Journal of

Risk and Financial

Management

Article
The Profitability of Technical Analysis during the COVID-19
Market Meltdown
Camillo Lento 1, * and Nikola Gradojevic 2

1 Faculty of Business Administration, Lakehead University, 955 Oliver Road,

Thunder Bay, ON P7B 5E1, Canada
2 Department of Economics and Finance, Lang School of Business and Economics, University of Guelph,
50 Stone Road East, Guelph, ON N1G 2W1, Canada; [email protected]
* Correspondence: [email protected]; Tel.: +1-807-343-8387

Abstract: This article explores the profitability of technical trading rules around the COVID-19
pandemic market meltdown for the S&P 500 index, Bitcoin, Comex gold spot, crude oil WTI, and the
VIX. Trading rule profits are estimated from January to May 2020, including three sub-periods, on a
high-frequency data set. The results reveal that the trading rules can beat the buy-and-hold trading
strategy. However, only the Bollinger Bands and trading range break-out rules become profitable
after transaction costs during the market crash. Moreover, it is found that composite trading signals
effectively improve the profitability of technical analysis around the COVID-19 market crash.

Keywords: technical analysis; technical trading; market efficiency; COVID-19

1. Introduction
With origins dating back to the 1800s, technical analysis is one of the earliest forms of
Citation: Lento, Camillo, and Nikola investment analysis. Technical analysts review a time series of past prices (and volumes) to
Gradojevic. 2022. The Profitability of discern patterns that may be useful for predicting future price changes. In general, technical
Technical Analysis during the analysis examines the economic value of charting, which attempts to exploit recurring
COVID-19 Market Meltdown. Journal
geometric patterns found in the history of prices, and the trading rules (TRs) approach that
of Risk and Financial Management 15:
mechanically applies mathematical rules (or trading indicators) constructed from past and
192. https://doi.org/10.3390/
present prices or volumes. Studies that found charting to be profitable include those of
jrfm15050192
Chang and Osler (1999), Lo et al. (2000), and Savin et al. (2007), whereas evidence for the
Academic Editor: Robert Hudson profitability of technical indicators can be found in the work of Levich and Thomas (1993),
Brock et al. (1992), Neely et al. (1997), Allen and Karjalainen (1999), Gençay (1998), Ratner
Received: 31 March 2022
and Leal (1999), and Lento and Gradojevic (2007).
Accepted: 17 April 2022
Published: 20 April 2022
Some scholarly contributions combine technical analysis with machine learning and
other non-parametric modeling methodologies. For example, Lo et al. (2000) showed that
Publisher’s Note: MDPI stays neutral charting based on automatic recognition of the head-and-shoulders or double-bottoms
with regard to jurisdictional claims in patterns assisted with kernel regressions might provide practical investment value for U.S.
published maps and institutional affil-
stocks. In a related study, Savin et al. (2007) produced risk-adjusted excess returns for the
iations.
head-and-shoulders price patterns of the S&P 500 and the Russell 2000 stock market indices.
Gençay (1998) used simple moving average technical indicators to feed a non-parametric,
artificial neural network model, which delivered statistically significant profits when tested
Copyright: © 2022 by the authors.
against buy-and-hold strategies. In contrast, Allen and Karjalainen (1999) could not find any
Licensee MDPI, Basel, Switzerland.
consistent profitability in the S&P 500 index market when applying genetic programming
This article is an open access article
to search for ex-ante “optimal” TRs. Their method was able to identify only specific low-
distributed under the terms and volatility periods with excess returns over the buy-and-hold strategies. Gradojevic and
conditions of the Creative Commons Gençay (2013) extended a panel of TRs with a fuzzy logic controller and generated technical
Attribution (CC BY) license (https:// trading indicators that were more tolerant of uncertainties of trading in financial markets.
creativecommons.org/licenses/by/ By doing this, they improved the profitability of simple moving average TRs. They also
4.0/). showed that the profitability of technical indicators was related to market volatility in the

J. Risk Financial Manag. 2022, 15, 192. https://doi.org/10.3390/jrfm15050192 https://www.mdpi.com/journal/jrfm

J. Risk Financial Manag. 2022, 15, 192 2 of 19

sense that higher volatility was associated with greater (lower) profits from fuzzy (pure)
technical trading strategies. More recently, Corbet et al. (2019) tested the profitability of the
moving average and trading range break-out technical indicators in the Bitcoin market, but
with mixed results. By the same token, Gradojevic et al. (2021) recently employed various
machine learning models, such as deep learning neural networks and random forests with
technical indicators, as inputs to predict hourly and daily Bitcoin price movements. The
results demonstrated that Bitcoin prices were weakly efficient for the hourly but not for the
daily horizon. In summary, several papers presented evidence that technical analysis can
be profitable and informative for price forecasting. However, its profitability can vary over
time, as suggested by the adaptive market hypothesis (Lo 2004).1
As is the case in the current study, moving average-based TRs are often used in techni-
cal analysis as some of the most successful approaches in practical applications. For instance,
Neely et al. (2014) showed that moving average signals could predict equity premium
more accurately than some macroeconomic fundamentals. Further, Avramov et al. (2021)
documented that the distance between short- and long-run moving averages for a large
cross-section of NYSE, AMEX, and NASDAQ stock prices could predict future equity
returns. In a related contribution, Zakamulin and Giner (2020) demonstrated that moving
average TRs exhibited more robust forecast accuracy in the S&P 500 index market than
momentum-based TRs. Similar empirical evidence was also provided by Marshall et al.
(2017). Next, Jiang et al. (2017) found robust and substantial evidence of the profitability
of TRs for the Chinese stock market. M’ng (2018) devised a novel adjustable moving
average indicator for the Far East equity markets that resulted in excess returns over the
buy-and-hold strategy. Finally, Kouaissah and Hocine (2020) successfully applied TRs for
portfolio selection strategies.
This paper contributes to the above literature by focusing on the performance of
TRs during the months surrounding the emergence of the COVID-19 pandemic. Such an
investigation is valuable because the research on the performance of TRs during financial
crises is relatively scarce. For example, Ni et al. (2013) applied moving average TRs to
the BRIC countries’ equity markets and found difficulties generating profitability during
financial crisis periods. Similarly, Narayan et al. (2013) examined the technical trading
profitability of the spot market for commodities and documented that structural breaks
generally diminished profits. In contrast, Ivanova et al. (2021) failed to observe significant
declines in technical excess returns during financial crises.
To the best of the authors’ knowledge, this is the first study to explore the practical
usefulness of trend and momentum technical indicators around the time of the COVID-
19 pandemic. It not only contributes to the literature on the profitability of TRs during
financial crises (e.g., Ivanova et al. 2021), but also provides valuable insights into the market
microstructure and traders’ behavior in response to such episodes of excess volatility
across a variety of asset classes. Technical trading literature typically focuses on a specific
market (e.g., as in Neely et al. 1997 or Corbet et al. 2019) or jointly analyzes various market
regimes (e.g., Zakamulin and Giner 2020). In contrast, the current paper covers three starkly
differential market regimes (pre-pandemic, pandemic crash, and market recovery periods)
and essentially tracks the shifts in aggregate traders’ beliefs as affected by market volatility.
Such an approach offers rich grounds for policy analysis that will be considered in the last
section of the paper.
In the current context, the profitability of technical analysis during the novel coro-
navirus disease (COVID-19) market crash has been a largely unresearched area. The
emergence of COVID-19 in Wuhan, China, quickly evolved into a global pandemic de-
clared by the World Health Organization on 11 March 2020. Government responses to the
pandemic have been unprecedented, with significant impacts on the global economy and
broader society. The COVID-19 pandemic and the resulting government responses sent
shock waves throughout financial markets. The main purpose of this paper is to explore
the profitability of TRs during the COVID-19 market meltdown and, thereby, to understand
the behavior of market participants and the underlying market microstructure during the
J. Risk Financial Manag. 2022, 15, 192 3 of 19

