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Long Term Trend Analysis in the Capital Market – The Case of Serbia

Abstract The paper explores the possibility of making investment decisions in emerging markets by using the trend analysis method on a particular example of the capital market in Serbia. The authors, starting from the common features of technical analysis, have analysed the common share index value in the capital market in Serbia, in the Belgrade Stock Exchange - Belexline from 1 March 2006 to 31 March 2009, by the usage of two moving averages method - Moving Average Convergence Divergence (MACD): an intermediate term of 50 days and a long-term one of 100 days. The above mentioned moving averages identify the establishment of a trend, the cessation of the existing one, a change and an establishment of the new one. The capital market in Serbia had two distinctive long-term trends within the above mentioned observed period of time. The method of two moving averages in combination with the MACD indicator analysis gave quite reliable signals of weakening and change of the long-term trend direction. Analysis of the long-term trend has not been considered for the period from 2009 to date because the market during this period was illiquid with little trading volume, while some stocks that are entered in the Belexline are not more subject of trade.