International Journal of Economics and Financial

Issues
ISSN: 2146-4138

available at http: www.econjournals.com

International Journal of Economics and Financial Issues, 2017, 7(2), 1-4.

Sutte Indicator: A Technical Indicator in Stock Market

Ansari Saleh Ahmar*

Department of Statistics, Universitas Negeri Makassar, Indonesia. *Email: ansarisaleh@unm.ac.id

ABSTRACT
This study aims at development of the technical indicator in Stock Market as Sutte indicator. Sutte indicator in stock trading that will assist in
the investment decision-making process which is to buy or sell stocks. This study took data from PT. Astra Agro Lestari Tbk. Which is listed
in the Indonesia stock exchange in the period of 5 April 2001 - 20 September 2016. To find out the performance of Sutte indicator, two other
technical analysis are used as a comparison, they are simple moving average (SMA) and moving average convergence/divergence (MACD). The
mean of square error (MSE), mean absolute deviation (MAD), and mean absolute percentage error (MAPE) are used to find out a comparison
of the level of reliability in predicting the stock data. The results of this study are Sutte indicator could be used as a reference in predicting
stock movements. Sutte indicator have a better level of reliability compared to two other indicators method SMA and MACD based on the
MSE, MAD and MAPE.
Keywords: Stock Market, Sutte Indicator, Technical Analysis
JEL Classifications: C58 D53

1. INTRODUCTION Nowadays, there are many traders who are experts mastering
the technical analysis and even have been able to modify
Stock trading is an economic activity that requires high accuracy. the technical indicators. Technical analysis is directed to
If an investor is lack of understanding on stock market, certainly, predict the safety of the price. The price at which buyers
she/he will experience significant losses and might become and sellers set a collective agreement which is regarded as a
insolvent. In stock trading, the investors are required to know matter of right, weighty and reveals all the factors, rational
the movement direction of the stock price and market conditions. and irrational, quantitative and non-quantitative, and the only
Both of these are very important in order to get maximum picture that should be considered (Suresh, 2013). Furthermore,
profit and minimum risky. Usually, an investor uses technical Neely and Weller (2011) revealed that technical analysis is the
indicators to detect stock movement. A technical indicator is an use of past price movements and/or other market data, such as
analysis of previous price movements to predict the upcoming volume, to assist the decision making process on trade in asset
price movements. Technical indicators are related to the stock markets. This decision is usually obtained by applying a few
movement chart. The main component of the formation on stock simple rules on share price history.
movement chart consists of 5 components; they are opening
price, the highest price, the lowest price, the closing price, and Many researchers have examined the technical analysis. Pring
the volume of transactions. An indicator in technical analysis (1991) showed that technical analysis aims at identifying trend
consists of two categories, that is lagging and leading indicators. reversals in the early stages and rising trend until the confidence
Lagging indicators are commonly used for measuring trends and level indicates that the trend has reversed. Taylor and Allen
leading indicators are generally used for overbought or oversold. (1992) showed the value of technical analysis for leaders of
Several types of technical indicators are the Stochastic, MACD foreign currency dealers. Murphy (1999) studied about market
and Bollinger bands (Nithya and Thamizhchelvan, 2014), moving action through the use of charts for the purpose of forecasting
average (Han et al., 2013), and relative strength index (Abbey upcoming price. Mengoli (2004) showed that the trading
and Doukas, 2012). approach comprises valuable momentum for the Italian stock

International Journal of Economics and Financial Issues | Vol 7 • Issue 2 • 2017 1

Electronic copy available at: https://ssrn.com/abstract=2924309
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speed, and the performance of technical trading rules in Chinese
namely SUTTE%L, SUTTE%H, and SUTTE-PRED. These three
domestic and foreign shares markets. Review of Pacific Basin
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SUTTE link between SUTTE%L and SUTTE%H. If the curve technical analysis. Applied Financial Economics, 17, 1003-1012.
SUTTE%L is above the curve SUTTE%H in a long period of McKenzie, M. (2007), Technical trading rules in emerging markets the 1997
time then it indicates that the stock price will increase and vice Asian currency crisis. Emerging Markets Finance and Trade, 43, 46-73.
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stock price will decline. Increases and decreases in stock prices in the Italian equity market. International Review of Financial
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Figure 2a showed that SUTTE%H and SUTTE%L intersect
Minitab. What are MAPE, MAD, and MSD?; 2016. Available from:
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5. CONCLUSION Analysis in Banking Sector of Equity Market. IOSR Journal of
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Pring, M.J. (1991), Technical Analysis Explained. New York, NY:
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4 International Journal of Economics and Financial Issues | Vol 7 • Issue 2 • 2017

Electronic copy available at: https://ssrn.com/abstract=2924309