Technical Analysis of a Non-Globally Integrated Stock Index
Abstract
This study examines the Ecuadorian stock market index, ECUINDEX, a market that is not integrated into international financial markets, unlike others in Latin America. The objective was to determine if graphical technical analysis can describe the price behavior of the ECUINDEX, testing the weak-form efficient market hypothesis. Market stationarity was evaluated to identify suitable volatility indicators. A mixed-methods approach was applied, combining quantitative tests (Boxplot and Dickey-Fuller) with qualitative analyses (graphical observation of prices and TEMA, RVI, and MA indicators). Monthly and daily closing price data of the ECUINDEX from 2013 to 2023 were analyzed, obtained from the Quito Stock Exchange through Investing. The results reveal that the ECUINDEX is non-stationary and that technical analysis consistently describes momentum, price direction changes, and market turns, highlighting the usefulness of technical indicators for understanding price trends and market inefficiencies.
References
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Delgado-Domonkos, L., & Zeng, A.-M. (2023). Reporting quality, stock market integration, and investment efficiency in Latin America. Borsa Istanbul Review, 23(4), 779 - 803. https://doi.org/10.1016/j.bir.2023.01.012
Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(366), 427. https://doi.org/10.2307/2286348
Diether, K., Lee, K., & Werner, I. (2009). Short-Sale Strategies and Return Predictability. The Review of Financial Studies, 22(2), 575-607. https://doi.org/10.1093/rfs/hhn047
do Prado, H., Ferneda, E., Morais, L., Luiz, A., & Matsura, E. (2013). On the Effectiveness of Candlestick Chart Analysis for the Brazilian Stock Market. Procedia Computer Science, 11, 1136-1145. https://doi.org/10.1016/j.procs.2013.09.200
Domoto, E., Okuhara, K., & Rene, A. (2022). Market Forecasting by Variable Selection of Indicators and Emotion Scores from Text Data. Journal of Advanced Computational Intelligence and Intelligent Informatics, 26(3), 382-392. https://doi.org/10.20965/jaciii.2022.p0382
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Dumiter, F., & Turcas, F. (2023b). Technical Analysis Applications: A Practical and Empirical Stock Market Guide. Romania: Springer International Publishing. https://doi.org/10.1007/978-3-031-27416-9
Dumiter, F., Turcaș, F., Nicoară, Ș., Bențe, C., & Boiță, M. (2023a). The Impact of Sentiment Indices on the Stock Exchange—The Connections between Quantitative Sentiment Indicators, Technical Analysis, and Stock Market. Mathematics, 11(14), 3128. https://doi.org/10.3390/math11143128
Edwards, R., Magee, J., & Bassetti, W. (2019). Technical Analysis of Stock Trends. Taylor & Francis Group.
Fama, E. (1970). Efficient capital markets: a review of theory and empirical work. Journal of Finance, 25, 383-417. https://doi.org/10.2307/2325486
Fernando, J. (31 de 03 de 2023). Investing. https://www.investopedia.com/terms/m/movingaverage.asp
Galariotis, E., Holmes, P., Kallinterakis, V., & Ma, X. (2014). Market states, expectations, sentiment and momentum: How naive are investors? International Review of Financial Analysis, 32, 1-12. https://doi.org/10.1016/j.irfa.2013.12.004
Gallegati, M., & Richiardi, M. (2009). Agent Based Models in Economics and Complexity. Springer. https://doi.org/10.1007/978-0-387-30440-3_14
Gallegos-Erazo, F. (2022). Chart Analysis of E-Mini Nasdaq-100 Futures During the 2020 Stock Market Crash. Universidad y Sociedad, 14(1), 452-461. https://rus.ucf.edu.cu/index.php/rus/article/view/2649