market turbulence. More specifically, the paper studies whether excess volatility triggered
by the COVID-19 pandemic shocks contributed to the profitability of technical analysis. In
addition, the combined signal approach (CSA) is employed and its potential usefulness for
increasing profitability at times of excess volatility is analyzed.
The scholarly evidence that concerns the potential links between volatility and tech-
nical trading profitability is mixed, and the current paper sheds additional light on this
undeveloped strand of the literature. For instance, in a seminal paper, Kho (1996) showed
that futures conditional volatility explains an additional 10% of the technical trading profits.
Moreover, Han et al. (2013) applied the moving average technical indicator and demon-
strated that they could generate large abnormal returns for high-volatility portfolios relative
to the CAPM and the Fama and French three-factor models. More recently, Ding et al. (2021)
reported cross-sectional profitability for trading strategies based on the VIX. However,
a few additional studies on the role of volatility were not as encouraging. For instance,
Menkhoff et al. (2012) found that high-interest-rate currencies deliver low returns in times
of unexpectedly high volatility, while Menkhoff and Taylor (2007) showed that technical
analysis can be more profitable for volatile currencies. Similarly, Hsu et al. (2016) concluded
that, after adjusting for risk, there existed no significant relationship between volatility and
TRs excess profitability. Finally, Beaupain et al. (2010) indicated that technical trading is
riskier in periods of high volatility than in quiet markets.
The rest of the paper is laid out as follows. Section 2 presents the construction of
TRs. Section 3 describes the data set, while Section 4 reports the results from individual
TRs. Section 5 offers a discussion of the results. Section 6 focuses on the evidence from
composite trading signals. Section 7 concludes the paper.

2. Methodology
2.1. Trading Rules
Three variants of four standard TRs are tested. First, the trend behavior is studied
by testing the traditional moving average cross-over (MACO) rule. The paper follows
Ratner and Leal (1999) and Gradojevic and Gençay (2013) to differentiate between buy and
sell signals based on Equations (1) and (2), respectively.

∑SS=1 ri,t ∑L r
> L=1 i,t (1)
S L

∑SS=1 ri,t ∑L r
< L=1 i,t (2)
S L
where ri ,t = (ln(Pt ) − ln(Pt −1 )) and is the natural log return at the five-minute interval, S is
the number of five-minute intervals for the short moving average, and L is the number of
five-minute intervals for the long moving average. The paper follows Brock et al. (1992)
and Lento (2009) to test the following S and L MACO intervals: (1,50), (1,200), and (5,150).
Second, filter rules (FR) are tested, defined based on a filter size (ƒ). Such trading rules
are driven by traders exploiting market trends and momentum. Specifically, buy (sell)
signals are generated when the log return rises (falls) by ƒ percent above (below) the most
recent trough (peak). Prior studies are followed (e.g., Gradojevic and Gençay 2013) and
three variants of the FR are tested by defining ƒ as 1%, 2%, and 5%.
Third, the trading range break-out (TRBO) rule is tested. The TRBO generates a
buy (sell) signal when the price breaks out above (below) the resistance (support) level.
The resistance (support) level is the local maximum (minimum) over the past n days
(Brock et al. 1992). Equations (3) and (4) present the TRBO buy and sell signals, respectively.

Buy = Pt > Max {Pt−1 , Pt−2 , . . . , Pt−n } (3)

Sell = Pt < Min {Pt−1 , Pt−2 , . . . , Pt−n } (4)

J. Risk Financial Manag. 2022, 15, 192 4 of 19

where Pt is the price at time t. Again, the prior literature is followed (e.g., Brock et al. 1992)
and three variants of the TRBO are tested by calculating the local maximum and minimum
based on 50, 150, and 200 5-min intervals. TRBO rules indicate when the balance between
demand and supply is settled violently, thus suggesting the initiation or continuation of a
directional trend (Kirkpatrick and Dahlquist 2016).
Lastly, the Bollinger Bands (BB) are tested (Bollinger 2001). BBs are traditionally
calculated based on an envelope plotted at a two-standard deviation (+/− 2σ) distance
from the 20-day moving average, thus, denoted by BB (20,2). Consistent with Lento et al.
(2007), the profits from BB (20,2) are calculated along with two variants: 30-day moving
average (+/− 2 σ) and 20-day moving average (+/− 1 σ). BBs are more of a contrarian
trading strategy than the other three TR. Essentially, BBs represent a variation of the trend-
following system, i.e., a break-out system that measures range volatility. The trading signal
is generated when the price moves out of a channel or band. Hence, it gauges both trend
and momentum.

2.2. Profitability Measures

Profitability is measured as the returns generated by the trading signals in excess of the
buy-and-hold trading strategy (BHTS) returns. The returns from the BHTS are calculated
by investing on the first day of the data set, given the trading rule parameters, and holding
until the last day. The returns from the TRs are calculated by going long (out of) the market
in the five-minute interval after a buy (sell) signal. No notional interest is earned while
out of the market. Similar to Gençay (1998), the TR returns are adjusted for an estimated
bid-ask spread and brokerage costs. Profits are presented before and after transaction costs
as transaction costs can vary significantly among market participants. Transaction costs
capture both the bid-ask spread and brokerage trading cost. The bid-ask spread for an
exchange-traded fund of an index is used as a proxy for the actual index. Consistent with
prior studies (e.g., Ratner and Leal 1999; Lento and Gradojevic 2007), transaction costs are
measured as 0.15% of the buy or sell amount.
The Sharpe ratio (SR) is also calculated to provide insights into the risk profile of the
profits generated by the trading signals (e.g., Zhu et al. 2015; Gradojevic 2007). Specifically,
the SR measures the average excess return (profit) per unit of total risk. The SR is calculated
with Equation (5).
µ − rf
SR = (5)
σ
where µ is the mean daily return from the trading rule, rf is the mean daily risk-free based
on the Fama-French three-factor model for 2020, and σ is the standard deviation of the
return series. All three measures are estimated on the entire sample. Note that, all else
equal, a larger Sharpe ratio indicates a better trading rule on a risk-return basis.

2.3. Bootstrapping Simulations

The statistical significance of the TR profits is estimated with the bootstrap simulation
approach developed by Levich and Thomas (1993), whereby an observed series of prices
(i.e., the actual data set), with a sample size denoted N + 1, will correspond to a set of N
returns. A series of mth (m = 1, . . . , M) permutations is randomly generated by reshuffling
the N returns from the observed data (M = N!) while holding the start and end points
fixed based on their observed values. Each mth permutation is random while inheriting
the distributional properties of the observed data. Each trading rule will then relate to a
unique profit measure (X [m, r]) for each mth permutation, thereby generating an empirical
distribution of profits. A simulated p-value is estimated by comparing the profits generated
by a trading rule on the observed data versus the simulated data.

3. Data
A high-frequency data set is employed at the five-minute interval for five asset classes
from 1 January 2020 to 12 May 2020. There are a total of 7058 observations for the Bitcoin
J. Risk Financial Manag. 2022, 15, 192 5 of 19

(BTC), COMEX gold spot (GLD), NYMEX WTI crude oil (OIL), S&P 500 index (SPX), and
the CBOE VIX index (VIX). The data are from the Thomson Reuters Eikon terminal. The
returns from these five asset classes could be replicated either through the futures market
or exchange-traded funds.2 Table 1 presents the descriptive statistics of the five-minute
interval returns across each dataset.

