Complex environments, simple strategies : an in-depth profitability analysis of MACD, RSI and bollinger bands for technological equities

Abstract

This study focused on technical analysis through Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI) and Bollinger Bands, both individually as well as their combination, to test their performance compared to the Buy-and-Hold strategy, using it as a benchmark. This research, unlike many previous studies, had a specific targeted sector which was the technological one. It also tried to bridge the gap between different research results regarding whether simple indicators were able to outperform the passive Buy-and-Hold strategy. This was done on high performing stocks from the NASDAQ stock exchange and was taken on 5-year and 20-year periods. The results showed that these indicators, as well as their combinations, severely underperformed the Buy-and-Hold strategy, reaching to just 50% of its profits in the 5-year period and 25% in the 20-year period.