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Berkshire Hathaway On The Brink Of Another BreakoutBerkshire Hathaway's stock recently displayed encouraging growth, with a notable bullish surge on August 7th. After reaching its zenith in March 2022, the stock suffered a 28% drop. By October 2022, the stock steadied at $260 and recently made a bullish stride, briefly outdoing its past record. However, this new high was marginal and fleeting, as the stock soon reverted below its former peak. A build-up of momentum led to this breakout, with the stock's inflection point being the $321 resistance, which then became support. This pivotal level has consistently posed challenges for the stock, given its proximity to its all-time high. It took 18 months for the stock to muster the courage to challenge this robust resistance. The stock's recent surge might be attributed to its favorable Q2 earnings report, where it reported earnings of 4.62 against the predicted 3.87. Notably, the daily 20 simple moving average stands slightly under the stock's current $350 price, potentially acting as a vital support. If the stock maintains this position, it may pave the way for future growth, potentially setting new record highs and establishing a lasting bullish trend. If you enjoyed this post, make sure to like, and follow for more quality content! If you have any questions or comments, comment below. We reply to every comment! See below for more information on our trading techniques. As always, keep it simple, keep it Sublime.
NYSE:BRK.BLong
by Sublime_Trading
2
BAC Bank of America Corporation Options Ahead of EarningsIf you haven`t bought BAC here: Then analyzing the options chain of BAC Bank of America Corporation prior to the earnings report this week, I would consider purchasing the 30usd strike price Calls with an expiration date of 2023-9-15, for a premium of approximately $0.83. If these options prove to be profitable prior to the earnings release, I would sell at least half of them. Looking forward to read your opinion about it.
NYSE:BACLong
by TopgOptions
1
Is It Time to Follow the Oracle's Lead?You may have heard of a certain Warren Buffett, and it seems like he might be onto something... Buffett, known as the "Oracle of Omaha," has demonstrated remarkable investment timing, or perhaps an innate ability to steer investment flows. This was clearly illustrated by his investment in Japan, which triggered a rally in the Nikkei to decade-long highs. While that window may have closed, Buffett has been discreetly bolstering his stake in another entity - Occidental Petroleum (OXY). If we scrutinize the timing of his purchases, it's apparent that Buffett likely had a price floor in mind. Intriguingly, his first purchase occurred when Crude was trading at a 15-year high! This leads us to examine Oil, which has been trading nearly 40% lower since mid-2022. Since our last discussion about oil, the Strategic Petroleum Reserve (SPR) has been further depleted, reaching its lowest level since 1983. The result of this drawdown is a diminished impact on energy costs as evidenced by the energy inflation index, which has not only passed its peak but has now turned negative. Interestingly, the Canadian dollar and the Norwegian Krone, currencies of major oil-exporting countries, have been outpacing the commodity typically correlated with them, Crude Oil. On the whole, it seems the energy commodity sector may have bottomed out, with all types of Oil and natural gas trading on an upward trajectory. In consideration of these factors, the outlook for oil leans towards the bullish side. The scarcity of oil in the SPR and the absence of energy inflation as a significant contributor to overall CPI make it unlikely for the U.S. to release more oil to depress energy prices. Coupled with the buoyant trend in the energy commodity space and the recent outperformance of major oil-exporting countries' currencies, it appears to be an opportune moment to consider a long position on oil. At the current price level of 72.33, risk managed trade points to setting the stops at the previous support of 66 and take profit level at 85. Each Crude Oil Future contract is equal to 1000 barrels of crude oil. Each 0.01 point increment in Crude Oil Futures is equal to 10 USD . The same view can also be expressed with greater precision using the Micro WTI Crude Oil, where each Micro contract is equal to 100 barrels of crude oil and each 0.01 point increment is equal to 1 USD. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: www.cmegroup.com www.cmegroup.com www.eia.gov tradingeconomics.com
NYMEX:CL1!Long
by inspirante
Berkshire Hathaway Q1 Earnings Rise on Insurance ReboundWarren Buffett's Berkshire Hathaway reported strong earnings growth in the first quarter of the year, primarily driven by the recovery of the conglomerate's insurance business. Operating earnings, which include profits from Berkshire's wholly-owned businesses, increased by 12.6% year-over-year to $8.065 billion. Insurance underwriting profit surged to $911 million, a sharp increase from $167 million a year ago, while insurance investment income also rose by 68% to $1.969 billion from $1.170 billion. The turnaround in Geico, which saw an underwriting profit of $703 million, was a significant contributor to the overall insurance business success. On the other hand, the company's railroad business BNSF and energy company posted year-over-year earnings declines. However, other controlled businesses and non-controlled businesses saw slight increases from the same period last year. Berkshire's cash reserves also increased to $130.616 billion from $128 billion in Q4 2022. Additionally, the company repurchased $4.4 billion worth of its own stock, the most since Q1 2021, up from $2.8 billion at the end of last year. Berkshire's net earnings, which include short-term investment gains, rose to $35.5 billion in Q1 2023, up from $5.6 billion in the same period last year, reflecting a first-quarter comeback in Warren Buffett's equity investments such as Apple. Nonetheless, Buffett cautioned investors not to pay too much attention to quarterly fluctuations in unrealized gains on investments. These results were released ahead of Berkshire's highly anticipated annual shareholders meeting, known as "Woodstock for Capitalists." Despite lagging behind the S&P 500's 7.7% advance with a 4.9% increase in its Class A shares this year, Berkshire's stock is still less than 3% below its all-time high.
