title: Memory effects in stock price dynamics: evidences of technical trading.
abstract: Technical trading represents a class of investment strategies for Financial Markets based on the analysis of trends and recurrent patterns in price time series. According standard economical theories these strategies should not be used because they cannot be profitable. On the contrary, it is well-known that technical traders exist and operate on different time scales. In this paper we investigate if technical trading produces detectable signals in price time series and if some kind of memory effects are introduced in the price dynamics. In particular, we focus on a specific figure called supports and resistances. We first develop a criterion to detect the potential values of supports and resistances. Then we show that memory effects in the price dynamics are associated to these selected values. In fact we show that prices more likely re-bounce than cross these values. Such an effect is a quantitative evidence of the so-called self-fulfilling prophecy, that is the self-reinforcement of agents' belief and sentiment about future stock prices' behavior.
authors.affiliation: Sapienza", Università di Roma, Dip. Fisica, P. le A. Moro 2, 00185, Roma, Italy.
authors.forename: Federico
authors.initials: F
authors.lastname: Garzarelli
authors.affiliation: Institute of Complex Systems, CNR, Roma.
authors.forename: Matthieu
authors.initials: M
authors.lastname: Cristelli
authors.affiliation: IMT, Institute for Advanced Studies, Piazza S. Ponziano, 6, 55100 Lucca, Italy.
authors.forename: Gabriele
authors.initials: G
authors.lastname: Pompa
authors.affiliation: Institute of Complex Systems, CNR, Roma.
authors.forename: Andrea
authors.initials: A
authors.lastname: Zaccaria
authors.affiliation: 1] "Sapienza", Università di Roma, Dip. Fisica, P. le A. Moro 2, 00185, Roma, Italy [2] Institute of Complex Systems, CNR, Roma [3] London Institute for Mathematical Sciences, South Street 22, Mayfair London, UK.
authors.forename: Luciano
authors.initials: L
authors.lastname: Pietronero