In This Week’s Issue:

– Stockscores’ Market Minutes Video – The Power of Trades That Feel Wrong
– Stockscores Trader Training – Understanding Confirmation Bias
– Stock Features of the Week – Penny Stock Revival Part 2

Stockscores Market Minutes Video – The Power of Trades That Feel Wrong
Trades that frighten you, those that don’t seem to make any sense, often work the best. This week, I explain why and then provide my weekly market analysis.Click Here to Watch To get instant updates when I upload a new video, subscribe to the Stockscores YouTube Channel.

Trader Training – Understanding Confirmation Bias
Investors usually do some research on the stocks that they are considering purchasing. This might involve checking the company’s financial position, reading their recent news releases or consulting research done by experts. The aim is to make a well informed decision.

If the research satisfies their criteria, a trade will be made. For most investors, that trade brings with it a dangerous commitment. Since no one likes the pain of suffering a financial loss in the market, the investor now has a vested interest in finding any information that they can to confirm that they have done the right thing.

Behavioral finance researchers call this confirmation bias. This is the tendency to seek out information to confirm their trading position and ignore or underweight anything that runs contrary to their financial interest. It is dangerous practice and one of the reasons why I think the small investor should not seek out any information at all when buying stocks. Instead, just learn how to interpret the market’s message.

Let’s say you buy a mining stock that has some gold projects that have good potential. Before you buy the stock, you read the company’s news and some analysis done by a mining expert who publishes a newsletter. All indications from your analysis is that this stock is likely to go higher.

After you buy it, the stock does go higher, adding further credibility to the research work you have done. Then, one day, the stock makes a very abnormal move lower without any corresponding bad news. You go on to a stock market message board and find a few comments about initial results from the project rumored to be poor but most comments confirm what you know; the company has some great projects.

You ignore the naysayers and seek out other information that confirms that your stock is a good one to hold. You find enough good information to convince yourself that the market’s recent downward move is an overreaction and wrong.

In doing so, you have behaved like a normal human being eager to avoid pain and pursue pleasure. Unfortunately, we humans are myopic and, in this case, you are likely avoiding short term pain but increasing the chance for long term pain. The market moved down for a reason and, if you wait to find out why, it is usually too late.

I believe that fundamental analysis is essential for the market to function and has to be done. However, it does not have to be done by you because you do not have the resources to do it well. Those who do it right will tell you what they know by their actions in the market. Just listen to them.

If you know too much about a company, you are likely to fall in love and commit the sin of confirmation bias. If you must seek out information, make sure you are balanced in how you do it.

Last week I highlighted the improved market action in the Canadian Penny stocks. This sector of the market has been the doggiest of dogs for many years but in the past couple of months, it has done very well. Take a look at the chart of the TSX Venture index ($JX on Stockscores) to see how the market has done. The leaders have been in mining with Lithium, Silver and Gold the groups that have had the action. Some Biotech names have been doing well too. My two picks from last week’s newsletter were V.SCZ which is now up 57% and V.AVL which has gained 39% at the time I am writing this. These are gains in just one week.

The easiest way to do well in the market is to trade the hot market. The TSX Venture is hot again so this week I scanned for Canadian stocks under $2, making a 3% gain today and trading at least 100 times. Here are a couple of standout charts:

1. V.GPH
V.GPH is a story that I know too well, I bought a lot of it a couple of years ago when it struggled against a weak market. Now that Lithium stocks have been strong on the Tesla battery story, people are starting to notice this one as graphite is also needed for electric cars. Most importantly for me is that the stock is breaking up from a flag pattern after showing life in early March, taking the Stockscores above 60. Support at $0.095.

2. T.CS
T.CS is a copper miner with a good turnaround chart. Broke the downward trend at the start of March and now breaking up from a rising bottom today. Stockscore now above 60. Support at $0.095.

For Tyler’s Penny Stock Revival Part 1 go HERE

References 

• Get the Stockscore on any of over 20,000 North American stocks.
• Background on the theories used by Stockscores.
• Strategies that can help you find new opportunities.
• Scan the market using extensive filter criteria.
• Build a portfolio of stocks and view a slide show of their charts.
• See which sectors are leading the market, and their components. 

Tyler Bolhorn: Last week I highlighted the improved market action in the Canadian Penny stocks. This sector of the market has been the doggiest of dogs for many years but in the past couple of months, it has done very well. Take a look at the chart of the TSX Venture index ($JX on Stockscores) to see how the market has done. The leaders have been in mining with Lithium, Silver and Gold the groups that have had the action. Some Biotech names have been doing well too. My two picks from last week’s newsletter were V.SCZ which is now up 57% and V.AVL which has gained 39% at the time I am writing this. These are gains in just one week.

The easiest way to do well in the market is to trade the hot market. The TSX Venture is hot again so this week I scanned for Canadian stocks under $2, making a 3% gain today and trading at least 100 times. Here are a couple of standout charts:

For the Full  go HERE