Tuesday, May 29, 2012

Trading Range Patterns

MetaStock SPRS Series - Week 70 - TechniTrader® Stock Discussion for MetaStock Users - Trading Range Patterns: PXD - May 28, 2012
By: Martha Stokes C.M.T.

Using TechniTrader® Volume Accumulation “TTVA” and TechniTrader® Flow of Funds “TTFF” to determine whether a stock has topped or is merely in a brief correction, can help traders earn higher profits.

PXD hit the whole number resistance of $120.00 which is a stronger whole number resistance than others. It stepped back and formed lower highs but not lower lows in March and April. Then at the end of April, it retested the highs of February, failed to overcome that resistance and proceeded to sell down beyond the previous lows support level.

Since this is a trading range pattern rather than a platform, highs and lows will tend to vary often by many points.

Chart 1

Since this stock has fallen rapidly into a support level, a bounce can be expected also. Notice that even though there are two black candles side by side, TTVA is angling upward, warning of a risk of a bounce up.

Chart 2

The question is whether this stock will continue to fall further, or if the support highs of July, November, and December along with the sideways consolidation of January, will be sufficient strength to hold the stock at that level.

This is the difference between planning for a sudden move upward with momentum, or continuing sell side strategies.

PXD has already moved easily through the first tier of support and is slightly above the next tier. Below this is a very strong support V bottom on the short term trend.

Chart 3

Although a bounce is expected, volume is heavier to the downside and TTQA has shifted to the sell side. You can see that even though it is not red on the weekly charts, it is red on the daily charts.

Is the downside over yet? Has the stock reached its lowest low prior to bottoming?

Probably not, since this stock is poised for a bounce up after the two black candles. But unless volume to the upside gains momentum, the stock is more likely to stall and test a lower low.

That being said, this stock has plenty of support levels it will catch on with bounces.

Since it has nearly 95% institutional ownership, this downside price action is mostly rotation by funds already holding.

The trading range formed because larger funds were using small funds buying patterns as their signal to sell to rotate out of the stock.

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.

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.

No comments: