Free Articles  >>  Business And Finance >>  Page 3812  >> 

Sentimental Analysis

Dear Fellow Investor.

The investing crowd is often wrong when it comes to key trend turning points i.e.whether an up or downtrend of the market is about to change. If this is the case, one would want to measure the crowd’s expectation at potential turning points to identify extreme bullish or bearish markets.

Sentimental analysis does just that. It measures the emotions of the investing crowd in an attempt to identify extreme bullish or bearish indications. Once an extreme level has been identified, a trader can use this information from a contrarian viewpoint either to confirm other trading indicators or as a stand alone indicator.

If an extreme bearish sentiment exists, a contrarian would interpret this as a bullish indicator. If an extreme bullish sentiment exists, a contrarian would interpret this as a bearish indicator. While an extreme sentimental reading can be used as a stand alone indicator to identify possible counter-trend moves, it should only be used as a supplemental indicator for confirmation.

The following example will demonstrate how sentimental indicators can help confirm other trading indicators. Suppose a stock has had a nice run up and is now approaching a significant resistance level, the stock is upgraded by one of the major brokerage firms, and gaps up near the resistance level on heavier than usual volume. Because the stock has been upgraded, the crowd is now going to feel very optimistic and bullish about the stock, which is why it gapped up on heavier volume.

This happens all the time. Each time a brokerage company upgrades a stock for whatever reason, you can see the stock going up even if it’s just for this one day.

The reality is that this final gasp of buying has now most likely committed the last remaining sideline money to the stock and there is nothing left to propel the stock even higher. The over-optimistic public at a major resistance level is an excellent contrarian indicator to confirm the original trading signal.

In addition to extreme sentiment which can be easy to spot, one also needs to know that complacency in the market and media also give a contrarian signal that investors’ expectations are still too high despite the low price, and that a weak stock, sector or market has still not found a bottom. At a true bottom, investor fear should have reached an extreme level as the crowd finally becomes convinced there’s still more desaster ahead.

Yours in Successful Trading

Ricky Schmidt
About Author Ricky Schmidt :

Ricky Schmidt's website <a href="" target="_blank"></a> was created out of frustration in trying to decode books, magazines and newsletters on the subject, which are supposed to be for beginners but are not because they’re too difficult to understand. Too many “Big Words” and too much intelligent sounding grammar is used which is not very useful.

Article Source:
Article Url:

Article Added on Thursday, January 18, 2007
Publishers / Webmasters
Article ID: 55103
DELINK URL from Authors Bio
REMOVE Article
Tell A Friend
Leave A Comment!
Download this article in PDF
Report Article!
Search through all the articles:

165 Users Online !
Related Articles:
Latest Articles:
Business And Finance >> Top 50 Articles on Business And Finance
Category - >
Advertising Advice Affiliate Programs Automobiles
Be Your Own Mentor Careers Communication Consumers
CopyWriting Crime Domain Names DoT com Entrepreneur Corner
Ebooks Ecommerce Education Email
Entertainment Environment Family Finance And Business
Food & Drink Gardening Health & Fitness Hobbies
Home Business Home Improvement Humour House Holds
Internet And Computers Kiddos and Teens Legal Matters Mail Order
Management Marketing Marriage MetaPhysical
Motivational MultiMedia Multi Level Marketing NewsLetters
Pets Psychology Religion Parenting
Politics Sales Science Search Engine Optimization
Site Promotion Sports Technology Travel
Web Development Web Hosting WeightLoss Women's Corner
Writing Miscellaneous Articles Real Estate Arts And Crafts

Disclaimer: The information presented and opinions expressed in the articles are those of the authors
and do not necessarily represent the views of and/or its owners.

Copyright © AwareINDIA. All rights reserved || Privacy Policy || Terms Of Use || Author Guidelines || Free Articles
FAQs Link To Us || Submit An Article || Free Downloads|| Contact Us || Site Map  || Advertise with Us ||
Click here for Special webhosting packages for visitors of this website only!
Vastu Shastra

Economy Linux Hosting with cPanel Provided By AwareIndia

Company IDS