Friday, December 19, 2014

121914 MSWeekly - Technical vs Fundamental Support Levels

One of the most wonderful aspects of studying charts and learning to read them properly is that the technical trader has the viewpoint of all the traders both professional and retail, who are employing technical patterns for their buying or selling decisions. In addition, anyone who is able to interpret and understand chart analysis also is able to see what the fundamentalists are doing. Fundamentalists who do not use Technical Analysis have many blind spots in their analysis which can be problematic.
There is a distinct difference between how price reacts to fundamental support, and how price behaves at technical support levels. By understanding whether fundamentalists or technical traders created a support level, the chartist can easily and quickly know who controls price and how price is most likely to behave at those levels in the near term.
This is a particularly important skill to develop for downtrending markets. Identifying the difference between fundamental support levels and technical support levels will help a trader prepare for “Buy To Cover” BTC price action and “Buy On The Dip” price. Bargain hunters can move in and disrupt sell short patterns. Also there are reversal patterns that are critical to recognize for closing sell short positions, and for entering stocks before they blast out of severely oversold conditions.
C:\Users\Adrienne\Desktop\TechniTrader MSWeekly 121914 image.jpg

Many technical traders make the mistake of assuming that all support levels are driven by technical patterns, and fail to consider the fundamentalist dominance in many price areas.  Simply applying Fibonacci, Gann, regression, speed, or other lines and patterns to a chart will not provide the reliability when fundamental support dominates over technical support.
Some fundamental support levels are obviously easy to identify such as all time highs and 52 week highs. Other fundamental support levels can only be identified by using indicators and price action analysis, in a relational approach that reveals Dark Pool as well as other large lot activity. Contrary to popular myth among technical traders, support levels are not precisely distanced. Support levels can and do occur at inconsistent percentages rather than precise percentage ranges.  
Often times technical traders will set up a series of levels for support, only to find they do not hold up and that price often dips into them during corrections or retracements. This can cause serious problems with stop losses, especially percentage style stop losses that are frequently hit due to fundamental buying or selling patterns not recognized by the technical trader. An example of such price action dropping through technical support levels is shown on the chart example below.  
C:\Users\Adrienne\Desktop\TechniTrader MSWeekly 121914.png
It is very common for fundamental support to not hold precisely at the highs or lows of that support, however technical support levels tend to be very precise.
When a technical trader recognizes the influence of fundamental buyers and sellers on price action and where these levels are developing, they are then able to modify their support analysis. This allows them to place stop losses at appropriate levels that will not be at risk of whipsaw action, which takes out many retail trader stop losses.
Learning to read charts properly involves far more than just reading a book on technical patterns or watching a webinar on various technical theories. To be an expert trader you must understand the intrinsic dynamics of the fundamentalists and the technical traders, where and why they buy, what orders they use, their share lot sizes, and how this creates support levels.
Trade wisely,
Martha Stokes CMT

Instructor & Developer of TechniTrader Stock and Option Courses
This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2014 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.


Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.

Friday, December 12, 2014

121214 MSWeekly - How To Recognize An Exit Before A Downtrend

Use Trailing Profit Stops
New and veteran retail traders must be keenly aware when entering or exiting a stock or option because this is where most losses occur. The better the entry and exit signals, the higher the profits. Taking the time to learn how to properly enter and exit a stock trade is something that will reap huge rewards for many years to come.
Exiting a trade is often a place where emotions are running high, even for a savvy veteran trader of 20+ years. If profits are soaring, the euphoria that sets in can make it harder to really see the price action and what is going on. Greed may take over and the desire to get just a little more profit may end up being the decision that wipes out all of the gains of the past few days for Swing traders. For Position traders the entries and exits are far more forgiving, the gains are significantly higher, and the risk is lower because the precision of a swing trade is not required.
What Swing traders need to remember most about exiting a trade is that once in profit use trailing profit stops, based on the technical and fundamental support levels on the chart. Fundamental support is always stronger than pure technical support. Next determine whether the run is momentum or velocity, as this makes a huge difference in where to place the trailing profit stop.
For the chart below the run is momentum. So the trailing profit stop needs to be below the prior day low or at a consolidation area because the candlesticks are constantly overlapping, and the wicks and tails are rather long and frequent. What is happening with this stock is the momentum run was triggered by High Frequency Traders HFTs as shown by the high volume bars in the TechniTrader Volume TTVA indicator in the middle chart window, and then chased by smaller funds and retail traders. Price is too steep to sustain, and the Angle of Ascent™ will cause the stock to fall.
C:\Users\Adrienne\Desktop\TechniTrader MSWeekly 121214.jpg
Many retail traders may want to hold on hoping that the stock will run higher. However indicators warn holding too long may be a high risk decision in terms of how much profit is kept, as the stock begins to fall due to profit taking.
This stock has been under profit taking mode since the black candle within the run. It now has many little weak indecision day candles, these are not hammer candlesticks. These are the newer candlestick patterns that expose how large lots are controlling price even as the smaller funds and retail traders are buying speculatively. TechniTrader Quiet Accumulation TTQA is green but that is not a Dark Pool giant lot pattern. The giant lot Institutions are selling very carefully so they are not disturbing price. However the stock is losing energy aka Volume so this run is exhausted, and at risk for profit taking.
At this point the exit should be to simply exit the trade, but many retail traders will hold on rather than taking profits with the larger lots. Retail traders often try to “get out at the top” of a run rather than collecting their profits and moving on to a lower risk trade. Study the small candlesticks to see that many times HFTs come in and then sell off in one day. Since retail traders are not able to trade the millisecond like the HFTs, by the time they enter their sell order and the order is processed the stock can move down very fast causing a loss of profits.
Trade Wisely,
Martha Stokes CMT

