Tuesday, May 22, 2012

Understanding TTQA shift of sentiment, HFT patterns, and small fund versus large fund action

MetaStock SPRS Series - Week 69 - TechniTrader® Stock Discussion for MetaStock Users - Understanding TTQA shift of sentiment, HFT patterns, and small fund versus large fund action - May 21, 2012
By: Martha Stokes C.M.T.

Hi Everyone,

I am going to be at the MetaStock® Users Conference in Las Vegas in October. I look forward to seeing many of you there. I will be doing another hands-on training session that will help you with short term trade analysis, speeding up your stock pick selection, and learning how to exit with higher profits.

Understanding TTQA shift of sentiment, HFT patterns, and Small Fund versus Large Fund action will be the topics of my discussion this week.

TTQA TechniTrader® Quiet Accumulation is the accumulation or distribution indicator for tracking the large lot activity, to determine which side of the trade the largest funds are on during a sideways pattern.

Sideways patterns are the most challenging of all for most traders. When a stock is trending, either up or down it is very easy to enter and ride the runs to profits. It’s the sideways patterns that catch most retail traders off guard, often surprising them as they enter just as a stock starts moving in a sideways pattern. Sideways action creates unreliable buy or sell signals, whipsaw trades, and lost profits if you are not expecting it to occur.

What TTQA does very well is to warn you early on that a sideways action has started. You can see that TTQA shifts from green to red to green to red on the chart below. Depending on the relation between volume, TTQA, price, and where we are in the trend you can discern who is trading on either the buy or sell side. Then you will be able to anticipate whether the sideways action will shift to the upside or shift to the downside.

Chart 1

In the chart above, we see that in November we had green TTQA followed by a period of small red TTQA. This was the area when some early distribution occurred as smaller funds bought and larger lots started rotating out of this stock.

Then in early January a pattern of green to red, green to red, green to red occurred exposing continued smaller fund buying with larger funds selling as the stock held in a sideways pattern that started to round.

So the big factor that tells us information about the TTQA pattern is the fact that this stock is at an all time high. Many stocks will step back as they enter a new all time high and this is the place where most rotation occurs for the largest institutions. As the stock runs up by smaller fund buying sprees, the large lots start selling to rotate out. The goal is not to disturb price as they rotate out but often a 100,000 share lot on a dark pool can cause the smaller funds 10,000-15,000 share lots to become overwhelmed creating downside pressure even before HFTs High Frequency Traders and Pros start selling short.

This is what happened to CFX in the chart above.

As the rotation increased and smaller fund buying decreased, the shift of power occurred and sell shorters stepped in to drive the price back down to moderate support levels.

When you can understand the internal dynamics of a sideways pattern you are better prepared for the breakout whether it is upward or downward.

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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