NYSE:BRK.BLong
by FOREXN1
19
The importance of focusing on a company's competitive advantageWarren Buffett : "The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage." This quote from Warren Buffett, emphasizes the importance of focusing on a company's competitive advantage when making investment decisions. According to Buffett, the key to successful investing is not simply identifying industries or companies that are poised for growth or societal impact, but rather understanding the unique advantages that a particular company possesses and how sustainable those advantages are over the long term.
NASDAQ:META
by Chartcoder
XOM, Possible Long Term Play with around 200 targetExxon Mobil Corporation stock MAY see around 200 USD price in up coming years ! Today, we are going to investigate one of the giant oil companies. XOM has completed a complete ascending wave cycle from 1970 to 2020 . Impulsive section of this wave cycle was between 1970 and 2014 and corrective section started at 104.76 (former ATH) on 2014 and lasted for 6 years . On Mar 2020 stock bottomed with double bottom pattern at 30.11 USD around 0.786 Retracement level of the whole large time frame bull run. This complete wave cycle can be labeled as primary degree wave 1 and 2 of the larger degree wave cycle ( cycle degree). After end of primary degree wave 2 , a considerable up side move started which strongly broke multi years down trend line and reclaimed the ATH ( actually made a new one ). This strong and steep up going wave can be considered as primary degree wave 3 which can push the stock up to around 200 USD. This primary degree wave 3 can itself be divided to 5 intermediate wave degree and I suppose currently we are in wave 4 (minor degree ) of wave 1 (intermediate degree) of 3 ( Primary degree ). What all above explanation means? It means most probably we have an up side move from around 78 to around 116 USD . Then , a considerable correction of intermediate degree wave 2 of primary degree wave 3 may start which can hammer down stock to around 63 USD . After that , most powerful and steep wave will start which can break the upper bond dynamic resistance ( as this the typical character of wave 3 of 3) and lead the stock to above 150 USD. All other predicted wave moves are shown on the chart. Therefore, I certainly keep XOM in my watch list to open a profitable long position in appropriate time ( most probably in up coming weeks). Please note our chart is in monthly time frame and there may be many fluctuations in up coming weeks and days. In addition, timing on the chart may become incorrect as timing is the most difficult task in charting. Also I kindly ask you to keep in mind this is before the fact long term prediction and normally it may need some updates in future. I hope this analysis to be useful and wish you all the best.
NYSE:XOM
by SaeedSajedi
22
What should I look at in the Income Statement?The famous value investor, Mohnish Pabrai , said in one of his lectures that when he visited Warren Buffett, he noticed a huge handbook with the financial statements of thousands of public companies. It's a very dull reading, isn't it? Indeed, if you focus on every statement item - you'll waste a lot of time and sooner or later fall asleep. However, if you look at the large volumes of information from the perspective of an intelligent investor, you can find great interest in the process. It is wise to identify for yourself the most important statement items and monitor them in retrospect (from quarter to quarter). In previous posts, we've broken down the major items on the Income statement and the EPS metric: Part 1: The Income statement: the place where profit lives Part 2: My precious-s-s-s EPS Let's now highlight the items that interest me first. These are: - Total revenue The growth of revenue shows that the company is doing a good job of marketing the product, it is in high demand, and the business is increasing its scale. - Gross profit This profit is identical to the concept of margin. Therefore, an increase in gross profit indicates an increase in the margin of the business, i.e. its profitability. - Operating expenses This item is a good demonstration of how the management team is dealing with cost reductions. If operating expenses are relatively low and decreasing while revenue is increasing, that's terrific work by management, and you can give it top marks. - Interest expense Interest on debts should not consume a company's profits, otherwise, it will not work for the shareholders, but for the banks. Therefore, this item should also be closely monitored. - Net income It's simple here. If a company does not make a profit for its shareholders, they will dump its shares*. *Now, of course, you can dispute with me and give the example of, let's say, Tesla shares. There was a time when they were rising, even when the company was making losses. Indeed, Elon Musk's charisma and grand plans did the trick - investors bought the company's stock at any price. You could say that our partner Mr. Market was truly crazy at the time. I'm sure you can find quite a few such examples. All such cases exist because investors believe in future profits and don't see current ones. However, it is important to remember that sooner or later Mr. Market sobers up, the hype around the company goes away, and its losses stay with you. - EPS Diluted You could say it's the money the company earns per common share. So, I'm finishing up a series of posts related to the Income statement. This statement shows how much the company earns and how much it spends over a period (quarter or year). We've also identified the items that you should definitely watch out for in this report. That's all for today. In the next post, we will break down the last of the three financial statements of a public company - the Cash Flow Statement. Goodbye and see you later!