Instructor & Developer of TechniTrader Stock and Option Courses
This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2014 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.


Friday, December 5, 2014

120514 MSWeekly - Buying Into Strength

Limit Orders And Bracketed Orders
“Buying Into Strength” is a standard professional strategy that helps traders avoid whipsaw action and temporary retracements, caused by large lot profit taking. The chart examples below are to explain how Buying Into Strength is the preferred choice of Professional traders, rather than using a Limit Order that gets you in at “a better price.”
Below is a Daily chart view which shows a consolidation, then a little move up followed by another consolidation. Say for this example you are trading the swing style resting day entry patterns, and feel this may be a good entry point before the stock moves up again.  

The rule of entry is Buying Into Strength. However you have heard other traders talk about getting in on a Limit Order, which says “Buy Me In At This Price Or BETTER” which means “LOWER” in the marketplace. For this example you feel pretty good about this new strategy, so you enter a Limit Order to buy into this stock.
The next day the stock drops and the order is executed. You’re not too worried because you are confident this stock is trending up, and you are using your favorite indicator MACD which is a momentum moving average based indicator.
C:\Users\Adrienne\Desktop\TechniTrader 120514 MSWeekly MACD image.jpg
You hold for several more days but the stock continues to move down rather than up. A big engulfing black candlestick forms and you either sell out at a small loss, or you hold on desperately hoping that the stock will reverse.
Those who would choose to hold hoping it would turn around, find themselves losing even more money as the stock drops further. Now by this time most short term retail traders have given up and sold out.

The reason for lost capital is because buying into weakness using a Limit Order allows the computers of the market to buy you in as the stock is falling in price.  This is not a good idea.  The notion is that traders can save money with a Limit Order, but more often than not the above scenario happens. Limit Orders are usually used improperly by retail traders, and are the cause of many poor trades.
Buying Into Strength means the following:
1. Analyzing the strength of VOLUME and giant Institutional buying activity in Dark Pools, to determine that the stock is indeed going to move up and has enough strength to sustain that move.
2. Using a controlled Bracketed Order that ONLY triggers if the stock does move up into your buy zone, and it also controls what you pay for the stock.
The Buy Into Strength bracketed order ONLY triggers when the stock moves up into your order price. Now you would be in a stock that is moving up making nice profits as shown in the same chart below two weeks later, rather than a stock moving down.

Summary:
This stock chart example did have upside potential. However many Professional traders took profits early and many retail traders got over zealous and started selling short, which caused a brief correction.  
The downside sell off in this stock was very brief because at the same time Mutual Funds were being invested, by those small lot investors who use Mutual Funds for their investing. This increased the money in funds accounts allowing institutional investors to jump in to buy on the dip, which shows in the indicator TechniTrader Quiet Accumulation TTQA in the bottom chart window.
The gap took the stock back to its original buy in price, and the stock ran up in a velocity run for 4 days. Notice that the TechniTrader indicators were weak on the initial setup but much stronger after the gap. In addition it is best to use leading indicators written for the automated marketplace of today, rather than MACD which is a lagging indicator.
Trade Wisely,
Martha Stokes CMT

Instructor & Developer of TechniTrader Stock and Option Courses
This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2014 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.

