Basics Intermediate: Understanding Bull and Bear Markets

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1.
Emotions can contribute to bull and bear markets.
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True. Aspects of investor psychology, such as emotions, can drive people to value stocks very high or very low.
2.
If you believe in "buying low and selling high," at which of the following points should you sell your stock?
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When the stock begins to move downward. This signals that the bull market may be reversing, although it is never certain. This signal is not present during the other situations mentioned, because they may just be periods of slow growth.
3.
The net advance measures the difference between the number of stocks advancing in price and the number declining in price.
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True. From this comes the advance-decline line.
4.
Selling short involves _______.
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Selling when prices are high and buying when prices fall. This is the reverse of the buy low, sell high strategy. It attempts to take advantage of falling prices.
5.
A portfolio with a lot of stocks can be very profitable during a bull market.
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True. Stocks are able to take advantage of growth because they are made of shares, which typically grow in value during bull markets.