Profitability of Technical Analysis: A Challenge to Market Efficiency
DOES TECHNICAL ANALYSIS WORK?
Investors often ask these questions: Does technical analysis work? Is it of any value to the investor as an investment tool to forecast market trends? Are the financial markets a random walk?
This book reveals that the stock market is not a random walk.
Of 13 technical trading systems tested on Malaysian stocks, 6 systems consistently beat the market. Which systems are the best?
THIS BOOK WILL REVEAL THE 6 BEST TRADING SYSTEMS!
The results also show that technical analysis tools as represented by the technical trading systems do in fact work.
Amongst other findings, the Channel Breakout (C.B.O.) 20-20 trading system has been found to be the most robust and profitable tool for the trading of Malaysian stocks.
SCOMIMARINE (Habib)
Note the excellent timing of the C.B.O. 20-20 trading system in calling buy/sell signals on SCOMIMARINE (formerly HABIB). This system called an excellent sell on 15.8.2005 at RM2.37 just before a sell-off that triggered a sharp decline toRM1.14 or 51.9% in less than 5 months, by 6/1/2006.
BONUS # 1
THIS BOOK ALSO REVEALS WHICH TECHNICAL TRADING SYSTEMS CAN “SAVE” AN INVESTOR FROM A FINANCIAL BUBBLE, NAMELY THE ASIAN FINANCIAL CRISIS!
Arising from two unusual but significant events highlighted in the book, namely the Asian financial crisis of 1997-1998 and the limit-down moves of some lower liner stocks in 2005 caused by the bank margin squeeze, the Channel Breakout trading system has also been found to be excellent and robust for timing stock trading under such special circumstances.
KLCI Weekly Chart from 1997 – 1999 during the Asian financial crisis
The KLCI suffered its worst fall ever during the Asian financial crisis of 1997-1998. The KLCI fell from 1,278 to 262 in 18 months, for a loss of 1,016 points or 79.4%.
Kuala Lumpur Composite Index during the Asian financial crisis (1997-1999)
An investor applying the buy-and-hold strategy on the KLCI would have suffered a diminution in investment value to the tune of 458 points (1234 – 776) between the holding periods from 17/3/1997 to 26/7/1999. On the other hand, an investor applying the C.B.O. 20-20 trading system during the same period would have traded on four occasions; on 2/6/1997, 3/2/1998, 7/9/1998 and on 6/4/1999. He was wrong on two occasions and right on two occasions. His theoretical investment gain, trading with the C.B.O. 20-20 system was 215 point, much better off than the performance of the buy-and-hold strategy.
KLCI: Buy-And-Hold Strategy vs C.B.O. 20-20 Trading System
Buy-and-Hold Strategy
C.B.O. 20-20 Trading System
17/3/1997 Bought Price 1,234
2/6/1997 Bought 1,117 26/6/1997 Sold 1,066 = -51
26/7/1999 Holding Price 776
3/2/1998 Bought 701 3/4/1998 Sold 666 = -35
7/9/1998 Bought 445 8/2/1999 Sold 526 = +81
6/4/1999 Bought 556 26/7/1999 Sold 776 = +220
Diminution in investment - 458
Net Investment Gain +215
HOW THE CHANNEL BREAKOUT SYSTEM COULD HAVE “SAVED” THE INVESTOR IN MAYBANK
MAYBANK
Few investors would have guessed that Malaysia’s premier bank could lose 72% of its value. From a high of RM8.15, MAYBANK plunged to a low of RM2.28 by 4/9/1998 during the Asian financial crisis. Notice that the C.B.O. 20-20 trading system called excellent buy and sell signals on MAYBANK as can be seen from this 1997-1999 MAYBANK chart.
BONUS # 2
THIS BOOK WILL REVEAL:
HOW TO HANDLE LIMIT-DOWN STOCKS ARISING FROM THE MALAYSIAN BANK MARGIN SQUEEZE OF 2005
FOUNTAIN VIEW
The CBO 20-20 trading system bought FOUNTAIN VIEW at RM2.70 on 18/11/2003 and sold out on 9/2/2004 at RM5.85 for a profit of RM3.15. Thereafter there was no buy signal until 8/6/2005 at RM0.565, by which time the stock had collapsed. The CBO 20-20 system “saved” the investor RM5.285 by staying out after 9/2/2004 and avoided the limit-downs from 28/4/2005 to 5/5/2005.
GULA PERAK
The CBO 20-20 trading system sold out GULA PERAK on 17/3/2005 at RM0.97 and never called a buy until 11/1/2006 at RM0.20, ‘saving’ the investor from the sharp limit-down moves of 24/5/2005 and 25/5/2005.
NGIU KEE
The CBO 20-20 trading system sold out NGIU KEE on 22/2/2005 at RM1.74 and never called a buy until 9/1/2006 at RM0.39, ‘saving’ the investor from the sharp limit-down moves of 1/6/2005 and 2/6/2005.
BONUS # 3
FINALLY, THIS BOOK WILL REVEAL THE MOST IMPORTANT SECRET OF ALL.
HOW TO TRADE FAST RISING AND FALLING BUBBLE STOCKS
WITH THE AUTHOR'S PROPRIETARY F-1 TRADER RULE!
As a triple bonus, the author shares with readers his proprietary trading strategy called the F-1 Trader system that can be used gainfully to trade both fast rising and falling bubble stocks.
FARMBEST
The C.B.O. 20-20 Trading System is too slow for a fast stock like FARMBEST. If there is a sell-off, your exit level (or sell-stop) using the C.B.O. 20-20 Trading System is at RM2.72 or lower, which is too insensitive. A faster entry and exit system must be devised.
SUREMAX
The arrows depict where the F-1 Trader Rule would have bought and sold SUREMAX in 2005.
KIMBLE
The arrows depict where the F-1 Trader Rule would have bought & sold KIMBLE in 2003. Although KIMBLE’s fundamentals are reasonable, it is classified as a bubble stock because of its steep angle of ascent & descent.
PROFESSOR HANK PRUDEN
Professor of Business and Head of Program in Technical Analysis
Ageno School of Business
Golden Gate University
San Francisco, U.S.A.
SAYS…..
“I strongly believe that every student of the securities market should read this book. Neophytes everywhere will see what a good piece of well-documented research with practical implications looks like. Graduates around the globe who wish to grow will welcome the well-documented case for adding technical analysis to their repertoire of tools in order to manage market risk…”
Ph.D. (with honors), Lundquist College of Business, University of Oregon; M.B.A., Haas School of Business, University of California, Berkeley; B.S., California State University, Chico, USA.
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I hope the brief introduction above has given you a good idea about the book. To know HOW TO PROFIT FROM TECHNICAL TRADING SYSTEMS that can beat the market, get this book right now.
This book comprises the findings and results of my Master of Philosophy research into the profitability of technical trading systems which was conducted at the Multimedia University, Malaysia in 2005.
You will have no regrets getting a copy of this book…IF YOU WANT TO KNOW WHAT ARE THE MOST PROFITABLE TECHNICAL TRADING SYSTEMS then THIS BOOK IS FOR YOU!
Buying this book could be the best decision you could have made.
