleys under the peaks. What pattern formed, and what completed it?

Fundamental Analysis A–Z — Fundamental Analysis A–Z

Calculations

  1. Mini balance-sheet exercise. Harbor Snacks reports the following: assets of $12,000,000 and liabilities of $7,000,000. (a) Using the rule Assets = Liabilities + Equity, what is Harbor's equity? (b) A year later its assets have grown to $14,000,000 and its liabilities are still $7,000,000. What is its equity now?
  2. A company earns net income of $4,000,000 and has 800,000 shares outstanding. Its stock trades at $75. (a) What is its EPS? (b) What is its P/E ratio?
  3. A company reports revenue of $20,000,000, gross profit of $8,000,000, and net income of $2,000,000. (a) What is its gross margin? (b) What is its net margin?
  4. A company's revenue was $12,000,000 last year and $15,000,000 this year. What was its revenue growth, in percent?
  5. A stock pays a yearly dividend of $1.50 per share and trades at $50. What is its dividend yield?
  6. A company has 1,000,000 shares outstanding and earns $1,600,000. (a) What is its EPS? (b) The company buys back 200,000 of its own shares and retires them, and earnings stay at $1,600,000. What is the new EPS? (c) In one sentence, why did EPS change even though earnings did not?

Fill in the Blank

  1. The financial statement that tracks the real cash moving in and out of the company — actual money, not accounting math — is the __________ statement.
  2. Whatever protects a company from competitors — a brand people trust, a product that is painful to switch away from, being the biggest, a patent — is called a __________.

Spot the Mistake

  1. A stock on Tom's watchlist has a P/E ratio of 6 — by far the lowest he can find. He buys it, saying: "Cheapest P/E out there. Guaranteed bargain." What is wrong with his reasoning?

Scenario

  1. Apex Gear reports a profit of $2,000,000 for the year — but its bank account actually SHRANK during the year, because it spent $3,000,000 in cash on new machines and trucks. A classmate says: "Impossible. The company must be lying about its profit." Using Fundamental Analysis A–Z, explain why both numbers can be perfectly true.

What Moves Markets — What Moves Markets

Calculations

  1. The S&P 500 closes at 5,200. A frightening headline hits overnight and the index falls 3% the next day. What does it close at?
  2. You own five stocks worth $2,000 each. Four of the five are Technology companies. (a) How many dollars do you have riding on the Technology sector? (b) That is what percentage of your whole portfolio?
  3. A company borrows $1,000,000 for one year. (a) At a 3% interest rate, how much interest does it pay for the year? (b) At an 8% rate? (c) How much MORE per year do the high rates cost the company? (This is the Fed's seesaw, in dollars.)

Fill in the Blank

  1. The monthly government report that measures inflation — the rising cost of a standard basket of everyday goods and services — is the __________ (Consumer Price Index).
  2. After a company reports its results, its leaders give their own forecast for the coming months. That forecast is called __________, and it often moves the stock price more than the results themselves.

Spot the Mistake

  1. The headline reads: "Company beats earnings expectations!" — and the stock falls 6% that day. A beginner says: "That headline has to be a misprint. Good news can't make a stock fall." Explain why the headline and the fall can both be real.
  2. The VIX is sitting at 38. Ben says: "A VIX that high means the market is definitely going down tomorrow." What does a high VIX actually tell you, and what does it NOT tell you?

Scenarios

  1. At 8:30 AM, the CPI report comes in much hotter than expected — inflation is running faster than traders hoped. Walk the What Moves Markets chain in order: (a) what do traders now expect the Fed to do with interest rates? (b) name two reasons stocks often fall on that expectation.
  2. On Monday you plan to buy a stock you have been studying. Its earnings report comes out Tuesday after the close — the first earnings report you would ever hold through. What does What Moves Markets advise, and why?

Answers

Worked solutions, module by module. Compare both your final numbers and your steps.

Technical Analysis A–Z — Technical Analysis A–Z

  • 1. (a) Add the closes: $50 + $52 + $54 + $53 + $56 = $265. Divide by 5: $265 ÷ 5 = $53 SMA. (b) The close of $56 is above the $53 line — a small sign of short-term strength: recent buyers are paying more than the recent average.
  • 2. The full move is $90 − $60 = $30. Half of the move is $30 × 0.50 = $15. Retracing 50% from the top: $90 − $15 = $75.
  • 3. $3.60 ÷ $1.20 = 3 average daily wiggles — a big day for this stock, roughly three normal days of travel squeezed into one.
  • 4. (a) 900,000 ÷ 1,500,000 = 0.60 = 60% of average volume. (b) It makes you doubt the breakout. Volume confirms moves: a real breakout wants a crowd bigger than usual, not a smaller one. This one had little commitment behind it and is more likely to fizzle.
  • 5. VWAP (Volume-Weighted Average Price).
  • 6. Oscillator.
  • 7. "Overbought" (RSI above 70) is a convention meaning momentum is stretched — not a law that price must fall. In a strong uptrend, RSI can sit above 70 for days while price keeps climbing. Zoe treated a weather report like a guarantee.
  • 8. The beginner stack rule: one trend tool, VWAP, and at most ONE oscillator — plus volume. His five oscillators mostly repackage the same price data, so they do not give five independent confirmations; they give the same hint five times and clutter the chart. If an indicator answers no new question, it does not go on the chart.
  • 9. Buyers control the day so far: price ($122) sits above VWAP ($120.50), meaning today's participants have paid more than the day's average price. The big picture trend is up, with price above its rising 50-day and 200-day averages. What you cannot conclude: that price will keep rising. Technical analysis describes what has happened — it never predicts what happens next.

