Study guide
10.8 Technical Indicators, Volume, Breadth & Sentiment
Canadian Securities Course CSC
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1 Introduction & Exam Overview
About the CSC Exams
2 Chapter 1: The Canadian Investment Marketplace
1.1 The Canadian Securities Industry & the Investment Dealer's Role 1.2 Financial Intermediaries: Banks, Trusts, Credit Unions, Insurers & Pension Funds 1.3 Financial Market Trends 1.4 Investment Capital, Financial Instruments & Financial Markets 1.5 Canadian Exchanges, ATSs, Dark Pools & the Order Protection Rule 1.6 Canadian Securities Regulators, the CSA & CIRO 1.7 Investor Protection: OSFI, CIPF and CDIC 1.8 Ethics, Standards of Conduct & the Client Focused Reforms 1.9 Conflicts of Interest, Complaint Handling & Remediation
3 Chapter 2: The Economy
2.1 Economics Foundations & Measuring Economic Growth 2.2 The Business Cycle & Economic Indicators 2.3 Inflation & Interest Rates 2.4 The Labour Market & Unemployment 2.5 The Bank of Canada & the Inflation-Control Target 2.6 Implementing Monetary Policy: The Operating Band, Market Operations & Transmission 2.7 Fiscal Policy, Deficits & the Challenges of Government Policy 2.8 International Finance & Trade: The Balance of Payments and the Canadian Dollar
4 Chapter 3: Features and Types of Fixed-Income Securities
3.1 The Fixed-Income Marketplace, Bond Terminology & Security 3.2 Protective Covenants, Retirement Provisions & Extendible/Retractable Features 3.3 Government of Canada Securities: T-Bills, Marketable Bonds & RRBs 3.4 Provincial & Municipal Debt and Strip Bonds 3.5 Corporate Bonds, Credit Spreads & Bond Ratings 3.6 Money Market Instruments, Floating-Rate Notes & International Bonds 3.7 Other Fixed-Income Securities & Reading Bond Quotes
5 Chapter 4: Pricing and Trading of Fixed-Income Securities
4.1 Bond Pricing, Price–Yield Relationships & Accrued Interest 4.2 Yield Calculations & Return Measures 4.3 The Term Structure of Interest Rates & Yield Curve Theories 4.4 Fundamental Bond Pricing Properties: Volatility Rules, Duration & Convexity 4.5 Bond Market Trading & Bond Indexes
6 Chapter 5: Common and Preferred Shares
5.1 Common Shares: Ownership Rights, Voting & Restricted Shares 5.2 Dividends, DRIPs, Stock Splits & Consolidations 5.3 Preferred Shares: Features, Cumulative Dividends & Taxation 5.4 Preferred Share Variations: Convertible, Callable, Retractable, Floating & Rate-Reset 5.5 Fundamental Equity Metrics & Ratios 5.6 Stock Indexes & Averages
7 Chapter 6: Equity Transactions
6.1 Order Types, Execution & Market Mechanics 6.2 Margin Trading: Long Accounts & Borrowing 6.3 Short Selling & Short-Margin Requirements 6.4 Trading & Settlement Procedures: T+1, CDS & Confirmations
8 Chapter 7: Derivatives
7.1 Derivatives: Role, Underlying Assets & Users 7.2 Options Fundamentals: Calls, Puts & Moneyness 7.3 Option Strategies & Risk Management 7.4 Forward & Futures Contracts 7.5 Rights & Warrants
9 Chapter 8: Corporations and their Financial Statements
8.1 Corporate Structures & Corporate Governance 8.2 The Annual Report, Accounting Standards & the Auditor's Report 8.3 The Balance Sheet & Income Statement 8.4 The Cash Flow Statement & Earnings Quality 8.5 Public Company Disclosure, Investor Rights, Take-Over Bids & Insider Trading
10 Chapter 9: Financing and Listing Securities
9.1 Government & Corporate Financing: Underwriting and Syndicates 9.2 The Prospectus Process, Stabilization & Purchaser Rights 9.3 The Exempt Market & Private Placements 9.4 The Listing Process: TSX, TSXV & Capital Pool Companies 9.5 Continuous Disclosure, Material Changes & Insider Reporting
11 Chapter 10: Investment Analysis
10.1 Methods of Equity Analysis & Macroeconomic Analysis 10.2 Fundamental Industry Analysis 10.3 Company Analysis: Competitive Advantages, Governance & the Dividend Discount Model 10.4 Discounted Cash Flow & Relative Valuation Multiples 10.5 Financial Statement Ratio Analysis 10.6 Assessing Preferred Share Investment Quality 10.7 Technical Analysis: Charts, Trends & Patterns 10.8 Technical Indicators, Volume, Breadth & Sentiment
12 Chapter 11: Portfolio Analysis
