Common Technical Indicators and their Impact on Stock Prices

Open Access
Author:
Young, Ryan
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Christoph Hinkelmann, Thesis Supervisor
  • Brian Spangler Davis, Honors Advisor
Keywords:
  • technical analysis
  • finance
  • volatility
  • stocks
Abstract:
In the following paper we will examine the effect of technical support and resistence levels on one-day U.S. equity returns. Moving averages and local minima/maxima of varying windows will be studied, as well as round numbers. Ultimately, we find that when an asset price closes arbitrarily near these technical indicators, its range of ensuing one-day returns changes in significant ways. The most notable observation was that moving averages (and to a lesser extent, round numbers) reduce volatility, sometimes substantially. Finally, we conclude by investigating how responsive U.S. equities have been to the studied technical indicators over time, finding that while the overall trend is positive, it has weakened since the Great Recession.