THE PROFITABILITY OF TECHNICAL ANALYSIS DURING VOLATILE PERIODS IN THE SOUTH AFRICAN FINANCIAL MARKETS

Mohube Ngoato Ramaube; Indrani O’Leary Govender; Jordy Bolton

Authors

Mohube Ngoato Ramaube Masters student in the Department of Finance and Investment Management at the University of Johannesburg https://orcid.org/0009-0000-5900-205X
Indrani O’Leary Govender Lecturer in the Department of Finance and Investment Management at the University of Johannesburg https://orcid.org/0000-0002-8035-8293
Jordy Bolton Jordy E. Bolton - Lecturer in the Department of Finance and Investment Management at the University of Johannesburg https://orcid.org/0000-0002-1063-8222

Keywords:

Technical Analysis, Moving Averages, Dual Moving Average Crossover, Relative Strength Index, Market Volatility, JSE

Abstract

It is argued that technical analysis is effective in inefficient markets, citing volatility as a contributing factor. The dual moving average crossover and relative strength index were applied to the FTSE/JSE Top 40 Index from 2007 to 2019 to investigate this. Using regression analysis, the relationship between the returns of each technical trading rule and market volatility was determined, and the results indicate that there is little to no correlation between market volatility and the profitability of these trading rules. When the trades are divided into long and short trades, the study reveals that long trades generate higher returns than short trades.

THE PROFITABILITY OF TECHNICAL ANALYSIS DURING VOLATILE PERIODS IN THE SOUTH AFRICAN FINANCIAL MARKETS

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