Monday, February 6, 2012

Shift of Sentiment Patterns

MetaStock SPRS Series - Week 54 - TechniTrader® Stock Discussion for MetaStock Users: GMCR - February 6, 2012
By: Martha Stokes C.M.T.

One of the recent patterns that has been occurring often is the “shift of sentiment” pattern that indicates early a final bottom has been reached. We are seeing many stocks completing bottoms with runs and gaps in the past few weeks.

The “shift of sentiment” patterns are very easy to recognize. They tend to form before the stock actually starts moving up, and often signal a period of quiet accumulation followed by stronger upward price action out of a bottom.

GMCR has such a pattern.

Chart 1

TTQA TechniTrader® Quiet Accumulation has red bars in October and November indicating dumping. The suddenly the bars change to green for several days and price stabilizes. Then the green bars fade to grey. This is quiet accumulation going on. The largest funds try to hide their activity from speculative traders, high frequency traders, and those traders that disrupt price.

This could easily turn into a sudden run or gap up for this stock.

Chart 2

TTVA TechniTrader® Volume Accumulation shows a big surge of buying in November and TTFF TechniTrader® Flow of Funds finds a bottom in mid-October. TTRSI TechniTrader® RSI is steadily rising indicating the sideways action is gaining strength.

Chart 3

What else do we see about this stock that is important?

GMCR likes to gap. Stocks have tendencies based on who buys that kind of stock. Some stocks rarely gap while others gap constantly. This is a stock that gaps frequently. That means as a trader, if this stock looks interesting you should plan that it has a high potential to gap. Stocks tend to rest a bit after a shift of sentiment then bolt upward to complete the bottom.

If this stock does gap, it will create an island gap, which is one of the strongest gap series that can form on a stock chart.

When the stock was moving up, the gaps were consistent with the platform building patterns. Clearly the stock gapped every time Earnings were to be or were announced. Then it formed a top and slid downward to the stronger support level. Now it appears to be ready to complete its bottom and resume an uptrend.

“Shift of Sentiment” patterns are becoming more and more prevalent in the past year. Watch for them and monitor a group to see how price behaves after the “shift of sentiment pattern” occurs.

To be a consistently successful trader you need to continually adapt to the changing trading conditions, and this is one of those changes. Sentiment shifts abruptly nowadays instead of more slowly.

Use the TTQA TechniTrader® Quiet Accumulation to find these shifts of sentiment, build a watchlist, and then you will be able to trade these types of patterns more successfully.

Trade wisely,

Martha Stokes, C.M.T.
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
MetaStock Partner

©2012 Decisions Unlimited, Inc.

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