This weeks headlines

Are your investment decisions negatively affected by

behavioral biases?
The weakness in equities continues
A closer look at USD/SEK
Base metals are rising and oil is yet again volatile

WEEK 6

Are your investment decisions negatively affected by

behavioral biases?

Most investors believe that they are rational and intelligent but in
reality, most investors are irrational. However, humans are not only
irrational, they are systematically irrational and do the same
mistake over and over again. In psychology these systematical
errors are called behavioral biases. Some of the biases might seem
silly but in reality, all are affected by them to varying degrees and
their influences are often subconscious. Being aware of your biases
will help you perform better investment decisions. Below are some
of the most common biases.
Confirmation bias is the tendency to seek out information that
conforms to your beliefs. If you like a stock, you are likely read
bullish reports on the stock and ignore bearish views on the same
stock. To counteract the confirmation bias, you should actively seek
out diverging opinions and always try to learn the other side of an
argument.
Recency bias: is the tendency to extrapolate recent events. If a
stock has risen we tend to think that it will continue to rise. The
recency bias is an important factor in the making of bubbles and it
is important to remember that nothing can rise forever and that
almost everything is cyclical.
Sunk cost bias: How many times have you looked at your account
and thought that you should sell a stock, but have decided against
selling it because you hoped to make back your loses? If this has
happened to you, then you have been under the influence of the
sunk cost bias. You feel that you have made an error investing in a
company but the already incurred cost is affecting your future
investment decisions.

Anchoring, the tendency to rely on information that is largely

irrelevant when making a decision. If you have looked at a stock and
thought, one year ago the stock was at 100 SEK and today its
trading at 70 SEK, it must be a bargain! Then you have been under
the influence of the anchoring bias. Your mind has anchored to the
price of 100 SEK and you believe the stock is cheap just because it
has fallen below the anchor. A rational investor will not evaluate a
stocks cheapness based on what it previously traded for; the stock
might still be expensive.

SPOT PRICES and one week change

OMXS30
1330,11 -1,93%
NASDAQ
4 363,14 -5,42%
S&P 500
1 880,05 -3,10%
DAX 30
9 286,23 -5,22%
NIKKEI
16819,59 -3,99%
HANG SENG
19 288,17 -2,01%
Gold spot
1 173,07 +5,09%
Crude Oil (Brent)
34,12
-0,23%
USD/SEK
8,4559
-1,46%
EUR/USD
1,1158
+3,02%
Bitcoin
376,50
-0,15%

Stocks

The weakness in equities continues.

Last week we argued that Swedish stocks should outperform
American ones given how much the OMX had underperformed
compared to the large U.S indices, albeit arguably having better
macro fundamentals such as high growth and a trade surplus.
Although outperforming the S&P by 1%, OMX large cap still ended
down about 2% on the week. However the big story was NASDAQ.
During the week it had trouble keeping up with the S&P and Dow
Jones, on Friday buyers had completely giving up as the NASDAQ
plunged 3,3%. One possible catalyst given for the decline was the
better than expected hourly earnings reported during Friday, as
good jobs numbers would increase the odds for a FED rate hike in
March. However, according to Peter Schiff, CEO of Euro Pacific
Capital, this rise in hourly wages could be a result of 14 States
raising the minimum wage at the beginning of the year. We also
note that commodities market interpreted things differently as gold
rose sharply on the same news, albeit the initial sell-off. More U.S
jobs data is going to be reported early in the week which perhaps
will confirm or deny the strength of the American labor market.
Going forward theres plenty of macro statistic and policy
statements to look forward to; we have highlighted some of the
most crucial ones in the event list for week 6 further down.
Something thats not on the list is Chinas foreign exchange reserve,
which was released on Sunday. It showed a decline by about 100
billion dollars in January to its lowest level in about 4 years. China is
desperately trying to stem capital outflow by selling dollars but so
far the measures have yet to be sufficient.

Bonds and Forex

A closer look at USD/SEK.