NASDAQ:TSLAEducation
by Be_Capy
KHC: WARREN BUFFET'S HOLDING BREAKOUTKHC (Kraft Heinz): I like the risk vs reward on the daily chart as it broke the neckline of an inverted head and shoulders and has just come to retest the breakout spot. Good enough for a long swing trade for me. Target of the inverted head and shoulders is in the 45 zone. If you look at the weekly chart, you'll see a nice rectangle range between 32.65 and 44.65. We're now in the middle of that range so if the inverted head and shoulders plays out we could reach the top of the rectangle. Stop at 38.2. Trade safe!
NASDAQ:KHCLong
by Elpidaldo
Taiwan Semiconductor - A Precarious Situation, Warren Bought...Apple apparently uses TSM chips with plans in the future to use more. My old friend Warren bought some recently, I noticed a gap in the chart after he bought. He bought quite a lot... I am wondering if we will fill the gap then go up. Or is it possible that we could go lower after testing the gap? Could Warren B wrong? This is one tough chart to predict! Just pointing out important levels where we can pivot. NFA, DYOR. Info to consider: Apple is a priority customer for TSMC's advanced manufacturing process. According to equipment manufacturers and Apple's production chain, Apple will use TSMC's 3nm wafers for the first time in the second half of the year. seekingalpha.com
NYSE:TSM
by ChartProphet
1
BERKSHIRE HATHAWAY repeating the post COVID recovery!Berkshire Hathaway Inc. (BRK.A) made a new ~5 month High yesterday, spearheading the bullish reversal of high cap stocks at the moment. The price is above the 1D MA200 (orange trend-line) and well above the 1D MA100 (green trend-line) and 1D MA50 (blue trend-line), the latter two are about to make a Bullish Cross. This draws comparisons with the previous 'Strong correction' Phase, during the COVID outbreak in February - March 2020. As you see the stock dropped a little over -30%, with the 1D MA50/100 Bearish Cross signaling the last flush, the 1D Death Cross signaling the Bottom and the 1D MA50/100 Bullish Cross the confirmation of the new rally. This time during the 2022 correction phase, the stock dropped a little less than -30%, again the 1D MA50/100 Bearish Cross signaled the last flush, the 1D Death Cross signaled the Bottom and the 1D MA50/100 Bullish Cross is very close to take place. Will it confirm a new rally. That remains to be seen. What's certain is the fact that this time, Berkshire is already above the 1D MA200, without having the 1D MA50/100 Bullish Cross, but it is just below the 0.618 Fibonacci retracement level, which was also a Resistance before the Cross. We've plotted the 2020 correction and recovery phase on the 2022 price action (black line) and as you see, even though lengthened, it matches the trend almost perfectly. This points to a longer term recovery this time (reasonable in the absence of the 2020 trillions USD in rescue packages) but it does show an ATH test by Q3 2023. ------------------------------------------------------------------------------- ** Please LIKE 👍, SUBSCRIBE ✅, SHARE 🙌 and COMMENT ✍ if you enjoy this idea! Also share your ideas and charts in the comments section below! This is best way to keep it relevant, support me, keep the content here free and allow the idea to reach as many people as possible. ** ------------------------------------------------------------------------------- You may also TELL ME 🙋‍♀️🙋‍♂️ in the comments section which symbol you want me to analyze next and on which time-frame. The one with the most posts will be published tomorrow! 👏🎁 ------------------------------------------------------------------------------- 👇 👇 👇 👇 👇 👇 💸💸💸💸💸💸 👇 👇 👇 👇 👇 👇
NYSE:BRK.ALong
by TradingShot
2
My crazy partner is Mr. Market!We are used to the fact that the world's most prominent investors are known for their outstanding deals, returns and stability of results over a long time horizon. Yes, all this is certainly a sign of excellence, but no investor has gained his popularity through books. The books he wrote. This man created his writings back in the 1930s and 1940s, but they still inspire anyone who has taken the path of smart stock investing. You've probably guessed by now who we're talking about. It's the humble author of The Intelligent Investor and Warren Buffett's teacher, Benjamin Graham. It's amazing that after many years, this book is still considered the bible of investing on the basis of fundamental analysis - Graham wrote such a thorough description of how a person investing in stocks should think. His insight into the market can be useful to anyone who is exposed to this chaotic environment. To understand Graham's philosophy, imagine that the market is your business partner "Mr. Market." Every day he stops by your office to visit and offer you a deal on your mutual company stock. Sometimes he wants to buy your stock, sometimes he wants to sell his own. And each time he offers a price at random, relying only on his gut. When he panics and is afraid of everything, he wants to get rid of his shares. When he feels euphoric and blind faith in the future, he wants to buy your share. That's the kind of crazy partner you have. Why is he acting this way? According to Graham, this is the behavior of all investors who don't understand the real value of what they own. They jump from side to side and do it with the regularity of a "maniac" every day. The task of the prudent investor is to understand the fundamental value of your business and just wait for another visit from the crazy Mr. Market. If he panics and offers to buy his stock at an extremely low price - take it and wish him luck. If he begs to sell him the stock and calls an unusually generous price - sell it and wish him luck. Of course, after a while, it may turn out that Mr. Market was not bad at all and made a very profitable deal with you. But the fact is that on the long horizon of time his luck will be washed away by a series of stupid things he will inevitably do. As for you, rest assured that tomorrow you will meet another Mister. So, as Graham has taught us, is teaching us, and will continue to teach us - you just have to be ready for it. Understanding the fundamental value of the company, this meeting will bring you nothing but pleasure!
