Leveraging Technology to Dive Deeper into Market Behaviors

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

While relying on fundamental and technical analysis to make investment decisions can be an effective strategy, it’s important to understand that price action is often attributed to randomness and cannot be explained with logic. For example, you can have a company with a great fundamental story and eye-catching technicals that sells off purely due to negative sentiment.

This tells us that using market sentiment alone is not enough to provide consistent returns. Market behaviors, on the other hand, are truly what drive outcomes. In other words, if traders can find a way to take the concept of market sentiment to the next level, from how investors in aggregate may feel about a given asset to the likelihood of them taking a course of action on those feelings, it can be a very powerful tool. 

That’s why it’s so important to identify ways to use market behaviors to your advantage. Some investors look to analyst ratings and sentiment indicators for assistance, but these approaches have plenty of flaws. On the other hand, using a tool like OVTLYR can be another way to dive deeper into market behaviors with the help of cutting-edge technology.

The company’s platform uses artificial intelligence (AI) and behavioral analytics to build on data from the bottom up so that you can have a top-down view of when markets have become too fearful or greedy. OVTLYR helps investors confidently use behavioral concepts like contrarianism and cognitive biases backed by data to generate alpha for their portfolios. Essentially, OVTLYR lies at the intersection where market sentiment stops and behavioral finance begins.

It’s safe to say that most market participants are guided by their emotions. Likewise, many are taking steps to mitigate the negative impacts of their own biases. That’s what really stands out about a platform like OVTLYR. It helps investors to gain priceless insight into how biases and irrationalities of other market participants drive their investment decisions and how to use that information to their advantage.

By incorporating both publicly available and non-personally identifiable data into the platform’s proprietary technology, you gain direct insight into the market behaviors surrounding individual stocks and their respective sectors. 

In the screenshot taken above from the OVTLYR platform, Each bar on the graph represents the status of a constituent in the given sector. Near 50%, one could consider the sector well-balanced and behaving relatively rationally as a whole (although individual tickers within may demonstrate otherwise); however, as weight accumulates on the “fear” side - indicative of downward/pessimistic extremes and irrationality - a prudent course of action would be to act against that irrationality (situationally contrarian). Likewise, the inverse is true in the positive/”greed” direction. 

The idea is that there are several behavioral factors that impact the price action of stocks and sectors every single day. OVTLYR leverages AI to recognize these trends and predict where pockets of fear and greed create opportunities for its members.

OVTLYR also provides insight into individual stocks, represented here in the 3-month view of Berkshire Hathaway BRK stock. As the oscillator reaches extreme fearful levels represented by the black line and confirmed with red bars, it tells traders that now might be a smart time to open a long position in the stock. 

Many of the most successful investors will tell you that their decision-making is based on “gut feeling,” which is a skill that takes years to develop. With this platform, you can combine your existing market instincts with data-driven analysis to take your trading and investing to the next level.

OVTLYR provides easy-to-understand data and visualizations for over 1,300 companies with $45-$50 trillion market capitalization, as stocks with more liquidity provide more actionable insights. The platform is intended for investors and traders that hold their positions for one month to one quarter or longer. It’s not meant for day-trading purposes but is far more responsive than a completely passive investing approach. 

The company is offering a free pilot for the remainder of the year and will be rolling out some exciting new features soon such as a directional volatility histogram that can potentially display when securities or a sector might revert to the mean.

It’s fascinating to think about all of the possibilities of using AI to make better investment decisions, and the way that OVTLYR leverages technology to help investors dive deeper into market behaviors is a fantastic example. Make sure to check out the company’s website for more details and to sign up for its pilot program.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.