Friday, November 28, 2014

Volume Leads Price

Use Technical Analysis To Identify Patterns
I often talk to traders who are struggling with mediocre results or chronic small losses due to whipsaws. Although it is natural to think the markets, market makers, or High Frequency Trader’s HFTs are the cause of poor results and lost profits, the actual culprit is a lack of Spatial Pattern Recognition Skills SPRS.
Technical Analysis is your EDGE in the markets. Most traders assume that everyone in the market from large to small funds, HFTs, and Professionals are all using Technical Analysis. However the truth is that most of the Market Participants are not using it. This is the advantage that retail traders have, because by looking at a chart you can learn to read what is going on before price moves.
An excellent chart example is below, and it is a Cloud Industry Stock.  The Cloud Industry is one of the big industries, and is going to reshape the world economy over the next decade.
This stock was sideways for a period of time, gapped up on High Frequency Trader HFT activity and then corrected. Now it is forming a Consolidation after a brief run out of the bottom. See in the bottom chart window that TechniTrader Volume Accumulation TTAV is leading Price.
The TTVA indicator is leading Volume over Price very strongly during the Consolidation. What this means is that a Market Participant Group is controlling price, holding it in a tight price pattern BUT the Volume moving into the stock is huge.  This is Quiet Accumulation going on in Dark Pools by the giant Buy Side Institutions. Soon HFTs and Professionals will discover this Quiet Accumulation and rush in to buy the stock, moving price up with momentum.
By being able to identify a Consolidation pattern under Quiet Accumulation, you can enter the stock with confidence and ride the run upward. The key to this type of trade is to be able to see that Volume leads Price. Many traders still hold fast to the old adage that Price is the most important indicator. However in our modern automated marketplace that is dominated by giant lot investors, Volume is now the more important indicator. Remember that there are 3 pieces of data that come from the market and those are Price, Time, and Volume aka Quantity.
By interpreting the subtle nuances of relationships between these data streams and what the relationships mean in terms of who is in control of price, retail traders can make higher profits by avoiding weak stock picks and whipsaws. They will also have a much more enjoyable trading experience and find they are making consistent profits over time with stronger run gains.
Trade Wisely,

Martha Stokes CMT

Instructor & Developer of TechniTrader Stock and Option Courses
This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2014 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.


Friday, November 21, 2014

2114 MSWeekly - Platform Compression Patterns

Platform Compression Patterns Are Ideal Entries
Sideways Market Condition For Swing and Momentum Traders
Platform compressions are ideal entries for swing and momentum traders, and identifying these compression patterns early is most important.
The stock chart below with candlesticks is a good example of three Platform patterns.  
The consolidations outlined in the green boxes are the Platforms, and the compressions are at the ends and have a purple line by them. This is a relational technical analysis pattern. The stock was under Dark Pool quiet accumulation by giant Mutual and Pension Institutions, which tends to form Platforms. Dark Pools create this sideways pattern with controlled bracketed orders, as they buy incrementally over time. The goal of the Dark Pools is not to disturb price. As they conclude their buying, High Frequency Traders HFTs find out and can push price up with momentum. Consequently these Platform compressions are ideal entries for Swing and Momentum traders, and they are often missed.  
A compression is a tight consolidation of candlesticks, rather than the wider spread of ones that make the Platform. It doesn’t matter where the compression forms, at the low or high of the Platform range, and it often precedes a decisive breakout and run or gap up. Then the stock resumes its sideways pattern as Dark Pools start buying at the next level.  
Bollinger Bands® can be used to assist in the identification of the compression, as shown in the chart below.
These expanding and contracting bands provide excellent analysis for sideways patterns. Entries must be made prior to the breakout, due to the rising energy that develops as price compresses.  
One aspect of Bollinger Bands to remember is that the center line for a strong compression will be equal distance from the outer bands.  In a strong compression, the center line on Bollinger Bands will move right through the center of the candlesticks.  If the center line is below or above, then the pattern is not as strong or indicative.
Learning to identify compressions in Platforms is a Spatial Pattern Recognition Skill™ that helps Swing and Momentum traders trade Platform market conditions. Sideways markets occur 50-60% of the time, and these are the market conditions that tend to have retail traders whipsawed out of trades constantly.
So instead of attempting to trade the small runs in a Platform wait for the compression pattern, and enter before the stock runs or gaps with momentum as shown in the chart below.
Using different techniques and strategies during a sideways Platform market can help Swing and Momentum traders find more stocks to trade, with much higher point gain potential.

Trade Wisely, 

Martha Stokes CMT

Instructor & Developer of TechniTrader Stock and Option Courses
This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2014 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.


Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.

Friday, November 14, 2014

3 Patterns For Early Entries Out Of Bottom

How To Use V Formations For Swing Trading


The automated market has many unique patterns that form due to the changes in the market participant groups, the various trading venues, and order processing systems. Learning to identify where a stock is likely to suddenly experience Dark Pool giant lot buyers during a downtrend, can help technical traders enter a reversal rally sooner to gain higher profits.


This requires recognizing where the Buy Side Institutions buy zones using Dark Pools are, or have occurred in prior months. During a sudden sell down triggered by High Frequency Traders a stock can plummet in price quickly, it also generally will rebound and run back up quickly especially if the sell down was HFT triggered and the company is doing well. “Sympathy moves” as these sell offs are called, occurred many times during the most recent correction.