TVC:DJIEducation
by Be_Capy
22
📈 Warren Buffett famous quotes 📈Warren Buffett famous quotes: “Time is the friend of the wonderful company, the enemy of the mediocre.” “Do not take yearly results too seriously. Instead, focus on four or five-year averages.” “I always knew I was going to be rich. I don’t think I ever doubted it for a minute.” “It is not necessary to do extraordinary things to get extraordinary results.” “One can best prepare themselves for the economic future by investing in your own education. If you study hard and learn at a young age, you will be in the best circumstances to secure your future.” “You know… you keep doing the same things and you keep getting the same result over and over again.” “I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. So I do more reading and thinking, and make less impulse decisions than most people in business.” “Someone’s sitting in the shade today because someone planted a tree a long time ago.” “Chains of habit are too light to be felt until they are too heavy to be broken.” 🚀 Follow profile for more! 🚀
SP:SPX
by InvestMate
3
The Only Earnings Play I Am Betting OnI believe BRK.B's earnings was pushed back in response to the FED meeting today. Which is great because now I can catch some calls for a lower premium. Anyways, the goal here is to profit off the Buffet machine that is Berkshire Hathaway. From a technical POV, it is obvious we have a powerful set up in both the W and the D view (watching 50, 100, 200 MA's). Secondly, we are looking at a powerful buy range here at the $280 price point. The cup and handle formation are setting itself up to be exploited... I will not go deep into the fundamental POV but here's what I am watching.
NYSE:BRK.BLong
by SPADESASSETS
Can one go wrong by buying Berkshire dips?BRK.B - Intraday - We look to Buy at 272.02 (stop at 264.98) Support is located at 272.00 and should stem dips to this area. Preferred trade is to buy on dips. Weekly pivot is at 270.73. Daily pivot is at 271.36. We look for a temporary move lower. Our profit targets will be 291.98 and 296.98 Resistance: 283.00 / 290.00 / 295.00 Support: 275.00 / 270.00 / 263.70 Weekly chart for context Disclaimer – Saxo Bank Group. Please be reminded – you alone are responsible for your trading – both gains and losses. There is a very high degree of risk involved in trading. The technical analysis , like any and all indicators, strategies, columns, articles and other features accessible on/though this site (including those from Signal Centre) are for informational purposes only and should not be construed as investment advice by you. Such technical analysis are believed to be obtained from sources believed to be reliable, but not warrant their respective completeness or accuracy, or warrant any results from the use of the information. Your use of the technical analysis , as would also your use of any and all mentioned indicators, strategies, columns, articles and all other features, is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness (including suitability) of the information. You should assess the risk of any trade with your financial adviser and make your own independent decision(s) regarding any tradable products which may be the subject matter of the technical analysis or any of the said indicators, strategies, columns, articles and all other features. Please also be reminded that if despite the above, any of the said technical analysis (or any of the said indicators, strategies, columns, articles and other features accessible on/through this site) is found to be advisory or a recommendation; and not merely informational in nature, the same is in any event provided with the intention of being for general circulation and availability only. As such it is not intended to and does not form part of any offer or recommendation directed at you specifically, or have any regard to the investment objectives, financial situation or needs of yourself or any other specific person. Before committing to a trade or investment therefore, please seek advice from a financial or other professional adviser regarding the suitability of the product for you and (where available) read the relevant product offer/description documents, including the risk disclosures. If you do not wish to seek such financial advice, please still exercise your mind and consider carefully whether the product is suitable for you because you alone remain responsible for your trading – both gains and losses.