Table 1. Descriptive Statistics.

Standard Coefficient of
Mean Median Skewness Excesskurtosis
Deviation Variation
BTC 0.005% 0.007% 0.624% −13.29 118.57 520.33
GLD 0.002% 0.002% 0.163% −0.05 98.62 133.50
SPX −0.001% 0.002% 0.342% −3.34 388.83 139.00
VIX 0.021% 0.000% 1.510% 6.29 71.69 150.25
WTI −0.008% 0.000% 7.415% −36.01 972.99 2719.80
Notes: Table 1 presents the mean, median, standard deviation, skewness, coefficient of variation, and excess
kurtosis for the five-minute interval returns across each of the five markets: Bitcoin (BTC), COMEX gold spot
(GLD), NYMEX WTI crude oil (OIL), S&P 500 index (SPX), and the CBOE VIX index (VIX).

Table 1 reveals that the mean and median five-minute returns are close to zero. How-
ever, the variation and distribution shape measures suggest many extreme observations
for WTI, VIX, BTC, and the SPX markets. This is understandable as the COVID-19 market
meltdown was one of the most significant market crashes in decades (based on, e.g., VIX
volatility) that also witnessed WTI oil futures prices become negative for the first time
in recorded history. The GLD market was the least volatile across the period analyzed,
consistent with the idea that gold is a safe-haven investment during times of crisis (e.g.,
Bredin et al. 2015). The safe-haven characteristic of gold during the pandemic is even
more notable as almost all assets expressed in US dollars, including gold, became strongly
correlated during this period (Kwapień et al. 2021).
The profitability of the TRs is estimated across the entire period of 1 January 2020,
to 12 May 2020. In addition, the profitability of each TR is analyzed across the same 2020
market crash regime shifts identified by Lento and Gradojevic (2021): (i) the normal market
regime spans from 1 January to 19 February, just before the SPX crashes, (ii) the market
crash regime spans from 20 February to 23 March, representing the peak to trough of the
SPX market crash, and iii) the market recovery regime spans from 24 March to 12 May,
representing the SPX’s recovery from the trough.
The number of trades generated by each TR variant is reviewed across the entire
sample and each of the three market regimes (See Appendix A). All TRs generated many
signals across the sample, aside from the FR (2%) and FR (5%) in the GLD and SPX markets,
which generated fewer signals. The largest number of signals were generated in the VIX
market. It is also interesting to note that most TR variants generated the least number of
signals during the market crash regime compared to the normal and recovery regimes.

4. Results
The daily profits from the TRs across the entire period are presented in Table 2. The
results reveal specific concentrations of positive profits both before and after transaction
costs on the observed data. For example, at least nine of the 12 variants generated profits
before transaction costs in the OIL and SPX markets. Positive profits after transaction costs
on the observed data occurred much less frequently across the five asset classes. Moreover,
the bootstrapping simulation data suggest that many positive profits are not statistically
significant. Interestingly, BBs consistently generated statistically significant profits on the
VIX before and after transaction costs.
J. Risk Financial Manag. 2022, 15, 192 6 of 19

Table 2. TTR Profitability across the full sample.

MACO MACO MACO BB BB BB

(1,50) (1,200) (5,150) (20,2) (20,1) (30,2)
−0.32% −0.22% −0.47% 0.21% 0.32% * 0.13%
BTC
−1.07% −0.43% −0.63% −0.19% −0.30% −0.19%
−0.07% 0.04% * 0.04% * 0.01% 0.01% * −0.01%
GLD
−0.78% −0.22% −0.13% −0.41% −0.62% −0.38%
2.16% 1.22% 2.90% −1.06% −0.27% −0.95%
OIL
1.49% 0.94% 2.76% −1.43% −0.85% −1.22%
−0.22% −0.02% 0.03% 0.27% * 0.35% ** 0.16%
SPX
−0.93% −0.37% −0.15% −0.13% −0.27% −0.14%
−2.71% −0.88% −0.63% 1.50% *** 1.35% *** 0.79% *
VIX
−3.57% −1.30% −0.85% 1.04% *** 0.68% *** 0.44% *
FR FR FR TRBO TRBO TRBO
(1%) (2%) (5%) (50) (150) (200)
−0.30% −0.18% 0.02% −0.22% 0.24% 0.11%
BTC
−0.54% −0.26% 0.01% −0.35% 0.20% 0.08%
−0.05% −0.01% −0.12% 0.06% 0.00% 0.04% **
GLD
−0.09% −0.02% −0.12% −0.07% −0.05% 0.00%
2.39% 3.57% 3.36% * 2.07% 1.15% 0.84%
OIL
1.60% 3.26% 3.26% * 1.95% 1.12% 0.81%
0.10% 0.20% ** 0.28% 0.09% 0.10% 0.17%
SPX
−0.09% 0.15% 0.28% ** −0.06% 0.05% 0.14%
−0.51% −1.09% −0.94% −1.05% −0.32% 0.21%
VIX
−2.06% −1.77% −1.08% −1.21% −0.37% 0.19%
Notes: Table 2 presents the daily profits before and after transaction costs that are located in each cell above and
below, respectively. Bold font represents trading profits whereby the trading rule returns exceeded the returns
from the naïve buy-and-hold trading strategy (BHTS). Variants of the following trading rules are shown: moving
average cross-over (MACO), Bollinger Bands (BB), filter rules (FR), and trading range break-out (TRBO). ***, **,
* represent statistically significant trading profits based on the Levich and Thomas (1993) bootstrapping technique
at the 1%, 5%, and 10% levels, respectively.

The SRs support the main findings that the largest SRs are clustered within the TRBO
rules, which were also the most profitable (See Appendix B). Large TRBO SRs are consistent
with similar studies such as Zhu et al. (2015), who found the TBROs were superior on
a risk-return basis to moving average rules. Regarding asset classes, the largest SRs are
observed in the OIL market relative to the other four markets. Specifically, the SRs were
large and positive for all the MACO, FR, and TRBO variants. Only BBs generated low or
negative SRs in the OIL market.3
Next, the profitability of the TRs is assessed across the three different regimes during
the COVID-19 market meltdown (See Appendix C), along with the SRs (un-tabulated).
First, the profits across the normal market regime reveal that the TRs consistently generated
positive profits only in the OIL market. However, the TRs have generated less positive
profits after transaction costs in the OIL market, while the bootstrapping simulation data
further reveals that the returns in the OIL market are not statistically significant. The SRs
were relatively large in the OIL market. Statistically significant profits were only observed
by the two BB variants in the VIX market. In addition, all of the SRs for BBs on the VIX
were relatively large, suggesting superiority to the other trading studies on a risk-return
basis as well. Overall, the findings during the normal market regime are consistent with
the findings across the entire sample.
Next, the majority of trading rule variants generated positive profits on the observed
data before transaction costs during the market crash regime. Regarding profits after
transaction costs, only the BB and TBRO TRs generated positive profits on the observed
data across all five asset classes during the market crash. The bootstrapping simulation data
reveal that statistically significant profits were consistently generated during the market
crash regime by the BB, FR, and TRBO in the SPX market (SRs were consistently large
J. Risk Financial Manag. 2022, 15, 192 7 of 19

except for FR (5%)), the BB and TRBO in the BTC market (SRs were consistently large
except for TRBO (50)), and the MACO and TRBO in the GLD market (SRs were consistently
large except for MACO (1,50)). These results reveal that the TRBO consistently generated
positive profits during the market crash regime.
Lastly, the TRs generated positive profits in the OIL and VIX markets before and after
transaction costs across the market recovery regime. The SRs were among the highest
for the VIX across all four trading rules, and large in the OIL market for the MACO, FR,
and TRBO. The bootstrapping simulation data shows that MACO and FR consistently
generated statistically significant profits in the OIL market, which were also accompanied
by relatively large SRs.