Gao, C., & Martin, I. (2021). Volatility, Valuation Ratios, and Bubbles: An Empirical Measure of Market Sentiment. The Journal of Finance, 76(6), 3211–3254. https://doi.org/10.1111/jofi.13068
Hyo-Jeong, L., & Hyuk Ch. (2014). Individuals’ Return Predictability in Market and Limit Trades. Asia-Pacific Journal of Financial Studies, 43(1), 59-88. https://doi.org/10.1111/ajfs.12040
Investing. (29 de Diciembre de 2023). es.investing. https://es.investing.com/tools/market-hours
Ji, Z., Wu, P., Ling, C., & Zhu, P. (2023). Exploring the impact of investor’s sentiment tendency in varying input window length for stock price prediction. Multimedia Tools and Applications, 82(18), 27415–27449. https://doi.org/10.1007/s11042-023-14587-8
Kaczynski, D., Salmona, M., & Smith, T. (2014). Qualitative research in finance. Australian Journal of Management, 39(1), 127-135. https://doi.org/10.1177/0312896212469611
Kaniel, R., Saar, G., & Titman, S. (2008). Individual Investor Trading and Stock Returns. The Journal of Finance, 63, 273 - 310. https://doi.org/10.1111/j.1540-6261.2008.01316.x
Kräussl, R., & Mirgorodskaya, E. (2017). Media, sentiment and market performance in the long run. European Journal of Finance, 23(11), 1059–1082. https://doi.org/10.1080/1351847x.2016.1226188
Krishnamoorthy, S. (2018). Sentiment analysis of financial news articles using performance indicators. Knowledge and Information Systems, 56(2), 373–394. https://doi.org/10.1007/s10115-017-1134-1
Kulwizira, B., Sánchez-Barrios, L., & Gómez-Bravo, Y. (2024). Towards understanding MILA stock markets integration beyond MILA: New evidence between the pre-Global financial crisis and the COVID19 periods. International Review of Economics and Finance, 89, 478-497. https://doi.org/10.1016/j.iref.2023.07.029
Latibex. (07 de 03 de 2024). Información General. Latibex.com. https://www.latibex.com/esp/Sobre-Latibex/Informacion-General
Lintner, J. (1956). Distribution of Incomes of Corporations Among Dividends, Retained Earnings, and Taxes. The American Economic Review, 46(2), 97–113. http://www.jstor.org/stable/1910664
Lui, Y., & Mole, D. (1998). The use of fundamental and technical analyses by foreign exchange dealers: Hong Kong evidence. Journal of International Money and Finance, 17(3), 535-545. https://doi.org/10.1016/S0261-5606(98)00011-4
Marshall, B., Cahan, R., & Cahan, J. (2008). Does intraday technical analysis in the U.S. equity market have value? Journal of Empirical Finance, 15(2), 199-210. https://doi.org/10.1016/j.jempfin.2006.05.003
Mehrzad, A., Min, C., & Bharat, S. (2021). Patterns of Insider Trading: It Is Not All Black and White. Journal of Accounting, Auditing & Finance, 36(4), 695–722. https://doi.org/10.1177/0148558X20963637
Menkhoff, L., & Taylor, M. P. (2007). The obstinate passion of foreign exchange professionals: Technical analysis. Journal of Economic Literature, 45(4), 936–972. https://doi.org/10.1257/jel.45.4.936
Milionis, A. E., & Papanagiotou, E. (2011). A test of significance of the predictive power of the moving average trading rule of technical analysis based on sensitivity analysis: application to the NYSE, the Athens Stock Exchange and the Vienna Stock Exchange. Implications for weak-form market efficiency testing. Applied financial economics, 21(6), 421–436. https://doi.org/10.1080/09603107.2010.532105
Mitchell, C. (2010, noviembre 15). Triple exponential moving average (TEMA): Definition and formula. Investopedia. https://www.investopedia.com/terms/t/triple-exponential-moving-average.asp
Mora-Valencia, A. (2021). Cross-hedging portfolios in emerging stock markets: Evidence for the latibex index. Mathematics, 9(21), 2736. https://doi.org/10.3390/math9212736
Murphy, J. (2000). Análisis Técnico de losMercados Financieros. Institute of Finance.