NYSE:BRK.BLong
by Saxo
1
Against Our Primitive Nature In Trading 🐵 “I think investment psychology is by far the most important element, followed by risk control, with the least important consideration being the question of where you buy and sell.” ~Tom Basso, Market Wizard A strong psychological foundation is the key to successful investing. The human mind is a powerful, complex tool that quickly turns into a double-edged sword to those untrained in its control. It’s like driving a Formula-1 race car. A skilled driver can push his racer to its limits, extracting every last bit of performance. A novice driver on the other hand is better off in a mini-van. Put him behind the wheel of an F-1 and he’ll end up crashing straight into a wall. Psychology, or emotional strength, is the basis on which high-performance skills are built. It doesn’t matter whether it’s top performing traders, all-star athletes, or extreme back-country skiers. When it comes to risky, high-pressure situations, the mind either snaps into a flow state or crashes and burns. Decision quality in these high-stress situations requires a person to be emotionally sound. And the only way to develop this emotional toughness is through consistent self-reflection. The goal is to intimately understand both your strengths and weaknesses. It’s been said that investing is the best way for a person to truly understand himself. The markets will quickly unveil every character flaw, insecurity, and weakness that lies inside. This is the nature of the market and it’s why emotions tend to run wild within it. Fear, greed, hope, self-doubt…..it takes psychological preparation to manage this barrage. The failure to do so leads to disaster. To deal with these emotions, it helps to understand how the mind originally developed. Humans evolved over millions of years, spending a majority of their time roaming the planet as tribal hunters and gatherers. The advent of cities with large populations is relatively new considering that the Agricultural Revolution was only 10,000 years ago — a small tick of time in the grand scheme of human existence. The fact that our brains were primarily developed within the harsh tribal lifestyle has many implications on our psychological makeup. It also explains why our pre-wired instincts naturally make us horrible traders. So then what’s the deal with emotions? Are they an inherent weakness to humans? NOPE!!! In fact, emotions are very useful in certain situations. Think back to the plains life: A tribal man is walking back from a hunt when he’s suddenly confronted by a mountain lion. As the lion comes into view, his brain’s amygdala triggers a fight-or-flight response. The man is instantly hit with various emotions like fear, aggression, anxiety, etc. At the same time, physiological changes take place in his body. Hormones like adrenaline, testosterone, and cortisol are let loose to prep the man to either fight or run. The man’s emotional/physiological response not only makes him stronger and more capable to survive this encounter, but it also enables him to make a decision in the blink of an eye. There’s no time to sit and ponder the best course of action in a life-or-death situation. Speed is key and emotions are instrumental in fueling rapid decision making. Okay, so emotions are great when it comes to dealing with mountain lions… but what about in present day market situations? Consider this: A man’s entire life savings is invested in SPY. All of a sudden, the market plummets 5%. And then another 6% the next day. The man is faced with both extreme volatility and huge losses. His family’s financial security is on the line. If he loses his savings, he can’t send little Timmy off to college. And if Timmy doesn’t go to college, he’ll definitely end up flipping burgers for the next 30 years at the fast food joint down the street. It’s a life-or-death situation. A decision needs to be made quickly. *Queue the mountain lion emotional/psychological response.* Rampant emotions are no good here. Rapid, haphazard decision making doesn’t help either. The man’s love for Timmy will only lead him to make irrational choices that’ll destroy his savings in the long run. In scenarios like this, the fight-or-flight response works against you. This is where cool-headed, rational decisions prevail. A trader needs to transfer his decision making from his emotional Amygdala to his rational prefrontal cortex. Doing so will help him overcome his immediate emotional and physiological responses in order to make a more sound decision for his savings. In addition to controlling these emotions, we also have to contend with our strong evolutionary desire to “fit in”. Think back to our plains-roaming ancestors again. They used to move in small packs that would provide each other with protection and support. All basic needs like food and shelter were met through the group. This reality made it vital that an individual be accepted by his group. If he wasn’t well-liked, he’d be ostracized and forced to leave, which was the equivalent of a death sentence in those days. A tribeless person would have a difficult time surviving alone and exposed in the wild. The conformists of the group were the ones who survived the longest. They were also the ones who reproduced the most, passing on their genetic code. The “fitting in” mentality became a dominant survival trait that grew stronger as it passed from generation to generation over millions of years. This is the reason we’re all born with the natural need to be accepted by others. Doing something that goes against the tide, especially something that could cause us to be rejected from our group, goes completely against our nature. This mentality may have made sense in the past, but it doesn’t make sense today… especially in markets. Does It Pay To Always Go With The Crowd Or Does It Pay To