The Zen-Nippon Chick Sexing School and Technical Analysis

I am currently reading ‘Moonwalking with Einstein – The Art and Science of Remembering Everything” by Joshua Foer and the book offers very good explanation of the importance of building procedural memory for pattern recognition. See some modified quotes  from the book:

  • The Zen-Nippon Chick Sexing School was based in Japan in the 1920s and offered a two-year program, which single goal was to teach how to recognize the female chicks from the cockerels. For the poultry farmers, male chickens are useless. They can’t lay eggs their meat is stingy. The sooner they can be disposed of – the better, but a costly problem has vexed egg farmers for millennia: It is virtually impossible to tell the difference between male and female chickens until they’re four to six weeks old. Until then they are indistinguishable and have to be housed and fed at considerable expense.
  • In the 1920s, the Japanese figured out a way to distinguish between male and female chicks immediately after their birth, which helped to lower the price of eggs worldwide. The professional chicken sexer, equipped with a skill that took years to master, became one of the most valuable workers in agriculture.
  • Chicken sexing is a delicate art, requiring Zen-like concentration and a brain surgeon’s dexterity. The gender of the young chick is recognized by the shape of their vent. By some estimates there are as many as a thousand vent configurations that a sexer has to learn to become competent. The job is made even more difficult by the fact that the sexer has to diagnose the bird with just a glance. There is no time for conscious reasoning.
  • What makes chicken sexing such a captivating subject and the reason my own research into memory has brought me to this arcane skill – is that even the best professional sexers can’t describe how they determine gender in the toughest, most ambiguous cases. Their art is inexplicable. They say that within three seconds they just “know” whether the bird is a boy or a girl, but they can’t say how they know. What they have, they say is intution. In some fundamental sense, the expert chicken sexer perceives the world – at least the world of chickens – in a way that is completely different from you or me. When they look at a chick’s bottom, they see things that a normal person simply does not see.

The best technical analysis experts are the modern chicks sexers. By looking at millions of charts at different time frames, they have attained the skill to recognize great technical setups from not so great ones. Their eyes see what most don’t and often they can’t even explain why they like certain chart. They just do, based on experience.

 

Industry Momentum Review

The number of distribution days in the major market indexes continues to grow as the names that led the rally over the past 7 months, took quite a beating over the past week – semiconductors, oil, basic material, small caps. I noticed a lot of shake-outs on different time frames: a stock breaks out from a range, only to reverse quickly and go below the bottom of the range, essentially shaking out a large number of shareholders. And just when the setup looks broken, the stock rallies back and makes a huge move. You have to observe and adapt quickly. Every setup has a different success rate in the different market environment. If you are not flexible enough and would like to stick to the one setup that you know well, you are better off to stay on the sidelines and wait for the fat pitch.

Sometimes stocks need more time to consolidate. In a strong “risk on” environment, most momentum stocks find buyers at their rising shorter-term moving averages – 5, 10 and 20. When the sentiment changes, the shorter MA become irrelevant. The market action is choppier and it takes more efforts to achieve less.

What was hot last week?

Drug manufacturers had a monstrous week: $CBST$VRUS$PTIE$KV-A

Airlines bounced from hell after crude oil stopped advancing (they are still in a downtrend)

Soda companies are holding well: $PRMW advanced more than 40% on Thursday and Friday as the $SPY lost 1% for the same period. $SODA is trading close to its all-time high.

The Earthquake in Japan will play the role of a catalyst for the world to review its energy policy. The overall short-term implications for oil, coal and natural gas are uncertain. What is clear is that Japan’s refineries are down and they will have to import gasoline from somewhere. The stocks of U.S. refiners might benefit: $WNR$ALJ$VLO$TSO$SUN$HOC among others.

In the st50 we noticed the number of apparel retailers on the list is growing as many of them managed to escape mostly unscathed from the recent sell-off.

Some of the best looking swing long setups in the latest edition of the St50 are: $LUK$TBL, VRX,$HYC$PAY$EL$WFMI$RL

 

10 St50 Swing Setups for This Week

Every Sunday I take a look at the latest edition of Stocktwits 50 and highlight 10 stocks that have the potential to outperform in the following trading week.  Last week choices and their respective returns were: $BHI (-2.5%), $MRO (+6.3%), $SFN (+6%), $ITMN (+18.5%), $AREX (-0.8%), $ARBA (+5.3%), $CAM (+3.8%), $BRKS (7.2%), $ROK (-1%), $FNSR (+5.2%).

Which industry groups worked best over the past week:

– Biotech ($ITMN, $JAZZ, $RPRX);

– Communication equipment ($EXFO, $JDSU, $ALU);

– Precious metals – gold and silver miners ($ANV, $EXK)

– Oil and gas explorarion ($ROYL, $HERO);

– Long-term care facilities ($SKH, $SRZ);

– Chinese hotel services ($HMIN, $HTHT, $SVN).

 

Some of the best looking swing setups in the St50 this week are:$EMC $JDSU $ALLT $DBLE $AREX $PXD $FNSR $TGA $ROK $SBGI. A setup is not considered for complete unless it is triggered.