How to Read Stock Charts — Self-Check Quiz

Seven questions across candlesticks, support and resistance, moving averages, and patterns.  |  ← Back to Chapter 1

How to use: try each question on your own first, then click "Show answer & explanation" to compare. Because free-text answers cannot be auto-graded on a static page, short-answer questions give you a model answer and key terms to check yourself against.
Educational use only. This quiz checks whether you can read a chart. It is not investment advice and never recommends buying or selling anything. Every "signal" below describes a tendency, not a certainty.
Multiple choice Recognition Identify a candle or pattern from a described chart.
Q1 Multiple choice Basic
On a daily chart, one candle has these prices: open 50, close 55, high 56, low 49. What kind of candle is it, and where is the body?
  1. ①Bearish; the body spans 55 (top) down to 50 (bottom).
  2. ②Bullish; the body spans 50 (bottom) up to 55 (top), with wicks to 56 and 49.
  3. ③Bullish; the body spans 49 up to 56.
  4. ④Bearish; the body spans 49 up to 56.
Show hint
A candle is bullish when the close is above the open. The body always runs open-to-close; the wicks reach the high and the low.
Show answer & explanation
Answer: ②

The close (55) is higher than the open (50), so it is a bullish candle. The body spans the open-to-close range, 50 up to 55. The wicks reach beyond the body: the upper wick to the high (56) and the lower wick to the low (49). Options ③ and ④ confuse the body (open-to-close) with the full range (low-to-high); ① reverses the direction.

Q2 Multiple choice Intermediate
After a long uptrend, price rises to about $80, pulls back, rallies to $80 again but fails to break through, then falls below the dip between the two peaks — tracing an "M" shape. Which pattern is this?
  1. ①Ascending triangle (continuation).
  2. ②Inverse head and shoulders (bottom reversal).
  3. ③Double top (reversal).
  4. ④Bull flag (continuation).
Show hint
Two equal peaks that fail at the same resistance, then a break down through the middle trough — what letter does that trace?
Show answer & explanation
Answer: ③

Two failed attempts at the same resistance (~$80) followed by a break below the middle trough is the double top, an "M"-shaped reversal pattern. A double bottom would be its "W"-shaped mirror at support. A head and shoulders has three peaks with a taller middle one; a triangle shows a narrowing range; a flag is a brief pause, not a twice-tested ceiling.

Q3 Multiple choice Intermediate
A chart's 50-day moving average crosses from below to above its 200-day moving average. What is this called, and what is it commonly read to suggest?
  1. ①A death cross, suggesting weakening momentum.
  2. ②A golden cross, commonly read as strengthening upward momentum.
  3. ③An RSI divergence, meaning the stock is overbought.
  4. ④A role reversal, meaning support became resistance.
Show answer & explanation
Answer: ②

A shorter average crossing above a longer one is a golden cross, often read as a sign of strengthening upward momentum. The reverse (short crossing below long) is a death cross. Remember these are lagging signals built from past prices — a common description, not a guarantee. RSI divergence and role reversal are unrelated concepts.

Short answer Define it Write a definition, then compare against the model answer.
Q4 Short answer Basic
In one or two sentences each, define support and resistance.
Your text is not saved, sent, or graded. Jot down an answer, then compare below.
Show answer & explanation

Support is a price level where falling price has repeatedly stopped and turned back up — a "floor" where buyers have historically stepped in. Resistance is a price level where rising price has repeatedly stalled and turned back down — a "ceiling" where sellers have historically taken over. Both are best treated as zones rather than exact lines.

Key terms: floor / ceiling buyers step in sellers take over repeatedly turns zone, not exact line
Q5 Short answer Intermediate
A chart shows each successive peak topping the previous peak and each successive trough sitting above the previous trough. What is this sequence called, and which trend does it define? Then explain "role reversal" in one sentence.
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Show hint
Think about what "higher highs and higher lows" describes, and what happens to a level after price breaks decisively through it.
Show answer & explanation

This is a sequence of higher highs and higher lows, which defines an uptrend. (The mirror image — lower highs and lower lows — is a downtrend.) Role reversal is the tendency for a level that breaks to switch jobs: broken resistance often becomes new support, and broken support often becomes new resistance.

Key terms: higher highs higher lows uptrend broken resistance → support polarity
Concept Q&A Frequently asked Clearing up the most common misunderstandings.
Q6 Q&A
If I spot a confirmed chart pattern, does that guarantee price will move the way the pattern suggests?
Show answer
No. A chart pattern describes a tendency observed across many past cases — a tilt in the odds, not a promise. Patterns fail routinely: a "confirmed" head and shoulders can reverse straight back, a triangle can break the opposite way. Patterns are read as "this suggests," never "this guarantees," and they carry more weight when the trend, support/resistance, and volume all agree. See Chapter 4.
Q7 Q&A
The RSI is above 70 and labelled "overbought." Does that mean I should sell?
Show answer
No — and this handbook does not tell anyone to buy or sell. "Overbought" simply means price has risen far and fast on the 0–100 RSI scale; a strong trend can stay overbought for a long time without turning. RSI is context that agrees or disagrees with what price, trend, and volume already show — not a command. Reading a chart tells you what has happened and what the evidence suggests, not what you should do about it. See Chapter 3.

Educational self-check · standard technical-analysis definitions
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