It seems like the game changed last week. The Federal Reserves
four intended rate hikes for 2016 no longer appear to be in the
pipeline. Last Wednesdays poor US service sector figures
seemingly confirmed weak global demand and unstable global
economic conditions that have rubbed off on the US economy. To
some this is unsurprising, but it nonetheless was the straw that
broke the camels back in the eyes of the market. The FED skeptics
seem to have been correct all along regarding what most people
now believe were overly optimistic rate prognoses. As a result, the
USD and the US treasury yields declined sizably. The headwind for
the US was relieved somewhat two days later when the surprisingly
positive US jobs data was released. Unemployment was reduced to
an eight-year low level of 4,9 % and more importantly, average
wages rose by 0,5 % (0,2 expected). Even though the USD
strengthened a little, Wednesdays weak service sector numbers
seem to be what the market deemed as more important in
determining where rates are heading. Besides, the jobs data had a
few negative outliers. Employment growth was sluggish and labor
force participation rates have decreased substantially over a long
time, suggesting that the decline in unemployment could be a result
of people leaving the workforce rather than actually getting jobs.
The majority of governments which struggle with low inflation and
hold reluctant attitudes towards letting their currencies appreciate
may be facing further difficulties ahead. Sweden is a prime
example. Even though the SEK generally is viewed as undervalued,
the Riksbank, or rather commissioners within it, who in the past
were terrified by the smallest sign of appreciation might now, be of
the opinion that the SEK is strengthening too hastily. as a result, the

majority of market participants have predicted a rate cut of 10-15

basis points, expected to be announced this Thursday. Another cut
would leave the repo rate between -0,45 and -0,50 percent and
even though the projection given by the Riksbank suggests a
tightening monetery policy in the medium term, the range of their
forecasts is very wide, even suggesting that there is a 7,5% chance
of the repo rate going below negative 1,9% in the medium to long
term. However, given the Riksbanks outspoken dovishness theres
not a lot the Riksbank can do to surprise the USD/SEK to the upside
and perhaps only talking about the possibility of FX interventions
wont be enough to keep the Krona from appreciating this
Thursday. Also, check out our technical outlook for USD/SEK further
down.

Commodities

Base metals are rising and oil is yet again volatile.

On Wednesdays trade oil prices jumped 8 percent, as investors
took advantage of a weaker U.S. dollar. The Dollar dropped on
Wednesdays trade the most it has in seven years against other
currencies, as data showed a slowdown in the growth of the service
industry. Comments by Russia's foreign minister reiterating the
major producer's willingness to meet if there was consensus among
the OPEC and non-OPEC members, also reignited hopes of a deal to
cut output and helped to boost prices. On Fridays trade, oil prices
ended the week lower with Crude oil at 31.01 Dollar per barrel and
Brent oil at 34.13 dollar per barrel, losing the two weeks of gains, as
speculation about a possible deal between top oil producers
collided with concerns about a growing supply glut.
On Fridays trade, gold initially rose to $1,161.31 an ounce, its
highest since October 29, but later that day it fell back to $1,149.86

an ounce after a mixed U.S. job report. Doubts on whether the U.S.
Federals Reserve can keep raising the interest rates pushed gold
back, closing at $1,174.3 an ounce. Since mid-January, base metals
has recovered from 1.1445 dollar and surged over 18 percent.
Goldman Sachs says however, that the recent recovery is not
sustainable, and is only bullish on zinc as mine depletion and
production retrenchment is likely to continue to tighten the supply,
further supporting prices.

Small Cap

A summary of Analyst Groups latest analyses

Avega Group is Swedish consulting firm listed on OMXS Small Cap.
The company offers specialist competence primarily in business
development, system development as well as implementation of
SAP, Oracle and Microsoft Dynamics AX. Avega Groups customers
consist of mid and large cap companies in both the private and the
public sector. Avega Group has had a very good 2015. The company
increased their operating margin during the first three quarters to
8.5% compared 6.9% in 2014. The increased margin coupled with a
historically strong Q4 justifies an estimation of record revenue for
2015 at 435.5 MSEK. Avega Group grew by 6% during the first three
quarters compared to the market as a whole at 4%. Bringing this
together and assuming a growth of 6% in Q4 2015 yields an
estimated profit of 20.8 MSEK for 2015 which would mean a 41%
increase compared to the year before. The companys CEO Jonas
Bergh turned in his resignation the 16th of November 2015 due to
Mr. Bergh and the board of directors having differing opinions on
some issues. Mr. Bergh selling his shares as well as the uncertainty
sent the share price down 5%. The cautiousness of the market since
then could signify an opportunity for investors.

