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Price exhaustion and number preference: time and price confluence in Australian stock prices

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Author Info
Chris Doucouliagos

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Abstract

Confluence occurs when different trading filters generate signals that point to the same directional move. Using regression analysis, this paper investigates confluence trading signals associated with number preference and price exhaustion, for a sample of Australian stocks. The results show that certain price levels tend to act as psychological barriers, and that price exhaustion signals are a real phenomenon in the Australian stock market. It is shown also that confluence exists in the Australian stock market. Importantly, confluence is associated with price retracements that are of economic and statistical significance, offering profitable trading opportunities. The results suggest that Australian stocks do not follow a random walk.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal The European Journal of Finance.

Volume (Year): 11 (2005)
Issue (Month): 3 (June)
Pages: 207-221
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Handle: RePEc:taf:eurjfi:v:11:y:2005:i:3:p:207-221

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Related research
Keywords: Price exhaustion; number preference; confluence;

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  7. LeBaron, Blake, 1999. "Technical trading rule profitability and foreign exchange intervention," Journal of International Economics, Elsevier, vol. 49(1), pages 125-143, October. [Downloadable!] (restricted)
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  10. Bong-Chan, Kho, 1996. "Time-varying risk premia, volatility, and technical trading rule profits: Evidence from foreign currency futures markets," Journal of Financial Economics, Elsevier, vol. 41(2), pages 249-290, June. [Downloadable!] (restricted)
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  13. Blake LeBaron, 1994. "Technical Trading Rule Profitability and Foreign Exchange Intervention," International Finance 9411002, EconWPA. [Downloadable!]
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  14. Gencay, Ramazan, 1999. "Linear, non-linear and essential foreign exchange rate prediction with simple technical trading rules," Journal of International Economics, Elsevier, vol. 47(1), pages 91-107, February. [Downloadable!] (restricted)
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