Support and Resistance Levels MCQs

MCCs on Support and Resistance Levels

1. What is a support level?
A) A price level where buying interest is strong enough to prevent the price from falling further
B) A price level where selling interest is strong enough to prevent the price from rising further
C) A price level where the market is stagnant
D) A price level that always guarantees profit
Answer: A) A price level where buying interest is strong enough to prevent the price from falling further

2. What is a resistance level?
A) A price level where buying interest is strong enough to push prices higher
B) A price level where selling interest is strong enough to prevent prices from rising
C) A price level that indicates high volatility
D) A price level that shows the price is about to break
Answer: B) A price level where selling interest is strong enough to prevent prices from rising

3. Which of the following best describes a “breakout”?
A) When the price moves below a support level
B) When the price moves above a resistance level
C) When the price remains within support and resistance levels
D) When the price experiences no movement
Answer: B) When the price moves above a resistance level

4. If a support level is broken, what is likely to happen?
A) The price will increase significantly
B) The price may continue to fall further
C) The price will stay the same
D) The price will reverse immediately
Answer: B) The price may continue to fall further

5. What is the significance of identifying support and resistance levels in trading?
A) It helps traders predict the exact price movements
B) It allows traders to place trades without risk
C) It helps traders make informed decisions about entry and exit points
D) It guarantees profit
Answer: C) It helps traders make informed decisions about entry and exit points

6. Which of the following indicates that a resistance level may become a new support level?
A) A strong bearish trend
B) A breakout above the resistance level
C) A bounce from the support level
D) A consolidation at the resistance level
Answer: B) A breakout above the resistance level

7. What happens during a “pullback”?
A) Price moves sharply in one direction
B) Price retraces to a previous support or resistance level before continuing in the same direction
C) Price stagnates at a support level
D) Price reverses completely
Answer: B) Price retraces to a previous support or resistance level before continuing in the same direction

8. What can increase the strength of a support or resistance level?
A) The number of times the price touches that level
B) A single touch at the level
C) An increase in market volume at that level
D) Both A and C
Answer: D) Both A and C

9. What is a “psychological level”?
A) A support or resistance level based on historical data
B) A round number where traders expect buying or selling
C) A level that only technical analysts use
D) A level that guarantees price movement
Answer: B) A round number where traders expect buying or selling

10. If a stock has a resistance level at $50, what might a trader expect if the price approaches that level again?
A) The price will break through easily
B) The price will likely reverse or experience selling pressure
C) The price will become volatile
D) The price will stay at $50
Answer: B) The price will likely reverse or experience selling pressure