Superhero hero movies have been immensely huge with audiences since the turn of the century. So many films in this genre have broken some kind of box office record nearly every year. I believe this year will be no exception. This week Captain America: Civil War releases on the big screens, and I’m pretty sure it’s going to be have massive viewership this weekend! In financial markets, this is what we might call a trend continuation. If you noticed by now, trends exist in nearly every aspect where humans are involved and of course, our taste in movies is no exception.
So I’ve managed to pull some strings and we have Captain America with us today, to teach us more about trends in the market place!
(Clap clap clap)
Trader F: Hello Captain America, it’s good to have you with us!
Captain America: Thank you Trader F, thank you for having me.
Trader F: Now you’re here to teach us about trends, so what is a trend and how does it form?
Captain America: Well, trends represent a general alignment of bias in something. In movies, it’s our preference for superhero movies. In clothing fashion, jeans never seem to go out of style.
Trader F: In price charts, it’s a persistent move either up or down.
Captain America: Oh you have trends there too? Let me continue.The rhythm of a trend is a process which is repeated over and over again.
Trends don’t appear out of thin air, usually there will be a build up before a tipping point, followed by the change in bias which forms into a trend.
Broadly, there are 3 stages, Consolidation, Breakout and Retests, followed by Continuation.
Trader F: Oh I see, can you elaborate further for our audience please?
Captain America: Of course, let me start with..
It all starts in a state of consolidation, this is a phase where there is no clear direction or preference. But there is underlying interest is slowly building up in this state.
The original Superman series followed by a couple of Batman serie, kept audiences interested.
However, the 4th installment, “Batman and Robin” nearly killed the entire genre, if you watched it, you would probably understand why.
(Captain America smirks)
It caused production studios to delay releases of other movies of this genre.
But there was clearly interest in superhero movies, just that the studios at the time could not deliver the content which the public wanted. Probably due to technological constraints of the period.
(Tony Stark is not known to be the sharing type afterall.)
As the new millennia came around, advances in technology allowed production studios to really deliver computer generated graphics on a whole new level.
Trader F: Ah yes! In financial markets, we can visualize this interest as stop orders accumulating on both sides of the market, just beyond the range of the consolidation.
Captain America: Yes, it’s good you understand but let me continue.
Breakout and Retest
The consolidation is followed by a breakout, the first sign of a clear direction or preference. This is where a tipping point is reached, there could be a catalyst which pushes us to such a point. When all those with interest decide to commit to a direction or preference. This is usually accompanied by a retest of the trend.
Back in 2000, The first X-men movie was released and the response from the public was overwhelming! This is our superhero movie catalyst. It broke box office records the first weekend it was released. That is as tangible a breakout as we can get in the movie world, and it is easier to identify with for us traders since it comes with a dollar sign in front. 😉 This continued with the first 3 episodes of the series, breaking new box office records each time. So in a way, each new movie release right after this, was essentially a retest of audience’s interest in the genre.
Trader F: I see! In financial markets, we also usually see a retest of the consolidation range right after the breakout.
Captain America: I don’t understand what you’re saying Trader F, but let me finish..
Since then the movies studios have released a slew of new superhero movies. Spiderman, Ironman, Superman, Batman, Deadpool, just to name a few and of course, yours truly, Captain America.
(Captain strikes a pose)
Each movie has since had huge takings at the movie box office until now in 2016. This trend is likely to persist as the movie production studios have many superhero movies planned for release all the way past 2020 even.
Trader F: Similar to how each new movie is a retest of audience’s interest in this genre, price doesn’t move in straight lines although there is a trend. It retraces back to retest previous levels of interest before continuing the trend.
Captain America: Uh.. Ok very good Trader F, I’ll pretend I understood that. So now let me finish this last part I want to talk about..
When the trend ends, it goes back into the state of consolidation again.
So in movie terms, we may start seeing some superhero movies under perform at the box office, prior to any change in our superhero trend.
Recently, Batman vs Superman released in the theatres to a huge 7th highest opening weekend ever. However, it made a historical earnings drop in the second weekend. Perhaps there was too much build up for this movie and the audiences had superhero expectations for it. Nevertheless, while the movie wasn’t all that bad, the general audience deemed it did not meet expectations. Could this be the beginnings of the end of our superhero trend? I hope not.
Trader F: On the price chart, towards the end of an uptrend, we would start seeing supports failing to hold or resistances beginning to hold prices down. This period of struggle is when we go into consolidation.
Captain America: Okay I’ve had enough of your gibberish. Teach me to read the charts so I can make some money to pay my rent, S.H.I.E.L.D. doesn’t pay me enough!
Trader F: Looking at how much these production studios are making, maybe you should consider making your own movies instead?
(Grabs Trader F and drags him to the computer)
I wish you all superhero success in your trading!