5. Discussion and Analysis

Overall, the analysis reveals that many TRs could generate positive profits on the
observed data before transaction costs. However, most of these profits were not robust
enough to persist through transaction costs and statistical significance testing (see Table 2).
It should be noted that the BBs could generate positive profits before transaction costs on
the observed data in the BTC, GLD, SPX, and VIX markets. However, profits were only
statistically significant after transaction costs in the VIX market.
The study extends the prior literature that explored the relationship between technical
trading models and the implied SPX volatility (i.e., the VIX market). For example, Kozyra
and Lento (2011) first highlighted the usefulness of VIX data for calculating technical trading
rules. By determining technical trading signals on VIX data while trading on the SPX,
they found statistically significant profits, which were more pronounced during periods of
high volatility. Various studies have since incorporated the VIX into trading models. For
example, a recent study by Ding et al. (2021) designed VIX-based trading strategies based
on arbitrage theory. They find that VIX-based trading strategies can be used to exploit
short-term return momentum and generate excess returns.4 Specifically, most prior studies
that reported positive profits calculate the TRs on the VIX to predict future price movements
in the SPX market (e.g., Kozyra and Lento 2011; Zhu et al. 2019). The findings extend this
stream of literature by revealing that positive profits are not consistently generated when
simultaneously estimating TRs and trading in the VIX markets. Therefore, following the
above literature, it appears that historical VIX data are more appropriately employed in a
technical trading strategy in the SPX market than trading ETFs tied to the VIX.
The paper also extends the literature that explores the trading efficacy of the BBs.
Lento et al. (2007) first explored the investment information content in BBs and found that
the BBs were unable to generate positive profits consistently. However, they found that the
BBs were consistently more profitable when calculated with a contrarian approach. More
recently, Ni et al. (2020) explored the profitability of the BBs in the Taiwan stock market.
They found that BBs are a profitable trading strategy, with additional profits being made
when taking a contrarian approach only when share prices hit the upper BB. However,
a study by Fang et al. (2017) suggested that the profitability of the BBs has decreased
over time since their introduction in 1983. They conjectured that as trading rules become
more popular, excess returns disappear, which is the case for the BBs after John Bollinger
published his book in 2001.
The study reveals that the BBs continue to be among the most profitable trading rules
commonly used by practitioners (see Table 2), even though their overall profitability may
have declined over the past twenty years (Fang et al. 2017). Furthermore, the results reveal
that during the market crash regime, it must be noted that at least one BB variant could
generate statistically significant profits before transaction costs in the BTC, GLD, SPX, and
VIX markets (see Appendix C). This provides novel insights into the BBs’ ability to generate
profits under more normal market conditions (e.g., Lento et al. 2007; Ni et al. 2020) and
during market turbulence and uncertainty.
Regarding the three market regimes analyzed (i.e., normal market, market crash,
and market recovery), it is also noted that the TRs were generally more profitable during
 have declined over the past twenty years (Fang et al. 2017). Furthermore, the results reveal
that during the market crash regime, it must be noted that at least one BB variant could
generate statistically significant profits before transaction costs in the BTC, GLD, SPX, and
VIX markets (see Appendix C). This provides novel insights into the BBs’ ability to gener-
ate profits under more normal market conditions (e.g., Lento et al. 2007; Ni et al. 2020) and
J. Risk Financial Manag. 2022, 15, 192 during market turbulence and uncertainty. 8 of 19
Regarding the three market regimes analyzed (i.e., normal market, market crash, and
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driven by by trends and momenta that were
frequently interrupted
interrupted by violent and swift adjustments of imbalances between supply
and demand.
To further analyze the performance of the TRs during the market crash regime, the
paths taken by a variant of each each trading
trading rule
rule relative
relative toto the
the SPX
SPX (i.e.,
(i.e.,BHTS)
BHTS)are arevisualized.
visualized.
Figure 1 reveals that all four TR variants outperformed the BHTS. Specifically, the TRBO
(50) and MACO (1,150) are shown to take very similar paths by generating generating positive profits
but experiencing significant declines themselves. As As aa result,
result, their
their positive
positive profits are
mainly driven by their ability to mitigate the extent of losses experienced by the SPX. The
BB (20,1)
(20,1) and
andFR FR(2%)
(2%)also
alsoperformed
performed similarly.
similarly.However,
However, theirtheir
profits werewere
profits associated with
associated
a much
with greater
a much abilityability
greater to avoid significant
to avoid losseslosses
significant duringduringthe market crash regime.
the market More
crash regime.
precisely,
More the BBthe
precisely, (20,1)
BB and FRand
(20,1) (2%) FRpreserved wealthwealth
(2%) preserved duringduring
the market crash regime.
the market crash re-A
large part of this wealth preservation is due to the BB (20,1) and FR (2%)
gime. A large part of this wealth preservation is due to the BB (20,1) and FR (2%) avoiding avoiding some of
the largest
some of thedeclines during the
largest declines 16 March
during the 162020
Marchcrash.
2020 crash.

Figure 1. TTR Profitability

Profitability relative
relative to
to the
the BHTS
BHTS onon SPX
SPXduring
duringthe
themarket
marketcrash.
crash.Figure
Figure11presents
presents
the path taken by a variant of each trading rule relative to the SPX market (i.e., BHTS)
the path taken by a variant of each trading rule relative to the SPX market (i.e., BHTS) during
duringthethe
market crash regime. The x-axis is the five-min interval data beginning 21 February 2020, and ending
on 23 March 2020. The y-axis presents the index of returns with a base of 1.0 at the start of the market
crash regime. Note that the start of the figure does not coincide with the start of the market crash
regime, as several observations are required to calculate the trading rules.

Second, it is worthwhile to note that at least one MACO, FR, and TRBO variant
all generated statistically significant profits after transaction costs on the GLD market
during the market crash regime (see Appendix C). In addition, the BBs were able to
generate statistically significant profits before transaction costs. These findings suggest that,
although the GLD market may be efficient under normal market conditions, as suggested by
J. Risk Financial Manag. 2022, 15, 192 9 of 19

prior studies (e.g., Baur et al. 2020) and the sub-period results for the normal market regime
(See Appendix C), excess returns may be available during periods of market distress.
These findings are important for portfolio managers as gold is often seen as a safe-
haven investment based on its historical performance (e.g., Buccioli and Kokhol 2021; Areal
et al. 2015). For example, during the aftermath of the 2008 global credit crisis, gold prices in
USD more than tripled from August 2007 to August 2011. However, some have questioned
gold’s safe-haven properties during the COVID-19 pandemic. Recently, mainstream media
has questioned whether gold has lost its luster as a safe-haven asset since it experienced a
significant price decline of approximately 12% from 9 March 2020 to 18 March 2020, which
was a lagged decline following the earlier and more pronounced drop in the SPX. Academic
research by Akhtaruzzaman et al. (2021) corroborated these observations by suggesting
that gold was a useful safe-haven asset during the early phase of the COVID-19 market
meltdown (31 December 2019, to 16 March 2020) but lost its safe-haven status shortly after
that (17 March 2020, to 24 April 2020). Regardless, Akhtaruzzaman et al. (2021) suggest
that investors continued to invest in gold during the COVID-19 market meltdown.
These findings also suggest that TRs could be employed in the GLD market to devise
active trading strategies based on TRs, as opposed to a more passive approach that utilizes
the protective abilities of a gold hedge during a financial crisis. As discussed, TRs were
especially useful in the GLD market during the market crash regime (see Appendix C),
although not statistically significant across the entire period (see Table 2). To further analyze
these results, the impact of the TRs in the GLD market is visualized. Specifically, Figure 2
presents the path of the SPX, GLD, and TRBO (200) in the GLD market across the entire
J. Risk Financial Manag. 2022, 15, x FOR PEER REVIEW 10 of 20
sample period. The results reveal that the TRs successfully timed an appropriate exit from
the GLD market before the significant drop during the market decline regime.