Think For Yourself? The answer is obvious — it pays to think for yourself. And many times independent thinking will lead you to do the exact opposite of the crowd. As Warren Buffet once said regarding Berkshire Hathaway’s success — “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” Take March 2009 for example. Fear was running rampant and no one wanted to invest post-crisis. But this was the time when valuations were ripe for the picking. The market was getting ready to turn around. Going against the crowd and investing big during this period — being greedy when others were fearful — would have made you a fortune. This is why it’s so important to avoid falling victim to groupthink. An investor needs to make his own decisions based on his own convictions. But of course this isn’t easy. Thinking For Yourself Means Violating Your Biological Need To Be Accepted By Others. It Automatically Feels Unsafe And Uncomfortable . But The Ability To Manage This Negative Emotional Reaction That Comes With Independent Thinking Is The Key To Long-term Success . AVOIDING COGNITIVE BIASES IN TRADING. On top of rampant emotions and a dire need to “fit in” , our biological evolution also had another side-effect. It made us lazy. Back in the day we were faced with an endless cycle of feast and famine. We’d have short periods of feeding followed by long periods of minimal sustenance living. So naturally we evolved to conserve our energy as much as possible. If given two options we’re conditioned to choose the one that involves the least amount of effort. This applies not only to physical activities, but to mental functions as well. After all, the brain does account for up to 20% of the body’s total energy usage (more than any other organ). We’ll always go for the quick and easy solution over the tough one that requires more thinking. This is true even if the easy option ends up being wrong… To help facilitate this low-effort decision making we’ve developed Heuristics . Heuristics are simple, efficient rules we use to quickly make decisions and form judgments. They’re mental shortcuts that slice through complexity. Yet even though these Heuristics tend to work well most of the time, they can also lead to decisions devoid of rationality and logic. The resulting errors are what we call cognitive biases. Understanding these biases is important to help avoid them when making our trading decisions. Recency Bias Recency bias is believing what occurred in the recent past will continue to occur in the future. Say you flip a coin and get heads five times in a row. Naturally you’ll begin to think the sixth flip will also be heads. Heads is the trend. But in reality, you’d be wrong. This is called recency bias . You’re letting recent outcomes incorrectly influence your belief of future outcomes. No matter the outcome of the previous trials, the probability of the next coin flip being heads will always be 50%. Believing anything else is illogical. Investors consistently fall victim to this bias. It’s the main contributor to the complacency we see during each market cycle. Consider the “buy the dip” mentality that plagued the post-QE era. One of the greatest financial crises in history occurred 8 years prior, and in the time in between investors trained themselves to throw risk management out the window and aggressively buy more each time the market fell. It’s true that “buy the dip” worked well during that time, but there was no guarantee it would work in perpetuity. This is especially true considering the nature of market cycles. Strategies tend to work for a period of time until they don’t. And it’s usually the previously successful strategies that end up failing the hardest in the new environment. No one wants to be caught buying the dip when the market morphs from bull to bear. But unfortunately, recency bias leads a majority of investors straight off that cliff. “Buy the dip worked before… so it must work again!” Nope. Sorry. Gambler’s Fallacy On the other side of the coin (pun intended) we have the gambler’s fallacy (also known as the Monte Carlo fallacy). This is the opposite of recency bias. It occurs when you start believing that because a certain result happened more frequently in the past, there’s a higher probability a different result will occur in the future. Take the coin flip example again. Someone who flipped heads five times in a row may think the next flip has to be tails because of the 50% probability associated with the game. This is once again illogical. Over a large enough sample of trials (which can be performed through a Monte Carlo simulation), the number of heads and tails will be evenly split. But over any individual, shorter stretch, there is no requirement they must show up equally. You can have 100 head flips in a row and yet the probability of the next flip will still be 50% heads, 50% tails. The Gambler’s Fallacy is thinking the probability of a tails flip has increased based on the previous streak. Our “buy the dip” example once again shows the dangers of this bias in markets. The post-QE era was littered with the corpses of fund managers who tried to short the indices. Why’d they do it? It’s because they thought that after working so many times, “buy the dip” had to fail eventually. “Business cycles only last 5-7 years. It’s due time for the market to correct for real and blow out all these “buy the dip” idiots.” Again, this is not how it works. As John Maynard Keynes once said: “The market can stay irrational longer than you can stay solvent.” Sunk-Cost Fallacy / Loss-Aversion A sunk-cost fallacy is continuing an endeavour due to previously invested resources (time, money, effort) even when the optimal decision is to stop. Ever get full at dinner, but finish your plate anyway because you don’t want to waste the good money you paid for it? That’s the Sunk-cost Fallacy in