4 ms·

This may dissapoint you but, with very few exceptions, most of the time nobody knows why a stock is going one way or another on any given day. Unless there's s

by maest 6y ago

This may dissapoint you but, with very few exceptions, most of the time nobody knows why a stock is going one way or another on any given day. Unless there's some significant news or M&A deal that you can tie to price action (and even then, you're most likely explaining only part of the price movement), you won't know why a price is moving. There is a whole industry of people adding post-hoc rationalizations to price movements (e.g. CNBC, stock gurus and others). They do it because 1. what they say is not falsifiable in any way and 2. people find idle speculation about money to be exciting.

enos_feedler 6y ago
people take comfort in some kind of explanation for the cause of something. It's a bit bizarre, but makes sense. We just sort of accept it because as mentioned above, it's not falsifiable. I think it's right to point out "on any given day". On broader time horizons you can easily figure out why prices move and you can bet on it much easier.
erik_seaberg 6y ago
My favorite so far has been > The RSI is trading above 70. This could mean that either the stock is in a lasting uptrend or just overbought and that therefore a correction could shape (look for bearish divergence in this case). The price might go up if it doesn’t go down? Thanks, very helpful.
- refulgentis 6y ago
  There's concrete predictions laced in there, in the vocabulary of TA, or technical analysis. The self-aware who practice this call it 'horoscopes with funny lines', the premise is drawing trend lines based on different sets of historical data, using that to draw a conclusion about pricing over some time period X, then noting the consequences of the trend line shifting up or down. So, they're predicting both sides of movement because they're interested in the slope of the trendline dividing those sides and the time-frames they're analyzing, not the sides themselves. One example that clarified it for me is a purely degenerate case, the stock went from 1 to 0 over all possible timeframes. In that case, all trendlines are purely vertical, all trendlines are the same for all timeframes, so the fact it can only move up is obvious, and contrasting trendliness is uninteresting. However, in other cases, (say, a small medical research company that has been on the market for a decade but recently produced the singular vaccine for a massive pandemic, but has an expensive and novel manufacturing process that makes it 5x the cost of competitors possible solutions), contrasting trendlines for the last two months versus last decade is very informative for comparing the case in which the vaccine market becomes competitive, versus the monopoly it "is" today. Noting the signal we'll receive about the 'class' of price movement, based on both directions the price could move, is very helpful and necessary for judging the TA after the time period plays out.

by maest 6y ago

enos_feedler 6y ago

people take comfort in some kind of explanation for the cause of something. It's a bit bizarre, but makes sense. We just sort of accept it because as mentioned above, it's not falsifiable. I think it's right to point out "on any given day". On broader time horizons you can easily figure out why prices move and you can bet on it much easier.

erik_seaberg 6y ago

My favorite so far has been > The RSI is trading above 70. This could mean that either the stock is in a lasting uptrend or just overbought and that therefore a correction could shape (look for bearish divergence in this case). The price might go up if it doesn’t go down? Thanks, very helpful.

refulgentis 6y ago
There's concrete predictions laced in there, in the vocabulary of TA, or technical analysis. The self-aware who practice this call it 'horoscopes with funny lines', the premise is drawing trend lines based on different sets of historical data, using that to draw a conclusion about pricing over some time period X, then noting the consequences of the trend line shifting up or down. So, they're predicting both sides of movement because they're interested in the slope of the trendline dividing those sides and the time-frames they're analyzing, not the sides themselves. One example that clarified it for me is a purely degenerate case, the stock went from 1 to 0 over all possible timeframes. In that case, all trendlines are purely vertical, all trendlines are the same for all timeframes, so the fact it can only move up is obvious, and contrasting trendliness is uninteresting. However, in other cases, (say, a small medical research company that has been on the market for a decade but recently produced the singular vaccine for a massive pandemic, but has an expensive and novel manufacturing process that makes it 5x the cost of competitors possible solutions), contrasting trendlines for the last two months versus last decade is very informative for comparing the case in which the vaccine market becomes competitive, versus the monopoly it "is" today. Noting the signal we'll receive about the 'class' of price movement, based on both directions the price could move, is very helpful and necessary for judging the TA after the time period plays out.