Figure
Figure 2. SPX, GLD,
2. SPX, GLD, and
and TR
TR pathways. Figure 22 presents
pathways. Figure presents the
the paths
paths taken
taken by
by the
the SPX,
SPX, GLD,
GLD, and and the
the
TRBO (200) trading rule (after taxes) in the GLD market across the entire period analyzed
TRBO (200) trading rule (after taxes) in the GLD market across the entire period analyzed and three and three
market regimes (i.e., Normal Market Regime, Market Crash Regime, Regime, and
and Market
Market Recovery
Recovery Regime).
Regime).
presents the
The x-axis presents the period
period of 6 January 2020 (i.e., the first day the TRBO (200) generated a trading
signal) to 12 May
May 2020.
2020. The
They-axis
y-axispresents
presentsthe
theindex
indexofofreturns
returnswith
witha abase
baseofof1.0
1.0atatthe
thestart
startofof6
6January
January2020.
2020.

The trading
tradingprofits
profitsininthe
theOIL
OILmarket
marketmerit further
merit discussion
further andand
discussion analysis. Specifically,
analysis. Specifi-
the TRs
cally, thegenerated profitsprofits
TRs generated after transaction costs costs
after transaction acrossacross
nine of
ninetheoftwelve trading
the twelve rule
trading
rule variants on the full sample (see Table 2). The analysis of the results across the sub-
periods supports the robustness of the findings across the entire sample as TRs were gen-
erally profitable across all three market regimes. Most interesting is that, although the TRs
were profitable across the whole data span, their statistical significance was only evident
J. Risk Financial Manag. 2022, 15, 192 10 of 19

variants on the full sample (see Table 2). The analysis of the results across the sub-periods
supports the robustness of the findings across the entire sample as TRs were generally
profitable across all three market regimes. Most interesting is that, although the TRs were
profitable across the whole data span, their statistical significance was only evident during
the market recovery regime (see Appendix C).
The individual five-minute interval returns across the entire sample is shown to further
analyze these findings. Figure 3 reveals that the OIL market’s vast majority of extreme
volatility occurred during the SPX market’s recovery period. As previously discussed, the
OIL market experienced a major crash during the COVID-19 pandemic, partly driven by a
price war between Saudi Arabia and Russia initiated on 8 March 2020, which eventually led
oil futures to turn negative in April 2020. This price war occurred during the SPX market’s
recovery phase and can partially explain all of the volatility presented in Figure 3. During
this period, the statistically significant excess returns resulted from the TRs being profitable
during
J. Risk Financial Manag. 2022, 15, x FOR sharp downward movements in oil prices. Again, these findings suggest
PEER REVIEW that
11 of 20 the
TRs may be useful during times of crisis as part of portfolio management strategies.

Figure 3.
Figure 3. Individual
Individual5-minute intervalreturns
5-min interval returns in
in the
the OIL
OILmarket.
market.Figure
Figure3 presents each
3 presents five-minute
each five-minute
interval return in the OIL market across the sample period and three market regimes (i.e., Normal
interval return in the OIL market across the sample period and three market regimes (i.e., Normal
Market Regime, Market Crash Regime, and Market Recovery Regime). The x-axis presents the pe-
Market
riod of 1Regime,
JanuaryMarket
2020, toCrash Regime,
12 May andy-axis
2020. The Market Recovery
presents Regime).
the 5-min The x-axis
interval returnpresents the period
percentage.
of 1 January 2020, to 12 May 2020. The y-axis presents the 5-min interval return percentage.
6. CSA Trading Strategy
6. CSA Trading Strategy
A potential limitation of studies testing TRs on historical data sets is that a trader
A potential limitation of studies testing TRs on historical data sets is that a trader
would not know which TR variant to rely upon, ex-ante. Furthermore, the study explores
would not know which TR variant to rely upon, ex-ante. Furthermore, the study explores
the profitability of the TRs across three market regimes. Again, a trader may not know,
the profitability of the TRs across three market regimes. Again, a trader may not know, ex-
ex-ante, the beginning and end of the market crash and recovery regimes. Technical ana-
ante, the beginning and end of the market crash and recovery regimes. Technical analysts
lysts could mitigate such limitations by aggregating the individual TR variants into a com-
could
positemitigate such limitations
trading indicator employed by equally
aggregating
acrossthe
all individual TR variants into a composite
market regimes.
trading indicator employed equally across all market regimes.
A composite (or consensus) approach relies upon the concept of the “wisdom of
A composite
crowds,” which dates(orback
consensus) approach
to the early works ofrelies upon
Francis the (1822–1911).
Galton concept of theThe“wisdom
wisdom of
crowds,” which dates back to the early works of Francis Galton (1822–1911).
of crowds, in its simplest form, is a phenomenon whereby the average of a large number The wisdom
of
of independent estimates regarding a given question can be very close to the actual an- of
crowds, in its simplest form, is a phenomenon whereby the average of a large number
independent
swer (populationestimates
mean),regarding a given
and the average is question
consistentlycanmore
be very closethan
accurate to the actual
each answer
estimate
over time (Hertwig 2012; Surowiecki 2005). The wisdom of crowds concepts have been
increasingly being incorporated into finance research (e.g., Chau et al. 2020; Chalmers et
al. 2013; Ray 2006) and have already been employed with technical trading strategies (e.g.,
Lento and Gradojevic 2007; Wang et al. 2014; Ni et al. 2015).
The combined signal approach (“CSA”) trading strategy is followed as put forward
J. Risk Financial Manag. 2022, 15, 192 11 of 19

(population mean), and the average is consistently more accurate than each estimate
over time (Hertwig 2012; Surowiecki 2005). The wisdom of crowds concepts have been
increasingly being incorporated into finance research (e.g., Chau et al. 2020; Chalmers et al.
2013; Ray 2006) and have already been employed with technical trading strategies (e.g.,
Lento and Gradojevic 2007; Wang et al. 2014; Ni et al. 2015).
The combined signal approach (“CSA”) trading strategy is followed as put forward by
Lento and Gradojevic (2007) by aggregating the TR variants into a composite signal and
only going long when at least half or more of the 12 TR variants all agree on a buy or sell
signal. The CSA trading strategy is explored when six (CSA (6/12)), seven (CSA (7/12)),
eight (CSA (8/12)), nine (CSA (9/12)), ten (CSA (10/12)), and eleven (CSA (11/12)) trading
signals agree. The analysis does not include anything below six as this would not suggest
an average consensus on the trading signals. In addition, the approach does not test the
CSA when all 12 TR variants agree as this would generate too few (if any) trading signals,
especially considering the low number of trades generated by the FR variants in certain
markets (see Appendix A).
Table 3 presents the results of the CSA trading strategy employed across the entire
sample data with the twelve TR variants. The results reveal that the CSA (6/12), CSA
(7/12), and CSA (8/12) are all able to generate profits before transaction costs across all
five markets consistently. This suggests that the CSA trading strategy has some predictive
ability above the naïve BHTS while reducing a trader’s reliance upon any single TR variant
across a given time. However, profits after transaction costs are observed in the BTC and
WTI markets. The CSA trading approach was the least useful in the GLD and VIX markets,
whereas forecasting ability was evident in the BTC, SPX, and WTI markets.