action. Loss-aversion is the tendency to strongly prefer avoiding losses to acquiring equivalent gains. The pain of losing greatly overwhelms the pleasure of gaining. Marketers use Loss-aversion all the time. Which of the following headlines make you want to buy more? “Buy our insurance and save $100 a month!” Or “You’re losing $100 a month on insurance. Buy ours and save!” The second one of course. The thought of losing $100 is much more powerful than the thought of just saving it. Both Loss-aversion And The Sunk-cost Fallacy make it difficult to cut losses in the market. No one wants to cut a losing position after spending countless hours developing a thesis. It feels like a waste… all that work for nothing. It becomes easy to find yourself attached to an investment because of the Sunk-cost Fallacy. But this mentality is completely irrational. Refusing to cut a loser, regardless of the initial time investment, leaves you exposed to an even larger total loss (time & capital) down the line. Cutting a loss also becomes even harder when loss-aversion comes into play. Taking a loss not only means admitting you’re wrong, but also turns your paper loss into a real account drawdown. This is too much to handle for most, even if it’s in their best interest. The illogical fear of taking the pain now opens the door to even more pain in the future. Confirmation Bias Confirmation bias is seeking out information that supports an initial thesis while disregarding all else. Rose-colored glasses are a large problem in the investment world. Too many investors find a company they like and then proceed to become its #1 cheerleader. They only look for news and press releases that support their positive image of that company. Any fundamental warning signs are immediately disregarded and objectivity is squashed. This is asking to be unpleasantly surprised in the future. Confirmation bias creates a dangerous blind spot that has a high likelihood of decimating a trading account. Observational Selection Bias Similar to Confirmation Bias , Observational Selection Bias involves noticing a particular idea and then falsely assuming that the frequency of available evidence supporting that idea has increased. Say you develop a thesis that Solar Stocks should take off soon. And as soon as you create that thesis, you start to notice a huge increase in News stories and data that support it. This makes you even more confident in Solar Stocks. This is most likely the bias in action. Developing your initial solar thesis has you primed towards certain types of information. This priming is very easily confused with actual increasing sentiment towards the solar sector. Objectivity is once again smothered, making this bias crucial to avoid. These Cognitive Biases are completely natural to have. And that’s what makes them dangerous. We need to stay vigilant of these biases to make sure they don’t creep into our analysis process. Objective analysis is the key to success in the markets. But for objective analysis to flourish, biases need to be squashed. PLAN YOUR TRADES AND TRADE YOUR PLAN Clearly Our Biology And The Biases That Come With It Are Hazardous To Our Financial Health. But how exactly do we solve this problem? The trick is to Plan Your Trades And Trade Your Plan. The First Step To Successful Trading Is Creating A Solid Strategy That Accounts For Every Possible Market Scenario. High Volatility, Low Volatility, Black Swans, It Doesn’t Matter. Everything Should Be Planned For. Nothing Should Be A Surprise. A Detailed Strategy Will Pre-plan The Action Steps You’ll Take In Specific Market Situations. This Ensures You’ll Have Strict Guidelines To Follow When Your Emotions Inevitably Run Wild. Your Past Objective Mind Will Have Already Made The Correct Decisions For Your Current, Emotionally Charged, Irrational Mind. This Is How You Avoid Destructive Choices In The Heat Of The Moment. But This Only Works If You Actually Execute Your Plan When The Time Comes. This May Sound Simple. And Honestly It Is. But That Doesn’t Mean It’s Easy. Execution Is Difficult Because Our Biological Wiring Does Everything In Its Power To Prevent Us From Pulling The Trigger. Our Emotions And Biases Flare Up And We’re Forced To Do Battle With Them Before All Else. The Best Trading Plan In The World Won’t Prevent Your Fight-or-flight Response. It Won’t Cure Your Dire Need To Stick With The Herd Or Your Cognitive Biases Either. You’ll Still Experience All The Feelings That Come With Your Biological Reality. There’s No Way Around It. That’s why you need to accept it. Let the process play out. Feel what you’re feeling. But as it happens, take a step back, and from a distanced view, fully acknowledge what’s occurring. Objectively analyze it: “The market just dropped 400 points and I’m feeling x, y, and z. Why am I feeling like this? Should I be feeling this way? How should I react?” Explicitly following through with this exercise, either mentally, or even better by physically writing these questions and answers down, immediately switches your brain from using its emotional Amygdala to its rational prefrontal cortex. The process will prevent the type of knee-jerk decisions you’re trying to avoid while reminding you to stick to your pre-defined trading plan. Another effective tactic to ensure execution is reducing your stimuli. If the market is crashing, don’t sit in front of your computer screen and watch it. Every tick will cause an emotional response. And the more frequently you have to deal with these emotional responses, the more likely you’ll succumb to them and deviate from your trading plan. Just like you don’t trust a toddler with a bunch of colored markers in an empty, white-walled room, we don’t trust ourselves with a mouse and keyboard during trading hours. Both result in a mess. As the Legendary Trader Peter Brandt said: “Trading an upstream swim against human emotions.” These are wise words from a wise man. Plan your trades and trade your plan . That’s How You’ll Win In The End. & Thank For Reading Untill End, No Problem If You Skipping Some Text. I Hope You Find Something Useful In This Post. Stay Safe & Good Luck. Thank Alex Burrow MACROOPS Thank For Artist The Image