Ozturk, M., Toroslu, I., & Retoño, G. (2016). Heuristic based trading system on Forex data using technical indicator rules. Applied Soft Computing, 43, 170-186. https://doi.org/10.1016/j.asoc.2016.01.048
Richards, D., & Willows, G. (2019). Half-day trading and spillovers. Journal of Behavioral and Experimental Finance, 22, 105–115. https://doi.org/10.1016/j.jbef.2019.02.009
Sharaf, M., Hemdan, E., El-Sayed, A., & et al. (2023). An efficient hybrid stock trend prediction system during COVID-19 pandemic based on stacked-LSTM and news sentiment analysis. Multimed Tools Appl, 82, 23945–23977. https://doi.org/10.1007/s11042-022-14216-w
Taylor, M., & Allen, H. (1992). The use of technical analysis in the foreign exchange market. Journal of International Money and Finance, 11(3), 304-314. https://doi.org/10.1016/0261-5606(92)90048-3
Tharavanij, P., Siraprapasiri, V., & . Rajchamaha, K. (2015). Performance of technical trading rules: evidence from Southeast Asian stock markets. SpringerPlus, 4(552). https://doi.org/10.1186/s40064-015-1334-7
Villarraga, E. F., Giraldo, S., & Agudelo, D. (2012). Asimetrra en la informaciin Y Su efecto en Los rendimientos en Los mercados accionarios latinoamericanos (information assymetry effects on Latin American stock markets). SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2400737
Wang, Z., Hu, Z., Li, F., & et al. (2023). Learning-Based Stock Trending Prediction by Incorporating Technical Indicators and Social Media Sentiment. Cognitive Computation, 15, 1092–1102. https://doi.org/10.1007/s12559-023-10125-8
Yaguana, M. (2018, diciembre 26). ¿Sabías que en Ecuador existe un índice bursátil como el Dow Jones? ¡Conoce todo sobre el ECUINDEX! Bolsadequito.com. https://www.bolsadequito.com/index.php/blog-2/429-sabias-que-en-ecuador-existe-un-indice-bursatil-como-el-dow-jones-conoce-todo-sobre-el-ecuindex
Yang, J., Y., W., & Li, X. (2022). Prediction of stock price direction using the LASSO-LSTM model combines technical indicators and financial sentiment analysis. PeerJ Computer Science, 8, 1148. https://doi.org/10.7717/peerj-cs.1148
Zhu, Z., Bai, Z., Vieito, J. P., & Wong, W.-K. (2019). The impact of the global financial crisis on the efficiency and performance of Latin American stock markets. Estudios De Economía, 46(1), 5–30. https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/52632
Ahmed, M. (2018). What proportion of time is a particular market inefficient? ... A method for analysing the frequency of market efficiency when equity prices follow threshold autoregressions. Journal of Time Series Econometrics, 10(2). https://doi.org/10.1515/jtse-2016-0021
Beyer, H. (1981). Tukey, John W.: Exploratory data analysis. Addison-Wesley publishing company reading, mass. — Menlo Park, cal., London, Amsterdam, Don Mills, Ontario, Sydney 1977, XVI, 688 S. Biometrical Journal, 23(4), 413–414. https://doi.org/10.1002/bimj.4710230408
Bolsa de Valores de Quito. (26 de 12 de 2018). bolsadequito. https://bit.ly/3TWotZv
Cadena, J., Pinargote, H., & Solórzano, K. (2018). Mercado de valores y su contribución al crecimiento de la economía ecuatoriana. Revista Venezolana de Gerencia, 23(83), 563-578. https://www.redalyc.org/articulo.oa?id=29058775004
Cheung, Y., & Chinn, M. (2001). Currency traders and exchange rate dynamics: a survey of the US market. Journal of International Money and Finance, 20(4), 439-471. https://doi.org/10.1016/S0261-5606(01)00002-X
Daxhammer, R. J., Facsar, M., & Papp, Z. A. (2023). Behavioral finance: Limited rationality in financial markets. UVK Verlag.
Delgado-Domonkos, L., & Zeng, A.-M. (2023). Reporting quality, stock market integration, and investment efficiency in Latin America. Borsa Istanbul Review, 23(4), 779 - 803. https://doi.org/10.1016/j.bir.2023.01.012
Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(366), 427. https://doi.org/10.2307/2286348
Diether, K., Lee, K., & Werner, I. (2009). Short-Sale Strategies and Return Predictability. The Review of Financial Studies, 22(2), 575-607. https://doi.org/10.1093/rfs/hhn047
do Prado, H., Ferneda, E., Morais, L., Luiz, A., & Matsura, E. (2013). On the Effectiveness of Candlestick Chart Analysis for the Brazilian Stock Market. Procedia Computer Science, 11, 1136-1145. https://doi.org/10.1016/j.procs.2013.09.200
Domoto, E., Okuhara, K., & Rene, A. (2022). Market Forecasting by Variable Selection of Indicators and Emotion Scores from Text Data. Journal of Advanced Computational Intelligence and Intelligent Informatics, 26(3), 382-392. https://doi.org/10.20965/jaciii.2022.p0382
Dorsey, D. (1993). The Relative Volatility Index. Technical Analysis of STOCKS &, 11(6), 253-256.
