This is an interesting presentation (20 min) on understanding root of human irrationality and biases. Basically through a clever series of experiments, the researchers teach monkeys the concept of money and using that to get food. Then they create a market place and choices for monkeys similar to what humans face when making financial decisions. These experiments in "monkeynomics" shows that some of the biases like loss aversion and silly choices we make, monkeys make too.
I read an interesting article in Scientific American magazine. Imagine, for example, that you are in a library and you are lost. Are you in the Science Fiction or the Fantasy section?
One approach is you can go around until you find a helpful sign. Let's say you took faster approach and simply looked at the books on the shelf next to you. You see:
One approach is you can go around until you find a helpful sign. Let's say you took faster approach and simply looked at the books on the shelf next to you. You see:
Cognitive distortions are simply ways that our mind convinces us of something that isn’t really true. Dr. Aaron Beck, the “father” of cognitive therapy, first proposed the theory behind cognitive distortions. We all may suffer from these occasionally, but when they come to be how we see and interact with the world, they can prevent us from seeing things as they are and limit your growth and success.
By learning to correctly identify this kind of distorted thinking, one can then answer the negative thinking back, and refute it. This post covers the most common cognitive distortions. Part-2 will cover couple of exercises one can do to refute these distortions and replace with more rational, balanced thinking.
Came across an interesting article. This study shows that many of us will deny our own senses just to conform with others. I suspect this scenario plays out often in markets as well. Probably more so as markets are much more ambiguous then the experiments described in the article.
Link: Confirming to the norm
Conceptus (CPTS) had deeper correction from resistance band (shaded rectangle) as analyzed in prior post. Prior post is available here - (Mar 19) CPTS. The stock came few cents short of resistance band before selling off strongly. Besides the structure of chart, another reason is general market weakness.
The chart is quite symmetrical i.e., 3 big up swings (A, B, C) and 3rd leg had again 3 minor up legs (a1, b1, c1). Markings on the chart. Also last couple of times, when the stock sold off, both times it slid along lower channel for few bars (arrows on the chart). Generally these kind of things would be missed by indicators. Assuming it does again, that means stock would likely go further down to around $13. Beyond that, for now it is wait and see mode. Depending on how general market is, either the stock might go into sideways mode or have further correction.
The chart is quite symmetrical i.e., 3 big up swings (A, B, C) and 3rd leg had again 3 minor up legs (a1, b1, c1). Markings on the chart. Also last couple of times, when the stock sold off, both times it slid along lower channel for few bars (arrows on the chart). Generally these kind of things would be missed by indicators. Assuming it does again, that means stock would likely go further down to around $13. Beyond that, for now it is wait and see mode. Depending on how general market is, either the stock might go into sideways mode or have further correction.
Both market corrections are fairly close to the analysis so far and bounced from long zones. Prior analysis on these two markets can be found here:
(Apr-03)$USDJPY,
(Apr-07)$GBPJPY.
USDJPY:
Not much has changed. 3 legged correction to long zone as analyzed in prior post on Apr-3. Bounced from the zone strongly. 1st correction on higher time frame. So better to keep part of position for a larger move. Once it closes decisively above ~ 82.25, stop can be moved to break even.
(Apr-03)$USDJPY,
(Apr-07)$GBPJPY.
USDJPY:
Not much has changed. 3 legged correction to long zone as analyzed in prior post on Apr-3. Bounced from the zone strongly. 1st correction on higher time frame. So better to keep part of position for a larger move. Once it closes decisively above ~ 82.25, stop can be moved to break even.
GBPJPY:
Deeper correction to the long zone as analyzed in prior post. Unless entered on anticipation, the entry now would require taking too large risk. So better to pass. Entering on anticipation for this market would have been ok given that the zone coincides with a strong resistance turned support.
Interesting Ted Talk by Nobel laureate and founder of behavioral economics Daniel Kahneman. Using examples from vacations to colonoscopies, he talks about how our "experiencing selves" and our "remembering selves" perceive happiness differently. Duration - 21 minutes.
We don’t choose between experiences, we choose between memories of experiences. Even when we think about the future, we don’t think of our future normally as experiences. We think of our future as anticipated memories. ~ Daniel Kahneman
Strong sell off last few days. Micro 3 leg top - (A, B, C on the chart). Broke trend line (dashed line) that held the trend for several months. Given above factors, I think we will likely have a 2 legged correction to 1330 area. One factor to keep in mind though is high VIX reading. So I wouldn't rule out if the second leg forms as sideways move. At this point, I don't know if market will go on to make new highs. It really doesn't matter. What I am interested is whether I can get a low risk zone to get on board long side and profit without needing market to make a new high.
Strong breakout of a long consolidation zone with a run up. Chart is similar to USDJPY. Forming 1st correction. Prior up leg has three legs (On chart - A, B, C). So greater chance the correction will be an higher time frame correction. 127 - 126 (shaded long zone on chart) is a good confluence zone i.e., prior resistance turned support (horizontal line) and is between 38% and 50% on Fibonacci grid.
Larger Scale: Strong breakout of a long consolidation zone with a run up.
Daily Chart: Forming 1st correction. Currently had two legs within correction.
Current thinking: Two possible outcomes. The up leg resumes from here. But that requires too large stop and is not my preference. If we miss, not a big deal. Another outcome is the market forms 3rd leg down and comes into the 80.75-81.5 zone. Given strong down bars in the correction so far, I think a 3rd down leg is likely providing a low risk entry zone (circle on the chart).
Daily Chart: Forming 1st correction. Currently had two legs within correction.
Current thinking: Two possible outcomes. The up leg resumes from here. But that requires too large stop and is not my preference. If we miss, not a big deal. Another outcome is the market forms 3rd leg down and comes into the 80.75-81.5 zone. Given strong down bars in the correction so far, I think a 3rd down leg is likely providing a low risk entry zone (circle on the chart).
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