Table 3. CSA strategy profits across the entire sample period.

BTC GLD SPX VIX WTI

0.22% 0.05% 0.26% −0.41% 2.96%
CSA (6/12)
0.01% −0.21% −0.05% −0.94% 2.66%
0.20% 0.07% 0.23% 0.24% 0.69%
CSA (7/12)
0.05% −0.19% −0.11% −0.20% 0.43%
0.33% 0.00% 0.15% 0.24% 1.34%
CSA (8/12)
0.09% −0.29% −0.13% −0.42% 1.09%
0.24% −0.04% 0.23% −0.87% 1.10%
CSA (9/12)
−0.07% −0.33% 0.02% −1.54% 0.80%
−0.04% −0.09% 0.09% −0.80% 0.62%
CSA (10/12)
−0.31% −0.17% −0.04% −0.95% 0.50%
−0.16% −0.09% 0.11% −0.74% 0.63%
CSA (11/12)
−0.31% −0.10% 0.05% −0.81% 0.60%
Notes: Table 3 presents the daily profits before and after transaction costs that are located in each cell above and
below, respectively, across the entire sample period. Bold font represents trading profits whereby the trading
rule returns exceeded the returns from the naïve buy-and-hold trading strategy (BHTS). The Combined Signal
Approach (CSA (a/b)) involves going long when at least “a” or more of the “b” TR variants all agree on a buy or
sell signal.

As an additional analysis, the CSA strategy is employed on each of the three market
regimes (See Appendix D). The results reveal that the CSA strategy was very profitable
during the market crash regime. These findings are consistent with the previous discussion
of Figure 2, whereby the CSA beat the naïve buy-and-hold trading strategy during the
market crash regime by preserving wealth by correctly timing market exits. Comparing the
results across the market meltdown regime of the CSA trading strategy with the individual
TRs reveals that the CSA is successful in reducing reliance upon any single trading rule
and generated profits more consistently across the BTC, GOLD, OIL, and SPX markets.
The findings for BTC require more care and discussion. First, this work is related to
that of Gerritsen et al. (2020) in that they tested trend-following indicators, while the current
paper uses both trend and momentum TRs. Although the sample of Gerritsen et al. (2020)
consisted of pre-COVID-19 daily data on BTC, their conclusions also indicated that the
J. Risk Financial Manag. 2022, 15, 192 12 of 19

trading range break-out rules were able to deliver superior performance in trending markets.
In the same vein, Bouri et al. (2021) focused on pre-COVID-19 five-minute BTC data,
but they did not employ TRs and used functional data analysis instead. Their results
denied the weak form of the efficient market hypothesis, which is consistent with the
main message from the current paper. Furthermore, when aided with sophisticated deep-
learning methods, technical trading models that explore high-frequency predictability in
the BTC market, such as those from Alonso-Monsalve et al. (2020), reinforced the evidence
of departures from the efficient market hypothesis. However, Alonso-Monsalve et al.
(2020) did not assess the economic value of their forecasts and their analysis covered the
pre-COVID-19 time period (2018–2019). In all, the current paper complements the above
literature and extends their samples to a more recent period that was characterized by
abrupt regime shifts due to the emergence of the COVID-19 pandemic.

7. Conclusions
The main findings can be summarized as follows: (1) The financial crisis caused
by the COVID-19 pandemic offers limited TR excess profits relative to the buy-and-hold
strategy. (2) Trs that are statistically significantly profitable for almost all asset classes
during the market crash (after accounting for transaction costs) are the Bollinger Bands
and trading range break-out rules. (3) This suggests that market trend and momentum,
impacted by the large imbalances between supply and demand, played a significant role in
price formation and trader behavior in all asset classes. (4) Combined (or composite) CSA
technical trading strategies can generate profitability improvements for all asset classes
and are highly effective during the market crash regime.
Therefore, overall, the findings suggest that TRs may be useful for investors during
market crashes and that many markets were weak-form inefficient during the COVID-
19 market meltdown. These findings are consistent with the notion that, at such times,
investors may become distressed by market trends and momentum and, consequently,
shift from fundamental analysis to technical analysis. As a result, TRs and the resulting
composite trading signals could play an essential role in a portfolio management strategy
that seeks to preserve capital during times of distress. Moreover, the evidence of violations
of the efficient market hypothesis could pose challenges to policymakers and regulators. In
particular, if financial markets become inefficient in their weak form, then policy prescrip-
tions to remedy the situation may not be clear and effective since the underlying causes
for the inefficiency are unknown. However, it is important to note that because the Sharpe
ratio does not account for all systematic risk, any findings of profitable TRs may pick up
varying levels of systematic risk (and systematic risk premiums required by investors) and
thus not indicate violations of the weak form of market efficiency.
The presented findings represent the first steps in understanding high-frequency,
non-fundamental forces that were at play in the first months of the COVID-19 pandemic.
To address the potential limitation of the use of a relatively small set of TRs, in the future, it
would be helpful to expand the panel of technical indicators to those that, in addition to
market trend and momentum, reflect the intraday market volume and aggregate sentiment
of the investors (i.e., traders). Such measures may include, for instance, on-balance-volume,
fear and greed, and other global indicators that could serve as proxies for the world risk
appetite. In a recent paper, Makarov and Schoar (2020) demonstrated the importance
of net order flows for price formation in cryptocurrency markets. Since order flows for
assets effectively capture the information spreading process, they potentially contain both
technical (behavioral) and fundamental sources of disruptions at the market microstructure
level. Pending data availability at high frequencies, such a rich set of predictors might
provide additional insights into profitable trading strategies during market distress. An-
other limitation of the current paper lies in its direct application of TRs. This approach
could be extended to a full-fledged dynamic machine learning model that would rely on
a large panel of TRs as its inputs (in the spirit of, e.g., Gradojevic et al. 2021). In addi-
tion, such complex models might be enriched by incorporating the skewness feature of
J. Risk Financial Manag. 2022, 15, 192 13 of 19

technical analysis as in Jin (2021). Finally, researchers could further extend the work of
Bettman et al. (2009) to incorporate elements of both fundamental and technical analysis
during the COVID-19 market meltdown to determine if there are any additional benefits
for portfolio management.

Author Contributions: Conceptualization, C.L. and N.G.; methodology, C.L. and N.G.; software,
C.L.; validation, C.L.; formal analysis, C.L.; investigation, C.L. and N.G.; resources, C.L. and N.G.;
data curation, N.G.; writing—original draft preparation, C.L. and N.G.; writing—review and editing,
C.L. and N.G.; visualization, C.L. and N.G.; supervision, C.L. and N.G.; project administration, C.L.
and N.G. All authors have read and agreed to the published version of the manuscript.
Funding: This research received no external funding.
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Not applicable.
Data Availability Statement: Not applicable.
Conflicts of Interest: The authors declare no conflict of interest.

Appendix A. Number of Trade Signal Generated by TR

Table A1. Number of Trading Signals Generated by TR.

