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However You Look At It Petrobras Is A Buy

Trade ideas usually come from one of two sources. Either they are fundamental or technical. Fundamental ideas reflect a change, or more often an expected change, in the fortunes of a company or the broader economy. That may be realizing a higher price for their product, increasing sales through higher demand, or it may be improving margins. Sometimes it is company specific and sometimes it is industry wide. Ideas of a technical nature come from the analysis of charts. Logically, historical patterns in pricing should not have any impact on the current price of a stock, nor any predictive quality. In reality, though, traders and investors pay attention to them, making certain patterns and levels worth paying attention to.

The best ideas, of course, are those that combine fundamental and technical analysis when both point to the same thing. One word of warning here, though; we are all human beings and as such are subject to something that psychologists call “confirmation bias”. In a nutshell this is our natural tendency to give more weight to things that confirm our preformed opinions than we do to things that challenge them. Inevitably a trade idea comes first from one of the two types of analysis and we have to be careful not to simply search for confirmation in the other. That is particularly true when the fundamental analysis comes first as there are many ways of reading and interpreting a chart.

For that reason, when I arrive at an idea by fundamental…

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