11.1 Measuring Investment Return 11.2 Measuring Risk: Types of Risk, Standard Deviation & Downside Measures 11.3 Portfolio Risk & Return: Correlation and Diversification 11.4 Beta, the Capital Asset Pricing Model & the Security Market Line 11.5 Portfolio Manager Styles: Equity & Fixed Income 11.6 The Portfolio Management Process: Objectives, Constraints & the IPS 11.7 Asset Mix, Monitoring, Performance Evaluation & Rebalancing
13 Chapter 12: Alternative Investments, Other Managed, and Structured Products
12.1 Alternative Investments: Structures, Fees & Liquid Alternatives 12.2 Alternative Strategies, Performance Measurement & Due Diligence 12.3 Segregated Funds, Labour-Sponsored Funds & Listed Private Equity 12.4 Income Trusts, REITs & Closed-End Funds 12.5 Structured Products: PPNs & Market-Linked GICs 12.6 Split Shares & Asset-Backed Securities
14 Chapter 13: Mutual Funds
13.1 Managed Products & Mutual Fund Structure 13.2 Pricing Mutual Fund Units: NAVPS & Forward Pricing 13.3 Mutual Fund Fees, Sales Charges & Unit Series 13.4 Mutual Fund Regulation, Fund Facts & Account Opening 13.5 Types of Mutual Funds & Fund Management Styles 13.6 Redemptions, Withdrawal Plans & Measuring Fund Performance
15 Chapter 14: Exchange-Traded Funds (ETFs)
14.1 ETF Origins, Structure, Tax Efficiency & ETF Facts 14.2 ETF Creation, Redemption & Arbitrage 14.3 Types of ETFs & Advanced Strategies 14.4 Comparing ETFs, Mutual Funds & Individual Securities
16 Chapter 15: Working with the Institutional Client
15.1 The Institutional Marketplace & Institutional Clients 15.2 Institutional Investment Guidelines, Styles & Restrictions 15.3 Buy Side & Sell Side: Trading Desks, Revenue, Clearing & Best Execution 15.4 Block Trading, Dark Pools & Algorithmic Trading
17 Chapter 16: Fee-Based Accounts and Working with the Retail Client
16.1 Fee-Based Accounts: Managed & Non-Managed Models 16.2 Fee Transparency, CRM2 & Total Cost Reporting, and MWRR vs. TWRR 16.3 The Financial Planning Approach & the Life Cycle 16.4 Behavioral Finance, Sequence-of-Returns Risk & Client Coaching 16.5 Estate Planning Basics
18 Chapter 17: Canadian Taxation
17.1 The Canadian Taxation System 17.2 Taxation of Investment Income 17.3 Capital Gains, Losses & The Superficial Loss Rule 17.4 Registered vs Non-Registered Tax-Advantaged Accounts 17.5 Tax Planning Strategies, Pension Plans & the RDSP
10.8 Technical Indicators, Volume, Breadth & Sentiment
Key Takeaways Explain This Topic AI
A golden cross (50-day average crossing above the 200-day) is bullish; a death cross is bearish.
RSI above 70 suggests overbought conditions and below 30 oversold; a divergence from price can warn of a reversal.
Breakouts on heavy volume are more reliable than breakouts on light volume.
Sentiment indicators such as the put/call ratio are often read contrarily: extreme pessimism can signal a buying opportunity.
Last updated: October 2026
Charts show patterns, but technical analysts also use mathematical indicators and measures of market breadth and sentiment to confirm what the chart suggests. This section covers moving averages, RSI and MACD, volume confirmation, and breadth and sentiment indicators.
Technical Indicators: Moving Averages, Momentum & Oscillators
Technical indicators apply mathematical formulas to historical price and volume data to confirm trends and identify potential turning points.
1. Moving Averages
Moving averages smooth price fluctuations to isolate underlying trends.
Simple Moving Average (SMA): Calculates the arithmetic mean of closing prices over N N N periods: SMA = P 1 + P 2 + ⋯ + P N N \text{SMA} = \frac{P_1 + P_2 + \dots + P_N}{N} SMA = N P 1 + P 2 + ⋯ + P N
Exponential Moving Average (EMA): Applies exponentially greater weight to recent prices, reducing the time lag inherent in simple moving averages and responding faster to recent price changes.
Key Moving Average Benchmarks:
20-day / 50-day MA: Used for short- and intermediate-term trend analysis.
200-day MA: The standard benchmark for long-term primary trend evaluation. When a stock trades above its rising 200-day MA, it is considered in a long-term bull market.
Moving Average Crossovers:
Golden Cross: Occurs when a short-term moving average (typically the 50-day SMA ) crosses above a long-term moving average (the 200-day SMA ). This generates an authoritative long-term bullish signal .
Death Cross: Occurs when the 50-day SMA crosses below the 200-day SMA . This generates a long-term bearish warning of a potential prolonged downtrend.