BTC GLD SPX VIX WTI

475 458 456 559 427
MACO (1,50)
(146/109/212) (159/91/207) (164/114/175) (218/133/204) (156/93/169)
133 165 221 261 174
MACO (1,200)
(44/25/43) (32/34/99) (97/56/66) (128/53/63) (62/43/57)
99 108 119 135 90
MACO (5,150)
(22/24/45) (30/32/45) (47/26/44) (65/33/33) (36/21/30)
585 585 579 574 525
BB (20,2)
(189/134/251) (185/133/264) (201/142/231) (219/132/219) (193/121/204)
766 765 703 736 697
BB (20,1)
(269/173/305) (242/185/333) (254/182/261) (288/177/267) (262/169/254)
477 478 422 474 428
BB (30,2)
(158/115/189) (156/108/211) (157/110/150) (175/122/172) (167/94/159)
278 50 223 1,447 765
FR (1%)
(60/123/82) (2/37/10) (3/164/55) (408/574/464) (36/201/527)
112 9 21 729 330
FR (2%)
(19/57/28) (0/7/1) (0/49/16) (169/389/170) (8/85/236)
21 0 9 170 94
FR (5%)
(2/11/6) (0/0/0) (0/8/0) (26/117/27) (0/17/77)
447 501 557 501 468
TRBO (50)
(174/106/107) (164/58/127) (208/38/55) (165/65/69) (149/39/527)
254 306 323 271 283
TRBO (150)
(100/52/70) (104/34/75) (124/6/140) (80/45/22) (89/8/91)
226 272 287 229 265
TRBO (200)
(84/46/84) (90/28/106) (111/2/93) (65/40/107) (81/5/52)
Note: Table A1 presents the number of trading signals generated by each trading rule variant across each of the
five markets (i.e., BTC, GLD, SPX, VIX, and WTI). The total number of signals generated across the entire sample
is presented above, while the number of signals generated across each market regime is presented below (i.e.,
normal market regime, market crash regime, and market recovery regime).
J. Risk Financial Manag. 2022, 15, 192 14 of 19

Appendix B. TTR Sharpe Ratios across the Full Sample

Table A2. TTR Sharpe Ratios across the full sample.

SRs for the MACO TTRs

MACO (1,50) MACO (1,200) MACO (5,150)
Before Tx After Tx Before Tx After Tx Before Tx After Tx
Costs Costs Costs Costs Costs Costs
BTC −1.719 −4.097 −1.248 −2.111 −2.125 −2.575
GLD −4.110 −5.785 0.698 −8.889 0.640 −6.270
OIL 3.151 4.027 9.112 6.560 2.328 2.527
SPX −1.632 −4.458 −0.305 −3.061 0.517 −1.635
VIX −11.494 −14.189 −2.533 −4.653 −1.801 −2.863
SRs for the BB TTRs
BB (20,2) BB (20,1) BB (30,2)
Before Tx After Tx Before Tx After Tx Before Tx After Tx
Costs Costs Costs Costs Costs Costs
BTC 1.367 −3.916 1.657 −5.323 0.995 −3.868
GLD 0.245 −6.345 0.149 −6.095 −3.115 −6.461
OIL −3.334 −4.633 −0.826 −2.978 −2.946 −3.928
SPX 4.890 −2.258 4.058 −3.226 4.820 −2.005
VIX 0.394 0.383 0.398 0.326 0.412 0.305
SRs for the FR TTRs
FR (1%) FR (2%) FR (5%)
Before Tx After Tx Before Tx After Tx Before Tx After Tx
Costs Costs Costs Costs Costs Costs
BTC −1.598 −2.387 −1.083 −1.471 0.226 0.081
GLD −1.729 −3.238 −0.274 −0.382 0.000 0.000
OIL 2.322 3.120 1.192 1.419 1.260 1.333
SPX 1.308 −0.719 4.608 3.829 4.514 4.550
VIX −1.391 −12.266 −6.640 −10.814 −2.388 −2.820
SRs for the TRBO TTRs
TRBO (50) TRBO (150) TRBO (200)
Before Tx After Tx Before Tx After Tx Before Tx After Tx
Costs Costs Costs Costs Costs Costs
BTC −1.009 −1.488 1.688 1.544 1.107 0.862
GLD 0.863 −1.965 −0.067 −1.272 0.576 0.044
OIL 3.310 3.507 11.604 11.083 7.292 6.757
SPX 1.563 −0.779 1.688 0.866 5.103 4.415
VIX −4.850 −6.415 −0.618 −0.721 0.264 0.237
Note: Table A2 presents the SRs before and after transaction costs for each TTR variant. The SRs are calculated in
accordance with Equation (5). Following Zhu et al. (2015), we present the SR after being multiplied by a factor or
102 . Note that higher SRs indicate that a TTR generated higher mean returns and/or less volatility relative to
TTRs with lower SRs.
J. Risk Financial Manag. 2022, 15, 192 15 of 19

Appendix C. TTR Profitability across COVID-19 Market Meltdown Market Regimes

Table A3. TTR Profitability across COVID-19 Market Meltdown Market Regimes.

TTR Profitability across the Normal Market Regime

MACO MACO MACO BB BB BB FR FR FR TRBO TRBO TRBO
(1,50) (1,200) (5,150) (20,2) (20,1) (30,2) (1%) (2%) (5%) (50) (150) (200)
−0.73% −0.44% −0.45% −0.49% −0.34% −0.61% −0.29% −0.44% −0.74% −0.54% −0.36% −0.61%
BTC
−1.36% −0.64% −0.55% −0.81% −0.91% −0.87% −0.42% −0.48% −0.75% −0.67% −0.40% −0.64%
−0.06% −0.01% 0.02% −0.08% −0.14% −0.13% −0.03% −0.16% −0.16% −0.07% −0.08% −0.09%
GLD
−0.75% −0.16% −0.12% −0.47% −0.69% −0.43% −0.04% −0.16% −0.16% −0.19% −0.13% −0.13%
−0.01% 0.33% 0.36% 0.39% 0.52% 0.53% 0.08% 0.36% 0.42% 0.06% 0.48% 0.47%
OIL
−0.69% 0.04% 0.20% −0.01% −0.09% 0.21% 0.01% 0.35% 0.42% −0.08% 0.45% 0.45%
−0.10% −0.08% −0.04% 0.04% 0.06% −0.01% −0.01% −0.13% −0.13% −0.12% −0.08% −0.07%
SPX
−0.82% −0.53% −0.26% −0.40% −0.63% −0.36% −0.01% −0.13% −0.13% −0.29% −0.13% −0.10%
−1.89% −1.30% −0.82% 1.81% * 1.95% * 1.22% −1.26% −0.84% −0.70% −1.62% −0.46% −0.34%
VIX
−2.82% −1.88% −1.11% 1.30% * 1.16% * 0.82% −2.37% −1.23% −0.75% −1.82% −0.51% −0.37%
TTR Profitability across the Market Crash Regime
MACO MACO MACO BB BB BB FR FR FR TRBO TRBO TRBO
(1,50) (1,200) (5,150) (20,2) (20,1) (30,2) (1%) (2%) (5%) (50) (150) (200)
−0.17% 0.38% 0.38% 2.17% ** 2.12% ** 2.18% *** −0.44% 0.00% 2.10% *** −0.57% 1.85% *** 1.68% **
BTC
−0.85% 0.19% 0.12% 1.78% ** 1.60% ** 1.84% *** −0.95% −0.23% 2.08% ** −0.72% 1.82% *** 1.66% **
0.17% 0.44% ** 0.44% ** 0.24% * 0.27% * 0.13% 0.00% 0.19% 0.15% 0.28% ** 0.10% 0.50% **
GLD
−0.39% 0.21% ** 0.18% ** −0.13% −0.33% −0.17% −0.11% 0.18%* 0.15% 0.15% ** 0.04% 0.47% **
2.67% 2.34% 2.34% 1.42% 3.09% 1.69% 1.94% 3.71% 3.19% 3.14% 3.14% 2.92%
OIL
2.12% 2.06% 2.62% 1.10% 2.57% 1.45% 1.23% 3.47% 3.15% 3.05% 3.11% 2.89%
−0.02% 0.47% 0.47% 1.96% *** 2.00% *** 1.55% ** 0.37% 1.36% ** 1.46% ** 0.79% ** 0.89% * 1.37% ***
SPX
−0.69% 0.09% 0.57% * 1.59% *** 1.45% *** 1.29% *** −0.19% 1.21% ** 1.45% ** 0.66% ** 0.85% * 1.36% ***
−8.45% −3.80% −3.80% 1.61% * 1.22% −0.92% −2.58% −4.83% −5.72% −3.67% −4.77% −1.40%
VIX
−9.23% −4.17% −4.10% 1.18% 0.62% −1.27% −5.39% −6.36% −6.13% −3.80% −4.83% −1.43%
TTR Profitability across the Market Recovery Regime
MACO MACO MACO BB BB BB FR FR FR TRBO TRBO TRBO
(1,50) (1,200) (5,150) (20,2) (20,1) (30,2) (1%) (2%) (5%) (50) (150) (200)
−0.58% −0.30% −0.79% −0.59% −0.46% −0.78% −0.20% −0.25% −0.61% −0.25% −0.37% −0.22%
BTC
−1.46% −0.48% −0.98% −1.07% −1.17% −1.16% −0.32% −0.28% −0.62% −0.35% −0.40% −0.24%
−0.24% −0.14% −0.16% 0.06% 0.10% 0.00% −0.13% −0.12% −0.17% −0.01% −0.09% −0.06%
GLD
−1.07% −0.53% −0.35% −0.42% −0.59% −0.33% −0.15% −0.13% −0.17% −0.14% −0.14% −0.10%
4.19% ** 1.54% 6.05% ** −3.89% −3.29% −3.84% 5.22% * 6.81% ** 7.10% ** 3.61% * 1.20% 0.17%
OIL
3.47% ** 1.32% 5.92% ** −4.25% −3.81% −4.08% 3.72% * 6.16% ** 6.49% ** 3.49% * 1.17% 0.14%
−0.27% −0.30% −0.28% −0.49% −0.37% −0.53% 0.09% −0.28% −0.62% −0.08% −0.13% −0.29%
SPX
−0.98% −0.59% −0.46% −0.86% −0.90% −0.78% −0.01% −0.31% −0.62% −0.20% −0.17% −0.32%
0.39% 1.32% 1.69% 1.09% 0.91% 1.05% 1.05% 0.65% 1.53%* 1.18% 1.63% 1.46%
VIX
−0.38% 1.05% 1.55% 0.72% 0.36% 0.78% −0.02% 0.27% 1.49% 1.03% 1.58% 1.44%
Note: Table A3 presents the daily profits before and after transaction costs are above and below, respectively. Bold
font represents trading profits whereby the trading rule returns exceeded the returns from the naïve BHTS. ***, **,
* represent statistically significant trading profits based on the Levich and Thomas (1993) bootstrapping technique
at the 1%, 5%, and 10% levels, respectively.
J. Risk Financial Manag. 2022, 15, 192 16 of 19

