The Predictive Power of Price Patterns

@article{Caginalp1998ThePP,
  title={The Predictive Power of Price Patterns},
  author={Gunduz Caginalp and Henry Laurent},
  journal={FEN: Behavioral Finance (Topic)},
  year={1998}
}
Using two sets of data, including daily prices (open, close, high and low) of all S&P 500 stocks between 1992 and 1996, we perform a satistical test of the predictive capability of candlestick patterns. Out-of-sample tests indicate statistical significance at the level of 36 standard deviations from the null hypothesis, and indicate a profit of almost 1% during a two-day holding period. An essentially non-parametric test utilizes standard definitions of three-day candlestick patterns and… 

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