2. Relative Strength Index (RSI)
Developed by J. Welles Wilder Jr., the Relative Strength Index (RSI) is a momentum oscillator that measures the speed and magnitude of price changes on a scale from 0 to 100:
RSI = 100 − [ 100 1 + RS ] \text{RSI} = 100 - \left[ \frac{100}{1 + \text{RS}} \right] RSI = 100 − [ 1 + RS 100 ]
RS (Relative Strength) = Average Gain of Up-Sessions over 14 Days Average Loss of Down-Sessions over 14 Days \text{RS (Relative Strength)} = \frac{\text{Average Gain of Up-Sessions over 14 Days}}{\text{Average Loss of Down-Sessions over 14 Days}} RS (Relative Strength) = Average Loss of Down-Sessions over 14 Days Average Gain of Up-Sessions over 14 Days Relative Strength Index (RSI) Oscillator Scale
- 100 ┌─────────────────────────────────────────────────────────────┐
- │ OVERBOUGHT ZONE (> 70) │ Vulnerable to Pullback
- 70 ├─────────────────────────────────────────────────────────────┤
- │ │
- 50 ├ - - - - - - - - - - Centerline - - - - - - - - - - - - - - -┤ Bull/Bear Momentum Threshold
- │ │
- 30 ├─────────────────────────────────────────────────────────────┤
- │ OVERSOLD ZONE (< 30) │ Candidate for Bounce
- 0 └─────────────────────────────────────────────────────────────┘
Overbought Threshold ( > 70 > 70 > 70 ): Indicates that buying momentum has pushed price to an extreme where the asset is vulnerable to a pullback or sideways consolidation. It is not an automatic sell signal, as strong momentum can keep an asset overbought for extended periods.
Oversold Threshold ( < 30 < 30 < 30 ): Indicates that selling pressure has pushed price to a depressed level, suggesting the security may be due for a technical bounce.
Momentum Divergences:
Bearish Divergence: Occurs when price reaches a higher high , but the RSI forms a lower high . This demonstrates that underlying buying momentum is weakening, frequently preceding a price decline.
Bullish Divergence: Occurs when price reaches a lower low , but the RSI establishes a higher low . This indicates that selling pressure is dissipating, often preceding an upward price reversal.
3. Moving Average Convergence Divergence (MACD)
Developed by Gerald Appel, the MACD is a trend-following momentum indicator that illustrates the relationship between two moving averages:
MACD Line: Calculated as the 12-period EMA minus the 26-period EMA .
Signal Line: A 9-period EMA of the MACD Line.
MACD Histogram: Measures the spread between the MACD Line and the Signal Line: Histogram = MACD Line − Signal Line \text{Histogram} = \text{MACD Line} - \text{Signal Line} Histogram = MACD Line − Signal Line
Trading Signals:
Bullish Signal: The MACD Line crosses above the Signal Line (Histogram shifts from negative to positive).
Bearish Signal: The MACD Line crosses below the Signal Line (Histogram shifts from positive to negative).
Zero-Line Crossovers: When the MACD Line crosses above zero, the 12-day EMA exceeds the 26-day EMA, confirming intermediate upward momentum.
Trading Volume & Market Breadth Confirmation
Price action without volume analysis provides an incomplete picture. Trading volume represents the liquidity and institutional conviction backing a price move.
Volume Confirms the Trend:
In a sustainable uptrend, volume should expand on advancing sessions and contract during corrective pullbacks.
If price advances to new highs while volume steadily contracts ( volume divergence ), the rally is driven by lack of selling rather than strong institutional buying, warning of potential trend exhaustion.
Breakout Confirmation: Breakouts above resistance or breakdowns below support require a significant surge in trading volume (typically ≥ 1.5 × \ge 1.5\times ≥ 1.5 × average daily volume) to confirm validity. Breakouts occurring on light volume often fail, resulting in bull traps or bear traps .
Market Breadth and Sentiment Indicators
Breadth indicators ask whether a market move is broad or driven by a few large stocks:
Advance-decline line: a running total of advancing issues minus declining issues. If an index makes new highs while the A-D line falls, fewer stocks are participating, which warns the rally may be weakening.
New highs versus new lows: a rising number of stocks making 52-week highs confirms a healthy uptrend.
Sentiment indicators are often read in a contrarian way: when almost everyone is bullish, there may be few buyers left.
Indicator What it measures Contrarian reading
Put/call ratio Volume of puts relative to calls A very high ratio (heavy put buying) suggests excessive fear, a possible buy signal
Short interest Shares sold short and not yet covered High short interest means future buying demand when shorts cover
Volatility index Option-implied expected volatility Spikes usually accompany panic near market lows
Investor surveys Share of investors who are bullish or bearish Extreme optimism is a warning; extreme pessimism can be an opportunity
No single indicator is reliable on its own. Technical analysts look for several signals pointing in the same direction.