Technical trading profitability: Evidence from international oil and gas companies

Nor, Safwan Mohd; Zawawi, Nur Haiza Muhammad

doi:10.1063/5.0105714

Cited by 3 publications

(1 citation statement)

References 9 publications

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“…While there can be a limitless combination of trading indicators, rules, and parameters, our findings support the economic significance of the hybrid fractal trend-countertrend trading system using publicly known parameters advocated by practitioners. Overall, the results are in line with [12] who found profitable trading opportunities in the broader group of US energy stocks, as well as [61] who documented superior risk-return performance of technical trading rules over the B&H in the portfolio of international integrated oil and gas firms.…”

Section: Robustnesssupporting

confidence: 83%

Is Technical Analysis Profitable on Renewable Energy Stocks? Evidence from Trend-Reinforcing, Mean-Reverting and Hybrid Fractal Trading Systems

Nor

Zawawi

Wickremasinghe

et al. 2023

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Demand for power sources is gradually shifting from ozone-depleting-substances towards renewable and sustainable energy resources. The growth prospects of the renewable energy industry coupled with improved cost efficiency means that renewable energy companies offer potential returns for traders in stock markets. Nonetheless, there have been no studies investigating technical trading rules in renewable energy stocks by amalgamating fractal geometry with technical indicators that focus on different market phases. In this paper, we explore the profitability of technical analysis using a portfolio of 20 component stocks from the NASDAQ OMX Renewable Energy Generation Index using fractal dimension together with trend-reinforcing and mean-reverting (contrarian) indicators. Using daily prices for the period 1 July 2012 to 30 June 2022, we apply several tests to measure trading performance and risk-return dynamics of each form of technical trading system—both in isolation and simultaneously. Overall, trend (contrarian) trading system outperforms (underperforms) the naïve buy-and-hold policy on a risk-adjusted basis, while the outcome is further enhanced (reduced) by the fractal-reinforced strategy. Simultaneous use of both trend-reinforcing and mean-reverting indicators strengthened by fractal geometry generates the best risk-return trade-off, significantly outperforming the benchmark. Our findings suggest that renewable energy stock prices do not fully capture historical price patterns, allowing traders to earn significant profits from the weak form market inefficiency.

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Section: Robustnesssupporting

confidence: 83%