Technical Analysis - Myth or Magic?

Masters Thesis from the year 2010 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1, Sheffield Hallam University (Sheffield Business School), language: English, abstract: Table of content TABLE OF FIGURES..................................................................................................I GLOSSARY...............................................................................................................II 1. INTRODUCTION 1 2. SHARE ANALYSIS AND ITS PREMISES 5 2.1 CLASSIFICATION AND DEVELOPMENT 5 2.2 DOW THEORY IN CORRESPONDENCE WITH TA 6 2.2.1 The Averages Discount Everything (except Acts of God) 6 2.2.2 The Three Trends 7 2.2.3 The History repeats itself 10 2.2.4 Criticism of the Dow Theory 11 2.3 RANDOM WALK THEORY IN CORRESPONDENCE WITH BHS 12 2.3.1 Criticism of the Efficient Market Hypothesis 15 2.4 FUNDAMENTAL ANALYSIS 17 2.5 TECHNICAL ANALYSIS VERSUS FUNDAMENTAL ANALYSIS 17 3. METHODOLOGY 20 3.1 TEST CONDITIONS 20 3.2 TESTED INDICES 23 4. INSTRUMENTS OF TECHNICAL ANALYSIS 25 4.1 INDICATORS 25 4.1.1 Moving Averages 25 4.1.2 Moving Average Convergence Divergence 26 4.1.3 Bollinger Bands 27 4.2 OSCILLATORS 28 4.2.1 The dilemma of Oscillators 28 4.2.2 Momentum 28 4.2.3 Relative Strength Index 30 4.2.4 Slow Stochastic 31 4.2.5 Combination of Indicators and Oscillators 32 4.3 APPROACH TO PERFORMANCE TESTS 32 5. RESULTS/FINDINGS 34 5.1 BHS 34 5.2 EMA 35 5.3 MACD 36 5.4 BOLLINGER BANDS 37 5.5 MOMENTUM 38 5.6 RSI 39 5.7 SLOW STOCHASTIC 40 6. ANALYSIS 41 6.1 EMA 41 6.2 MACD 43 6.3 BOLLINGER BANDS 44 6.4 MOMENTUM 45 6.5 RSI 47 6.6 SLOW STOCHASTIC 48 7. CONCLUSION 50 8. APPENDIX 53 9. REFERENCES 71