Friday, May 24, 2013

The Anatomy of a Correction

MetaStock SPRS Series - Week 120 - TechniTrader® Stock Discussion for MetaStock Users - The Anatomy of a Correction - May 27, 2013
By: Martha Stokes C.M.T.

Were you surprised by the big move down on Wednesday May 22, 2013?

It should not have been a surprise, in fact, if you had been using the proper indicators and technical as well as relational analysis you would have started preparing for this correction about a week before it happened.

A student just wrote on Wednesday to tell me he had pulled 98K profits just as the stock market turned that day. He had learned how to anticipate and prepare for corrections days ahead of the actual event.

To be a truly successful trader you need to learn how to read the relational patterns as well as technical patterns that expose what is really going on, who controls price, when that control begins to weaken, who is opposing the controlling market participants, and when their strength is going to overwhelm the other.

By understanding the dynamics of each market participant group, how they trade, where they trade, and when they trade you begin to see a much more important perspective than just a candlestick pattern or a crossover indicator.

Traders who make significant profits in the market are always vigilant about seeing the broader picture.

Below is the Dow chart:

The NASDAQ chart:

The S&P 500 chart:

The first thing to notice is the angle of ascent, the runaway trendline pattern with no support, and the support levels nearby. In addition, volume and TechniTrader® Quiet Accumulation TTQA reveal who controls price and if the large lots that are selling as price moves up tell you a great deal about how long this trend can sustain and when the shift of dominance occurs. Yes, large lots were selling for profit as smaller lots were buying speculatively for the past week.

The large lots taking profits were extremely careful in the beginning, allowing the zeal and exuberance of the less informed and uninformed smaller lots and smaller funds to continue to drive price upward even as the large lots were taking profits.

This is often a hard concept for many retail traders to accept. They assume that the pros are still buying but the indicators tell all. Charts do not lie. They reveal patterns that expose who is doing what.

When you reach this level of sophistication in your analysis then you will be reaping the financial gains that come with such expertise in analysis.

Trade wisely, 

Martha Stokes, C.M.T.
For more information email:
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
MetaStock Partner
©2013 Decisions Unlimited, Inc.

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