Technical Analysis - Myth or Magic?

Master's 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. INTRODUCTION1 2. SHARE ANALYSIS AND ITS PREMISES5 2.1 CLASSIFICATION AND DEVELOPMENT5 2.2 DOW THEORY IN CORRESPONDENCE WITH TA6 2.2.1 The Averages Discount Everything (except 'Acts of God')6 2.2.2 The Three Trends7 2.2.3 The History repeats itself10 2.2.4 Criticism of the Dow Theory11 2.3 RANDOM WALK THEORY IN CORRESPONDENCE WITH BHS12 2.3.1 Criticism of the Efficient Market Hypothesis15 2.4 FUNDAMENTAL ANALYSIS17 2.5 TECHNICAL ANALYSIS VERSUS FUNDAMENTAL ANALYSIS17 3. METHODOLOGY20 3.1 TEST CONDITIONS20 3.2 TESTED INDICES23 4. INSTRUMENTS OF TECHNICAL ANALYSIS25 4.1 INDICATORS25 4.1.1 Moving Averages25 4.1.2 Moving Average Convergence Divergence26 4.1.3 Bollinger Bands27 4.2 OSCILLATORS28 4.2.1 The dilemma of Oscillators28 4.2.2 Momentum28 4.2.3 Relative Strength Index30 4.2.4 Slow Stochastic31 4.2.5 Combination of Indicators and Oscillators32 4.3 APPROACH TO PERFORMANCE TESTS32 5. RESULTS/FINDINGS34 5.1 BHS34 5.2 EMA35 5.3 MACD36 5.4 BOLLINGER BANDS37 5.5 MOMENTUM38 5.6 RSI39 5.7 SLOW STOCHASTIC40 6. ANALYSIS41 6.1 EMA41 6.2 MACD43 6.3 BOLLINGER BANDS44 6.4 MOMENTUM45 6.5 RSI47 6.6 SLOW STOCHASTIC48 7. CONCLUSION50 8. APPENDIX53 9. REFERENCES71