Doxa

Doxa is a Swedish based dental company, listed on First North,

which focuses on bioceramic products. The company owns their
whole value chain and develops, produces and sells its products.
Doxas first product Ceramir Crown & Bridgewas, a dental cement,
were first launched in Sweden in 2009 and entered the US-market
in 2011. Today the US-market represent 95% of the sales. The
company is currently expanding its operations in Europe and
recently signed a distribution agreement covering France, Poland
and the Czech Republic. The expansion will grant Doxa access to
several European countries as well as lessen its dependency on the
US-market. The market for dental products globally is valued to
about 160 billion SEK and the growth is estimated to be 4-5%
annually. The growth estimate is likely to be exceeded in their
markets due to an ageing population as well as a higher demand for
cosmetic dental treatment. Doxa is in the final phases of developing
a new version of their Ceramir Crown & Bridgewas which one will
be able to prepare by hand. This type of product is primarily
requested by dental professionals in South America and Asia and
could thusly create new market opportunities.

RLS Global

RLS develops and sells biochemical products for treatment of caries,

tooth loss and slow-healing wounds. As of now, the companys
future seems to be largely dependant on how successful the launch
of their cutting edge wound care product ChloraSolv will be. If
everything goes as planned, sales should begin in Q2 of 2016. There
is of course a risk involved here, since the awaited CE marking could
be delayed and medical studies could show unexpected negative
results. RLS have an upcoming equity issuance intended to help

with the launch of ChloraSolv, but also with getting FDA product
approval in the US. This approval would open up a whole new
market for the company and could potentially increase its
profitability. Currently the market for ChloraSolv within the OECD
countries is valued at 100 billion USD, and the global market for
RLSs dental products is valued at around 20 billion USD. Between
2011 and 2014, the company has seen an annual growth of 62% in
sales of their dental products. Furthermore, there are plans on
changing stock exchange from Aktietorget to Small Cap, something
that could give RLS better access to capital and drive up its stock
price.

Hanza Holding

As an industrial contract manufacturer, Hanza is a cyclically

sensitive company operating in a market with only 2%
approximated annual growth in the coming years. However,
acquisitions of more profitable firms, disposal of the most
unprofitable parts of its business, and offshoring jobs to countries
with lower labor costs could potentially help boost their margins.
Recent purchases of the stock by both insiders and professional
investors indicate a belief that this ongoing program for increased
efficiency will bear fruit. There also exists the possibility of being
acquired themselves; competitor PartnerTech was in 2015 acquired
to a P/BV slightly above 1. Were Hanza to be bought at the same
level it would yield an up-side at around 63%. Big liabilities bring
with them high interest costs and could be a significant risk factor if
interest rates rise above todays levels. The high interest costs have
also, together with a fairly weak operating income, contributed to
the negative net income that Hanza has seen during the last couple
of quarters. Margins are rising however, and the EBIT-margin could

nearly double from 1,7% in Q3 to 3% by the end of 2016 if taken

measures manage to achieve better efficiency.

MACRO EVENTS WEEK 6

Monday
Japan: Eco Watchers Survey: Current JAN and Eco Watchers Survey
Outlook JAN
India: GDP Growth Rate YoY Q4
Canada: Housing Starts JAN
United States: Fed Labor Market Conditions Index JAN
Tuesday
Germany: Balance of Trade and Industrial Production MoM
United States: JOLTs Job Openings DEC and Wholesale Inventories
MoM DEC
Great Britain: Balance of Trade DEC
Australia: NAB Business Confidence JAN and Westpac Consumer
Confidence Index FEB
Portugal: Unemployment Rate Q4
Mexico: Inflation Rate YoY JAN
Wednesday
China: Foreign Direct Investment JAN
Japan: Machine Tool Orders YoY JAN
France: Industrial Production MoM DEC
Italy: Industrial Production MoM DEC
Great Britain: Manufacturing Production MoM DEC and Industrial
Production MoM DEC

United States: Fed Yellen Testimony, EIA Crude Oil Stocks

Change 5/FEB, EIA Gasoline Stocks Change 5/FEB, Fed Williams
Speech and Monthly Budget Statement JAN
Thursday
Australia: Consumer Inflation Expectations FEB
Euro Area: Eurogroup Meeting
United States: Initial Jobless Claims 6/FEB and Fed Yellen Testimony
Sweden: Riksbank Rate Decision
Russia: Balance of Trade DEC
Friday:
Germany: GDP Growth Rate YoY Flash Q4 and Inflation Rate YoY
Final JAN
Euro Area: Ecofin Meeting , GDP Growth Rate QoQ Flash Q, GDP
Growth Rate YoY Flash Q and Industrial Production MoM DEC
Italy: GDP Growth Rate QoQ Adv Q4
Great Bratain: Construction Output YoY DEC
United States: Retail Sales MoM JAN, Fed Kaplan Speech , Business
Inventories MoM DEC, , Michigan Consumer Sentiment Prel FEB
and Fed Dudley Speech
WRITERS