Dumiter, F., & Turcas, F. (2023b). Technical Analysis Applications: A Practical and Empirical Stock Market Guide. Romania: Springer International Publishing. https://doi.org/10.1007/978-3-031-27416-9
Dumiter, F., Turcaș, F., Nicoară, Ș., Bențe, C., & Boiță, M. (2023a). The Impact of Sentiment Indices on the Stock Exchange—The Connections between Quantitative Sentiment Indicators, Technical Analysis, and Stock Market. Mathematics, 11(14), 3128. https://doi.org/10.3390/math11143128
Edwards, R., Magee, J., & Bassetti, W. (2019). Technical Analysis of Stock Trends. Taylor & Francis Group.
Fama, E. (1970). Efficient capital markets: a review of theory and empirical work. Journal of Finance, 25, 383-417. https://doi.org/10.2307/2325486
Fernando, J. (31 de 03 de 2023). Investing. https://www.investopedia.com/terms/m/movingaverage.asp
Galariotis, E., Holmes, P., Kallinterakis, V., & Ma, X. (2014). Market states, expectations, sentiment and momentum: How naive are investors? International Review of Financial Analysis, 32, 1-12. https://doi.org/10.1016/j.irfa.2013.12.004
Gallegati, M., & Richiardi, M. (2009). Agent Based Models in Economics and Complexity. Springer. https://doi.org/10.1007/978-0-387-30440-3_14
Gallegos-Erazo, F. (2022). Chart Analysis of E-Mini Nasdaq-100 Futures During the 2020 Stock Market Crash. Universidad y Sociedad, 14(1), 452-461. https://rus.ucf.edu.cu/index.php/rus/article/view/2649
Gao, C., & Martin, I. (2021). Volatility, Valuation Ratios, and Bubbles: An Empirical Measure of Market Sentiment. The Journal of Finance, 76(6), 3211–3254. https://doi.org/10.1111/jofi.13068
Hyo-Jeong, L., & Hyuk Ch. (2014). Individuals’ Return Predictability in Market and Limit Trades. Asia-Pacific Journal of Financial Studies, 43(1), 59-88. https://doi.org/10.1111/ajfs.12040
Investing. (29 de Diciembre de 2023). es.investing. https://es.investing.com/tools/market-hours
Ji, Z., Wu, P., Ling, C., & Zhu, P. (2023). Exploring the impact of investor’s sentiment tendency in varying input window length for stock price prediction. Multimedia Tools and Applications, 82(18), 27415–27449. https://doi.org/10.1007/s11042-023-14587-8
Kaczynski, D., Salmona, M., & Smith, T. (2014). Qualitative research in finance. Australian Journal of Management, 39(1), 127-135. https://doi.org/10.1177/0312896212469611
Kaniel, R., Saar, G., & Titman, S. (2008). Individual Investor Trading and Stock Returns. The Journal of Finance, 63, 273 - 310. https://doi.org/10.1111/j.1540-6261.2008.01316.x
Kräussl, R., & Mirgorodskaya, E. (2017). Media, sentiment and market performance in the long run. European Journal of Finance, 23(11), 1059–1082. https://doi.org/10.1080/1351847x.2016.1226188
Krishnamoorthy, S. (2018). Sentiment analysis of financial news articles using performance indicators. Knowledge and Information Systems, 56(2), 373–394. https://doi.org/10.1007/s10115-017-1134-1
Kulwizira, B., Sánchez-Barrios, L., & Gómez-Bravo, Y. (2024). Towards understanding MILA stock markets integration beyond MILA: New evidence between the pre-Global financial crisis and the COVID19 periods. International Review of Economics and Finance, 89, 478-497. https://doi.org/10.1016/j.iref.2023.07.029
Latibex. (07 de 03 de 2024). Información General. Latibex.com. https://www.latibex.com/esp/Sobre-Latibex/Informacion-General
Lintner, J. (1956). Distribution of Incomes of Corporations Among Dividends, Retained Earnings, and Taxes. The American Economic Review, 46(2), 97–113. http://www.jstor.org/stable/1910664
Lui, Y., & Mole, D. (1998). The use of fundamental and technical analyses by foreign exchange dealers: Hong Kong evidence. Journal of International Money and Finance, 17(3), 535-545. https://doi.org/10.1016/S0261-5606(98)00011-4
Marshall, B., Cahan, R., & Cahan, J. (2008). Does intraday technical analysis in the U.S. equity market have value? Journal of Empirical Finance, 15(2), 199-210. https://doi.org/10.1016/j.jempfin.2006.05.003