Chart Patterns & Price Action — Chart Patterns & Price Action

  • 10. Downtrend structure. The highs are falling — $72, then $69, then $66 (lower highs) — and the lows are falling too — $64, then $60 (lower lows). "LH and LL" is a staircase going down.
  • 11. (a) Width: $31 − $25 = $6. (b) $6 ÷ $25 = 0.24 = 24% of the support price. That is a wide box — the same stock is 24% more expensive at the ceiling than at the floor, which is exactly why traders care where inside a range they buy.
  • 12. Neckline.
  • 13. Ascending triangle.
  • 14. That was a failed (false) breakout. A wick poking through a level means almost nothing. Jake should have waited for (1) a close on the other side of the level, and (2) rising volume to show real conviction. Traders who chased the poke got trapped and likely sold as it fell back.
  • 15. Support and resistance are zones, not exact lines. Thousands of orders cluster at slightly different prices around a level — $49.70, $50.10, $49.90. A dip a few dimes into the zone is normal behavior, not a break. Price entering the zone is what matters, not price touching one magical penny.
  • 16. A successful retest showing role reversal: the old $60 resistance flipped and acted as new support. The sellers who defended $60 on the way up are gone, and buyers who missed the breakout bought the dip there.
  • 17. Head and shoulders — left shoulder, head, right shoulder. The pattern completed when price broke below the neckline, the line connecting the valleys under the peaks.

Fundamental Analysis A–Z — Fundamental Analysis A–Z

  • 18. (a) Equity = Assets − Liabilities = $12,000,000 − $7,000,000 = $5,000,000. (b) $14,000,000 − $7,000,000 = $7,000,000. The owners' slice grew by $2,000,000 because everything the company gained went to equity while its debts stayed flat.
  • 19. (a) EPS = $4,000,000 ÷ 800,000 = $5.00 per share. (b) P/E = $75 ÷ $5 = 15. Investors are paying $15 for each $1 of yearly profit.
  • 20. (a) Gross margin = $8,000,000 ÷ $20,000,000 = 0.40 = 40% — 40 cents of every sales dollar survives after making the product. (b) Net margin = $2,000,000 ÷ $20,000,000 = 0.10 = 10% — 10 cents of every dollar survives as final profit.
  • 21. Growth = ($15,000,000 − $12,000,000) ÷ $12,000,000 = $3,000,000 ÷ $12,000,000 = 0.25 = 25% revenue growth.
  • 22. Dividend yield = $1.50 ÷ $50 = 0.03 = 3%. (And dividends are never guaranteed — the company can cut or cancel this at any time.)
  • 23. (a) EPS = $1,600,000 ÷ 1,000,000 = $1.60. (b) Shares after the buyback: 1,000,000 − 200,000 = 800,000. New EPS = $1,600,000 ÷ 800,000 = $2.00. (c) The same profit is now divided among fewer shares, so each remaining share owns a bigger slice of the company — that is the whole point of a buyback.
  • 24. Cash flow statement.
  • 25. Moat.
  • 26. A low P/E is not automatically a bargain. It often means the market expects the company's profits to shrink — the stock is cheap for a reason, and cheap can get cheaper. The P/E is a question ("why is this priced so low?"), not an answer. Tom also compared the number to nothing: P/E only makes sense against the company's own history and similar companies.
  • 27. Profit and cash are two different things. Profit is shaped by accounting rules; cash is a fact — money that actually moved through the bank account. Apex earned $2,000,000 on paper while spending $3,000,000 of real cash on machines and trucks, so its bank balance fell even though the year was profitable. Both numbers are honest. It is also why Fundamental Analysis A–Z warns that companies die from running out of cash, not from running out of accounting profit.

What Moves Markets — What Moves Markets

  • 28. The drop: 5,200 × 0.03 = 156. New close: 5,200 − 156 = 5,044.
  • 29. (a) 4 × $2,000 = $8,000. (b) Your whole portfolio is 5 × $2,000 = $10,000. $8,000 ÷ $10,000 = 0.80 = 80%. You do not own five separate bets — you own one big bet on one neighborhood of the market.
  • 30. (a) $1,000,000 × 0.03 = $30,000 of interest. (b) $1,000,000 × 0.08 = $80,000. (c) $80,000 − $30,000 = $50,000 more per year. That extra cost is why high rates squeeze company profits — and why markets hang on every word the Fed says.
  • 31. CPI.
  • 32. Guidance.
  • 33. Prices move on the news VERSUS what was expected — not on whether the news sounds good. The beat can be real and still disappoint: the crowd may have quietly expected an even bigger beat, or the good results were already priced in before the report, or the company's guidance for the future was soft. Disappointed holders sell, and the stock falls on genuinely good headlines.
  • 34. A high VIX tells you traders expect BIG price swings and are paying up for protection through options — fear is expensive right now. It does NOT tell you direction. The expected moves can be up, down, or both. VIX measures expected movement, not which way.
  • 35. (a) Traders expect the Fed to keep interest rates high — or raise them — to cool inflation, instead of cutting them. (b) Any two of: expensive borrowing squeezes company profits; expensive borrowing slows customer spending; safe bank accounts and government bonds now pay attractive interest, pulling money out of risky stocks; higher rates make future company profits worth less today.
  • 36. Check the earnings calendar BEFORE you buy — it is published weeks in advance — and seriously consider waiting until after the report. Holding a brand-new position through earnings is a gamble on a coin flip: the stock can gap up or down 5%, 10%, sometimes far more, overnight, and no amount of homework on the company tells you which way the surprise lands.