Friday, June 13, 2014

Understanding Price action in Short-Term Bottoms: ALXN by Martha Stokes CMT


A short-term bottom is defined as a bottom that tends to complete over a 3- to 5-month period. Sometimes these short-term corrections form more quickly in as little as one month.

Many times, swing and position traders miss out on the wonderful opportunities that short-term bottoms create. Short-term bottoms are often full of momentum energy and can move quickly out of the base. New bottom formations are developing in our electronic marketplace due to Dark Pool trading venues, HFT action chasing Dark Pools, and the new array of orders that are available for each different market participant group.

Learning to identify the patterns of price, quantity, and consistency of volume is the first step to finding excellent momentum trades out of short-term bottoms. Recognizing the new bottoming patterns early on, before the bottom completes, helps position traders see precisely where the bottom is going to most likely complete, which is the ideal entry level for low-risk position trade entries.

A Position Trade is a trade that is held anywhere from 2 weeks to several months. This style of trading is becoming more and more popular as the next generation of traders and investors start learning about the stock market. Since these younger traders are still working, with careers and young families taking a lot of their time, their time constraints require a much simpler, lower-risk entry that generates excellent profits over several weeks to several months.  You can position trade using stocks or you can trade position using options. Both work remarkably well for the busy person who only as a couple of hours a week to trade.

Alexion Pharmaceuticals (NASDAQ: ALXN) is a fine example of just how quickly a short-term bottom can complete.

The Top is one of the newer Top Formations not taught in the older technical analysis books. It rises out of a gap on lower volume. The stock has a flat consolidation before breaking to the downside. If you look at the Volume Bars, you can see why. The volume indicates the gap was created by High Frequency Trading front-running on news for this stock, so this is a gap that is at risk of filling. The top rounds quickly and then HFTs cause another huge black candle on spiking volume again. Since many of the smaller funds chase HFT action by accident, using the wrong type of order which triggers AFTER an HFT volume event, this top was fairly easy to anticipate. The result was the gap filled and then some, moving deep into the prior sideways action before finding support. Quiet accumulation halted the downtrend quickly, and the stock has steadily moved up since then with more strength to the buy side with white candles and volume. TT Quiet Accumulation (TTQA) is shifting sentiment from selling to accumulation.



Looking at TT Volume Accumulation (TTVA), the volume oscillator that compares large lots versus smaller lots and exposes the consistent quiet accumulation volume patterns, we can see that it steadily rose from the HFT volume spike that started the correction. It is obvious by studying the volume and large-lot indicators that Dark Pools were entering during the correction and halted the correction to resume the uptrend. This kind of indicator information is vital to understanding whether a stock is going to continue moving down, stop and start a bottom, or suddenly move with strong momentum.

Learning to read these indicators is easy and fun. Quickly finding stocks is all about using modern leading indicators that give you time to prepare and plan your entries for optimal profits, the lowest risk, and the most enjoyable trading experience.

Most traders are chasing stocks, frustrated, stressed-out, and trying to nibble a couple of pennies from trading. This makes trading hard, extremely stressful and emotional. And it increases risk and lowers profits.

Learn to trade with leading indicators that take the guesswork and stress out of trading.

Short-term bottoms confirmed with leading volume-based indicators are stock chart patterns that can help you prepare early for strong entries and they’re everywhere right now with stock prices recovering from the recent correction.

Learn more about TTQA, TTVA, and other leading hybrid indicators in this video.
 
Trade wisely,
Martha Stokes CMT


Chartered Market Technician
Member of Market Technicians Association
Master Rated Technical Analyst for Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses

©Copyright 2014 Decisions Unlimited, Inc. All Rights Reserved.
TechniTrader is the Registered Trademark of Decisions Unlimited, Inc.

Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor; it is strictly an educational service.

Post a Comment