Mehrzad, A., Min, C., & Bharat, S. (2021). Patterns of Insider Trading: It Is Not All Black and White. Journal of Accounting, Auditing & Finance, 36(4), 695–722. https://doi.org/10.1177/0148558X20963637
Menkhoff, L., & Taylor, M. P. (2007). The obstinate passion of foreign exchange professionals: Technical analysis. Journal of Economic Literature, 45(4), 936–972. https://doi.org/10.1257/jel.45.4.936
Milionis, A. E., & Papanagiotou, E. (2011). A test of significance of the predictive power of the moving average trading rule of technical analysis based on sensitivity analysis: application to the NYSE, the Athens Stock Exchange and the Vienna Stock Exchange. Implications for weak-form market efficiency testing. Applied financial economics, 21(6), 421–436. https://doi.org/10.1080/09603107.2010.532105
Mitchell, C. (2010, noviembre 15). Triple exponential moving average (TEMA): Definition and formula. Investopedia. https://www.investopedia.com/terms/t/triple-exponential-moving-average.asp
Mora-Valencia, A. (2021). Cross-hedging portfolios in emerging stock markets: Evidence for the latibex index. Mathematics, 9(21), 2736. https://doi.org/10.3390/math9212736
Murphy, J. (2000). Análisis Técnico de losMercados Financieros. Institute of Finance.
Ozturk, M., Toroslu, I., & Retoño, G. (2016). Heuristic based trading system on Forex data using technical indicator rules. Applied Soft Computing, 43, 170-186. https://doi.org/10.1016/j.asoc.2016.01.048
Richards, D., & Willows, G. (2019). Half-day trading and spillovers. Journal of Behavioral and Experimental Finance, 22, 105–115. https://doi.org/10.1016/j.jbef.2019.02.009
Sharaf, M., Hemdan, E., El-Sayed, A., & et al. (2023). An efficient hybrid stock trend prediction system during COVID-19 pandemic based on stacked-LSTM and news sentiment analysis. Multimed Tools Appl, 82, 23945–23977. https://doi.org/10.1007/s11042-022-14216-w
Taylor, M., & Allen, H. (1992). The use of technical analysis in the foreign exchange market. Journal of International Money and Finance, 11(3), 304-314. https://doi.org/10.1016/0261-5606(92)90048-3
Tharavanij, P., Siraprapasiri, V., & . Rajchamaha, K. (2015). Performance of technical trading rules: evidence from Southeast Asian stock markets. SpringerPlus, 4(552). https://doi.org/10.1186/s40064-015-1334-7
Villarraga, E. F., Giraldo, S., & Agudelo, D. (2012). Asimetrra en la informaciin Y Su efecto en Los rendimientos en Los mercados accionarios latinoamericanos (information assymetry effects on Latin American stock markets). SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2400737
Wang, Z., Hu, Z., Li, F., & et al. (2023). Learning-Based Stock Trending Prediction by Incorporating Technical Indicators and Social Media Sentiment. Cognitive Computation, 15, 1092–1102. https://doi.org/10.1007/s12559-023-10125-8
Yaguana, M. (2018, diciembre 26). ¿Sabías que en Ecuador existe un índice bursátil como el Dow Jones? ¡Conoce todo sobre el ECUINDEX! Bolsadequito.com. https://www.bolsadequito.com/index.php/blog-2/429-sabias-que-en-ecuador-existe-un-indice-bursatil-como-el-dow-jones-conoce-todo-sobre-el-ecuindex
Yang, J., Y., W., & Li, X. (2022). Prediction of stock price direction using the LASSO-LSTM model combines technical indicators and financial sentiment analysis. PeerJ Computer Science, 8, 1148. https://doi.org/10.7717/peerj-cs.1148
Zhu, Z., Bai, Z., Vieito, J. P., & Wong, W.-K. (2019). The impact of the global financial crisis on the efficiency and performance of Latin American stock markets. Estudios De Economía, 46(1), 5–30. https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/52632
Published
2025-04-03
How to Cite
Gallegos-Erazo, F. A., & Gallardo-Cornejo, A. M. (2025). Technical Analysis of a Non-Globally Integrated Stock Index. Revista Venezolana De Gerencia, 30(110), 847-864. Retrieved from https://mail.produccioncientificaluz.org/index.php/rvg/article/view/43707
Issue
Section
EN LA MIRA: sistemas económicos-financieros
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