AXP is a good example of a big blue chip firm that sold off more in sympathy, or due to the bulk of the Dow 30 and S&P500 stocks, which AXP is a member of both indexes, and less to do with company fundamentals.


The chart example below of American Express Co. (NYSE:AXP) dropped at a vertical angle of descent. The most important candle that formed was the extraordinarily long tail on 10/15/14 which was the initial reversal signal. Often times with HFTs triggering, a second reversal is required before the HFTs algos figure out that Dark Pools are moving in to buy. For AXP the indecision day candlestick was on 10/16/14, and was a confirmation that this stock was poised for an upside move.




The extraordinarily long candle of 10/15/14 formed precisely at a prior buy zone of the Buy Side Institutions. When the stock dropped into the buy zone, this triggered automated orders which drove price upward resulting in a long tailed reversal candle pattern. The following day HFTs attempted to sell down the stock again, but failed a second time. The HFT algos shifted to an upside automated order the next day and the price moved up quickly.


The chart example below shows where the Buy Side Institutions buy zone was previously and  price stopping there to reverse.


In the middle and bottom chart windows of the chart example below other huge signals which clearly showed that AXP was going to reverse quickly, were the TechniTrader Volume Accumulation TTVA and TechniTrader Flow of Funds TTFF indicators. V bottom formations on these two indicators provided early signals that the stock was not continuing down, but instead was going to reverse. Whenever these indicators form a V bottom, a reversal is imminent.
These are Leading Indicators and they help traders enter sooner for higher profits.




Summary:
Seeing a stock suddenly reverse and run up after it had just plummeted many points, doesn’t have to be frustrating for the technical trader. By learning to read both Candlestick Patterns as well as Leading Indicators, technical traders can enter these reversals before the stock runs up to its prior levels.


Candlesticks Patterns and Leading Hybrid Indicators are essential tools for technical traders if they want to be successful in today’s automated marketplace. There were hundreds of stocks that had similar V or U shaped velocity bottom action in recent months. Learning when and how to enter sooner will provide technical traders with a huge advantage and much higher profits.




Trade Wisely, 


Martha Stokes CMT


Instructor & Developer of TechniTrader Stock and Option Courses
This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2014 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.











Friday, November 7, 2014

Tracking The Dark Pools


Velocity Runs Out Of A Bottom

Dark Pools use precise controlled orders that trigger automatically over extended periods of time. Since these institutions are primarily buying for the long term, price can sometimes drop down before moving up. This tendency often leaves retail traders on the wrong side of the trade. Using an indicator that exposes the Dark Pool incremental buying gives retail traders an edge even High Frequency Traders HFTs do not have.

Below is a chart example of Sapient Corporation (NASDAQ:SAPE) which was under quiet accumulation by Dark Pools for several months. During this period, the stock slipped down slightly but remained well within the “buy zone” that the Dark Pools had created.


The enormous volume that occurred on the day of the HFT gigantic gap up distorts the volume.
Below is a chart example of how the volume appeared prior to that big gap.


HFTs attempted to sell the stock down a couple of times but Dark Pools were triggering buys during that period of time. Smaller funds were following HFTs with Volume Weighted Average Price VWAP and often sold when they should have been holding. Smaller funds managers typically have less experience and rarely use individual stock technical analysis for their buys and sells.

The Drop Down Pole Vault Candlestick Pattern, which is one of the new candlestick patterns that form due to Dark Pools triggering on a sell down by HFTs, was the pattern retail traders needed to recognize. An ideal Springboard candlestick pattern formed for a good entry with low risk for retail traders.

Then the stock experienced several days of fast running momentum and huge volume spikes.

Summary:

Often times retail traders who only learned a strategy and have been whipsawed out of trades, sometimes develop a belief that setting a specific point gain for a brief hold period is lowering their risk.

Unfortunately this strategy that is very popular and taught in many areas of the internet has two major problems which are the following:

  1. The shorter the duration of the hold, the higher the risk factors.
  2. Limiting your profits rather than letting a stock run as far as it will go.

Shorter duration trades increase risk because if the stock goes against you, your limited hold takes you out at a loss. Volatile intraday conditions hamper day traders, and most encounter chronic losses only to see that at the end of the day the stock actually moved up.

Limiting profits is foolish. Professional traders know that excellent runs with fast moving momentum should be allowed to run out with a volume exhaustion pattern or extreme patterns. By allowing a stock to run its full and complete run, professionals rode this stock up for huge profits in a few days. Meanwhile most retail traders either exited too soon, or some even took a loss on an excellent trade that moved strongly.

Learning how to trade velocity runs is critical to the success of swing, day, and momentum traders.


Trade Wisely, 

Martha Stokes CMT

Instructor & Developer of TechniTrader Stock and Option Courses
This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2014 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.