NASDAQ:METAEducation
by Zestiria
24
Bearish market is changing the rulesIt seems like all trading rules are out of control in this bearish market. One of the Greatest investors of all time Warren Buffett said "be greedy when others are fearful; and be fearful when others are Greedy" this rings true in the mind. However Buffer was an investor & not a traders. the rules differ or both games. THIS IS ONE OF MY BEST & MOST PROFITABLE trades. short term (W) is in correction while longterm (M) still technically in uptrend. price comes into the DZ which is the HL (Higher Low) of the longterm (M) chart. provide low risk entry & high profit. It seems in this market nothing hold true. As the price broke through the DZ. I followed my rules and took the Loss. If there is a lesson to carry. the DZ was tested (in the dark square) this basically weakens the DZ. One of my first trading teacher compared a DZ to a door. the more you knock on the door the more likely it will break down. This DZ door has been knocked before. it broke & the door opened. A better trade enhancer would of been a fresh untested DZ
TSX:ABXLong
by greatful-me
Why Warren Buffett pours billions of dollars into OXY ?Legendary investor Warren Buffet is pouring billions of dollars into Occidental Petroleum Corporation ! when it rejected heavily from strong and valid down trend line ! why ? Please note Buffett is a long term investor not a trader !. US market has been in a Bull run in large time frames (Yearly or Monthly) since 1932 therefore, any long term investor who chose fundamentally powerful stock has made a huge profit. Although I believe Berkshire could have chosen better time and maybe lower price to start buying shares of OXY, I think it will see higher prices in long term in fact, It goes much higher than ATH and will reach to around 180 USD per share or even higher in up coming YEARS. Now , lets look at what we have in technical point of view: 1. OXY was rejected strongly from valid down trend line in weekly time frame for 4th time . Break out of this heavy down trend line is very important for the stock to go higher. 2. In terms of Elliott waves, similar to many other energy stocks like XOM, COP, SLB and etc , OXY has completed and ascending complete wave cycle from IPO to latest major low (Primary degree waves 1 and 2 on the chart shown by green and red arrows respectively ). It means that impulsive section (Primay degree wave 3) of new wave cycle has been started at last major low around 9 USD. In closer look, currently we are in wave 4 of 1 of primary degree wave 3. Elliott wave labeling on the chart shows internal waves (12345) of wave 1 of primary degree wave 3. It means there is one more leg up ( wave 5 shown on the chart ) to complete wave 1 of primary degree wave 3. Then we will probably have a major correction (wave 2 of 3 ) down to 40-50 level and after completion of correction , wave 3 of 3 which is most profitable and most speedy wave will start. Please note this is most probable scenario and we are not talking about certainty. 3. Beside strong down trend line, there are many strong static resistances on OXY climb road. These Resistances are shown by red horizontal lines on the chart. Therefore, OXY will face difficulties on the way to reach it's target. One more important note : As Berkshire owns now around 20 % of company shares and they are long term holders, We can somehow be sure that 20 % of shares of company will be out of future sell pressure in up coming years which is very important note to be considered. All in all, I believe OXY , like many other energy stocks , offers huge profit for long term investor and traders. However, Is it a right time to open a long position? It depends on personality and risk management and patience of investors/traders. I myself, keep OXY in my watch list and think it can be bought on lower prices as shown by green lines. To me, buying a stock when it is struggling with a strong down trend line is dangerous and as always, I am seeking for a safe trade set up. I Hope this publication to be useful and wish you all the best.
NYSE:OXY
by SaeedSajedi
16
$CVX CHEVRON WYCKOFF plus INVERSE HEAD and SHOULDER Pattern$CVX Chevron Corp This is one of my favorite charts because it had a clear UPTHRUST WYCKOFF DISTRIBUTION PATTERN and I was able to short the full measured move down without a sweat and share that with my friends, yay money! Chevron has completed the full measured move down on the WYCKOFF distribution pattern and is showing signs of accumulation. A few things to note below: 1. Warren Buffet loaded on Chevron. 2. Supply on oil is still low and the demand is high. The government policy on oil refineries doesn't help the supply. 3. The Russia War on Ukraine is still in full effect. (prayers) 4. Their earnings lag, however, this stock will move significantly on news that directly effects these headlines. 5. It is a dividend paying stock, I believe the news will try hard to beat it down so hedge funds can load up. Like I mentioned above, $cvx appears to be in accumulation, it has formed a decent consolidation pattern. If you zoom into the 4 hour timeframe you will find a beautiful INVERSE HEAD & SHOULDER pattern developing (flip from bars to line chart for a different view). The left shoulder shows the highest selling volume bar and checks the box of a textbook inverse H&S. However, if this pattern fails, I have setup some support levels below. This one will be on the top of my watchlist next week!
NYSE:CVX
by ChaldeaCode