By Martha Stokes CMT
How Position-Style Price Action Converts to Swing-Style Price Action
One of the newer sideways patterns is the “platform.” A Platform is a very consistent sideways action that is the buy zone price range used by Dark Pools. These very consistent, controlled price patterns are very low-risk for beginners and novice traders who need a conservative, low-risk, and simple trading style that requires only a few hours a week for solid profits. The entry is easy to learn and follows the earnings season with stocks building sturdy platforms over time that can each last a couple of weeks to a couple of months.
GLNG has such a pattern.
The daily chart clearly shows the “footprints” of the Dark Pool giant-lot and large-lot investors, whose goal is to buy the stock within a specific price range. They buy many millions of shares of stock but do so over an extended period of time so that their huge-lot orders do not disturb the stock price. Ranges are generally 10-20% in width. They will allow a stock to sometimes dip, but buying resumes quickly. TechniTrader’s Quiet Accumulation, TTQA, is the indicator that is best for finding the Dark Pools' incremental buying pattern. This indicator compares the large-lot up- and down-ticks in order to determine whether the Dark Pools are buying or selling. In this instance, the green bars outlined with a green rectangle are showing that there are more of the larger lots buying, and buying slowly or incrementally, over a longer period of time. TTQA and price patterns confirm that this pattern is indeed Dark Pools quietly accumulating this stock.
This chart starts out with longer platforms which are shrinking as price moves up. This means that momentum price action has started. The momentum buying is smaller funds and smaller lots buying and pushing price up. It can also be caused by HFTs triggering on news related to the company.
The last sideways price action, outlined with the smallest black rectangle, has not only shrunk in terms of how many days the stock moves sideways, but also, the candles and width of the sideways pattern have gotten much smaller. This has actually turned into a compression of the platform into a consolidation. The moves up have longer white candles on higher volume.
When a position trade develops shorter, tighter sideways action, it is time to convert the trading style from a position hold to a swing-style trade. This means instead of using a position-style trailing profit stop, a swing-style trading trailing profit stop would be used to protect more profits as the stock moves into a momentum mode and the potential for a longer momentum run or a gap-up is increasing.
In this trade, the stock went momentum, ran up for 6 days, rested for 5 days, and then moved up again. Holding the stock for a few more days, rather than taking one-day profits, yields much higher gains for the trade.
Learning how to switch from a position-style hold to a swing momentum-style hold is an important skill every trader needs to learn. This allows traders to hold the stock longer for significantly higher profitability than just holding a stock for a few minutes intraday.
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Martha Stokes CMT
Chartered Market Technician
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor & Developer of TechniTrader Stock Market Courses
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