Olof Svanemur
Matilda Andersson
Sebastian Svensson

Technical Analysts
Carl Becht
Emil Ersbjrnsson

Tomas Nyln
Mark Thingo

Leo Dajaku
Jan Novotny

OMX Stockholm 30

OMX aiming for 1400

OMX Stockholm 30 has after a prolonged upswing last year turned
down and been traded for the last nine months in a falling trend in
which the volume increased slightly during the last month. This can
give indications that the negative trend is strong and will continue
to be so. The index is traded at the moment at the bottom of the
trend channel, where it recently went up from the support level.
MACD is above the signal line indicating that the index might
increase in the short term and try to reach to its resistance level of
1400 points. The index has a support level at around 1290 points
and a stop loss is set tentatively slightly below this level. The
technical view of the OMX Stockholm 30 is positive in the short
term while its negative in the medium term.

USD/SEK Spot

USD/SEK Displays distinct signs of weakness

USD/SEK has been creating bearish formations since a year back.
Currently USD/SEK has breached the trend channels bottom which
indicates a weakened uptrend henceforth, or a potential trend
reversal. Mixed signals from FED recently has put pressure on the
dollar and sellers have been more dominant than previously. ADX
shows that the short-term trend is negative whilst MACD has
constituted a sell-signal by crossing the signal-line from above.
USD/SEK is oversold and currencies rarely become heavily oversold
nor heavily overbought which could indicate a smaller kickback. A
stop loss or enhanced hedge should be placed beneath 8.3 SEK.
Whilst the long-term trend remains positive till a new technical
trend unfolds, USD/SEK remains somewhat technically negative in
the short term and technically negative in the middlelong term.

Brent Crude

NOK/SEK Spot

Strong development within the trend channel provides

opportunities to sell
Brent Crude Oil has been traded in a negative trend for more than 1
year with limited support levels within the trend channel. It has
recently moved upwards and is now reaching out to the ceiling of
the trend channel. MACD recently broke through the signal line and
is now well above it, which indicating a positive view from the
market but also that a reaction downwards may be forthcoming.
This is also supported with the RSI(14), which around 63 at the
moment, indicating that the Brent Crude Oil might be overbought.
The support level is to be found at $ 27 where a stop loss is set
tentatively slightly below. The resistance level is around $ 44. The
technical view of the Brent Crude Oil is positive in the short term
and negative in medium term.

NOK/SEK a test of previous resistance level 1.02 SEK is plausible

NOK/SEK has been trading in a downtrend and boast frequently
bearish formations with adequate breakouts. NOK/SEK correlates
almost positive with the oil price. NOK/SEK kickbacked from the
support line 0.95 SEK where it found a temporary bottom. ADX
shows that the trend is positive in the short-term while MACD is
gaining momentum heavily. NOK/SEK is overbought however which
indicates that the currency par is due for a pull-back. However
NOK/SEK shows great strength in trend and we believe a test of
previous resistance levels like 1.02 SEK is plausible. A stop loss or
enhanced hedge could be placed beneath the support line 0.98 SEK.
We are technically positive in the short- and middlelong term whilst
we are somewhat negative in the long term.

Lucent Oil

Firefly

MACD signals buying opportunity

Lucent Oil has been traded in a slightly positive trend for more than
1 year. After an outbreak through the ceiling of the trend channel
with increasing volume, the stock is now back traded within the
long trend. Since the peak, the decline has occurred during
continuous lower volume which indicates that the stock is about to
bottom out and a new rise to the ceiling of the trend channel can
begin. The chance that the stock will increase in the near future is
also supported with the fact that MACD this week crossed the
signal line from below, indicating that the market has a positive
view of the stock. The stock has a support level at 5 SEK and a stop
loss is tentatively set slightly below this level. Resistance is found at
8.7 SEK. The technical view of Lucent Oil is positive in the short- and
medium-term.

Firefly = Bullish uptrend continuing

Firefly has been trading in a primary uptrend. The stock frequently
creates bullish formations and patterns which indicates that the
buyers are very aggressive. Currently the stock is trading in a
neutral flag formation. The stock is heavily overbought whilst MACD
as well as ADX show positive divergence and display potential shortterm trend reversal. The stock is currently trading just beneath the
previous trend channel where the roof is considered a strong
resistance line. Volume has not been entirely adjacent to the
uptrend previously which is a sign of weakness. A stop loss could be
placed beneath the support line 28 SEK. We are techically positive
towards the stock in the short-, middlelong- and long term.