An analyze on effectiveness of candlestick reversal patterns for Vietnamese stock market

Abstract

The Japanese candlestick model is a common technical analysis used to understand the behavior and predict the trend in the financial market. There are many studies have been conducted to assess the effectiveness of candlestick patterns in different markets. This paper describes an empirical research to examine the predictability and profitability of the candlestick reversal patterns analysis on the Vietnamese stock market over the period from Jan 2, 2013, to May 15, 2018. The purpose is to determine whether candlesticks patterns can be used to achieve significant gains or to predict future price trends. We apply the use of Pivot Simple Moving Average to indicate the reversal signals of the market and compute the profit. Our results show the tested reversal candlesticks do not demonstrate the ability to predict the market trend and generated profitability is low on the stock market in Vietnam. The main contribution of this paper is a statistical analysis of the effectiveness of candlestick patterns as predictors of the behavior of those stocks.