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Price Exhaustion and Number Preference: Time and Price Confluence in Australian Stock Prices

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Author Info
Hristos Doucouliagos () (Deakin University)

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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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File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/swp2003_06.pdf
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Publisher Info
Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2003_06.

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Length: 25 pages
Date of creation: 31 Nov 2003
Date of revision:
Handle: RePEc:dkn:econwp:eco_2003_06

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  2. 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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  5. Aitken, Michael & Brown, Philip & Buckland, Christine & Izan, H. Y. & Walter, Terry, 1996. "Price clustering on the Australian Stock Exchange," Pacific-Basin Finance Journal, Elsevier, vol. 4(2-3), pages 297-314, July. [Downloadable!] (restricted)
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  8. 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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  13. Gencay, Ramazan, 1998. "Optimization of technical trading strategies and the profitability in security markets," Economics Letters, Elsevier, vol. 59(2), pages 249-254, May. [Downloadable!] (restricted)
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  16. 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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  18. Martin, Anna D., 2001. "Technical trading rules in the spot foreign exchange markets of developing countries," Journal of Multinational Financial Management, Elsevier, vol. 11(1), pages 59-68, February. [Downloadable!] (restricted)
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