Appendix D. CSA Strategy Profits across the COVID-19 Market Meltdown

Market Regimes

Table A4. CSA Strategy Profits across the COVID-19 Market Meltdown Market Regimes.

TTR Profitability across the normal market regime

BTC GLD SPX VIX WTI
−0.37% −0.01% 0.00% −0.51% 0.48%
CSA (6/12)
−0.58% −0.22% −0.41% −1.01% 0.29%
−0.24% −0.05% −0.07% −0.19% 0.53%
CSA (7/12)
−0.38% −0.27% −0.61% −0.56% 0.40%
−0.24% −0.07% −0.09% 0.21% 0.46%
CSA (8/12)
−0.36% −0.39% −0.49% −0.41% 0.34%
−0.86% −0.04% −0.15% −0.58% 0.59%
CSA (9/12)
−1.04% −0.34% −0.28% −1.11% 0.45%
−0.91% −0.10% −0.15% −0.10% 0.58%
CSA (10/12)
−1.14% −0.14% −0.16% −0.18% 0.52%
−0.92% −0.10% −0.15% −0.11% 0.54%
CSA (11/12)
−1.16% −0.10% −0.15% −0.12% 0.51%
TTR Profitability across the market crash regime
BTC GLD SPX VIX WTI
1.73% 0.35% 1.25% −3.43% 3.27%
CSA (6/12)
1.44% 0.01% 0.92% −4.18% 2.93%
1.68% 0.50% 1.17% −1.83% 2.66%
CSA (7/12)
1.53% 0.28% 0.97% −2.64% 2.38%
1.51% 0.45% 1.17% −3.18% 3.82%
CSA (8/12)
1.31% 0.27% 1.05% −4.53% 3.68%
2.14% 0.28% 1.64% −4.01% 3.74%
CSA (9/12)
1.89% 0.14% 1.60% −5.36% 3.64%
1.86% 0.33% 1.66% −4.38% 3.88%
CSA (10/12)
1.79% 0.32% 1.61% −4.75% 3.85%
1.97% 0.35% 1.68% −4.22% 3.89%
CSA (11/12)
1.97% 0.35% 1.68% −4.44% 3.89%
TTR Profitability across the market recovery regime
BTC GLD SPX VIX WTI
−0.28% −0.11% −0.10% 1.42% 5.70%
CSA (6/12)
−0.40% −0.42% −0.39% 1.01% 5.33%
−0.19% −0.11% −0.27% 1.92% −0.17%
CSA (7/12)
−0.24% −0.39% −0.54% 1.64% −0.47%
−0.21% −0.08% −0.30% 2.43% 0.84%
CSA (8/12)
−0.45% −0.38% −0.62% 2.19% 0.45%
−0.31% −0.11% −0.53% 1.75% 0.22%
CSA (9/12)
−0.78% −0.35% −0.79% 1.42% −0.29%
−0.86% −0.14% −0.39% 2.12% −1.28%
CSA (10/12)
−1.29% −0.24% −0.52% 2.06% −1.49%
−1.24% −0.14% −0.40% 2.24% −1.24%
CSA (11/12)
−1.43% −0.15% −0.40% 2.22% −1.29%
Note: Table A4 presents whether the daily profits before and after transaction costs are above and below,
respectively, across the three market meltdown regimes. Bold font represents trading profits whereby the trading
rule returns exceeded the returns from the naïve BHTS.
J. Risk Financial Manag. 2022, 15, 192 17 of 19

Notes
1 See and Nazário et al. (2017) and Neely and Weller (2012) for extensive surveys on the application of technical analysis in financial
markets.
2 The returns calculated in this study are based on spot indices and therefore may not reflect a true return that would include
components, such as a dividend yield (e.g., the S&P 500), convenience yield (e.g., gold), and holding cost (e.g., gold and
oil commodities). Investors employing a trading strategy using actual futures contracts (or ETFs) would incorporate such
components into their return measures.
3 We also calculated the percentage of the individual technical indicators that are significantly profitable (at both the 1-day and
10-day lags) to the percentage that would exist by chance assuming a random walk with a drift. The un-tabulated results reveal
that the sell signals were more profitable than the buy signals for the VIX and OIL markets driven by the MACO, BB, and TRBO
rules. However, buy signals were more profitable for the BTC and GLD mainly driven by the MACO trading rules. These results
are not reported for brevity, but they can be available upon request from the authors. We thank the three anonymous referees and
the Editor for this and other useful suggestions.
4 In a related paper, Xu et al. (2020) found predictability in the volatility indices of commodity exchange-traded funds, especially
on days with higher volatility and larger jumps. It is important to note that volatility indices cannot be traded directly, but
by constructing a portfolio of options that replicates the volatility index. Moreover, recently, Wang et al. (2022) showed that
multiscale trading strategies based on the VIX may be possible.

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