Friday, August 9, 2013

Trading a Momentum Market Using Swing Trading Techniques

MetaStock SPRS Series - Week 131 - TechniTrader® Stock Discussion for MetaStock Users - Trading a Momentum Market Using Swing Trading Techniques - August 9, 2013
By: Martha Stokes C.M.T.

Summertime momentum markets are rare. It takes two things occurring simultaneously to create a momentum market:
  1. A rush of new monies into stocks.
  2. Advances in new technologies.
We have both right now. The Bond Markets are a Trillion-dollar market but in one month alone, there was a dumping of bond funds in historical proportions. This amounted to nearly 80 billion dollars being pulled from bonds in one month. This is a huge red flag for current bond holders and bond fund managers that a major shift of sentiment has occurred.

The money has to be place somewhere in one of the several Financial Markets. It is moving from Money Market Accounts directly into stocks, creating a momentum energy market not seen in many years.

To swing trade a momentum market, you need to understand the dynamics of not only swing trading but also how momentum action behaves, how it is different from a velocity price action, and how it is NOT volatility as many will claim but ENERGY that continues in one direction with building volumes and rising prices followed intermittently by resting day patterns rather than retracements.

Momentum price action is unique and learning to read these charts requires far more understanding of candlestick patterns than is taught in books written a decade ago. Within the past 3-5 years, the way price reacts, how candles and where candles form, for how long, and when price will suddenly move again has changed dramatically. Just learning the candlestick patterns in a book or from an article online is not sufficient for highly successful swing trading in momentum markets.

Below, the TTQA indicator exposed Dark Pools buying. By itself, price doesn’t look like anything during some heavy Dark Pool buying. But the energy that is generated when Dark Pools buy incrementally without moving price causes big runs to follow, such as this chart has.

On the chart below, the failed sell down that started with the engulfing black is best seen in the indicators, which accurately tell you that the sell down attempt has failed and more upside is coming. This allows you to enter the stock prior to the gap.

In the chart below, shifts of sentiment, increasing volume patterns, building underlying energy in TTQA, all are vital cues that tell you the resistance level is going to be blasted right though, that this time resistance will not hold back this stock moving out of a long term bottom.

The crucial analysis you need in order to find stocks BEFORE they move suddenly, running or gapping up quickly, is relational analysis: the interpretation of the relationships between price, volume, lot size, and who is trading the stock at that time.

When you combine relational analysis, the new candlestick patterns that have just started to form in the past few years, and Hybrid Indicators like TTQA, your ability to choose fast-moving stocks and have strong momentum swing trades will be faster, easier, and far more reliable.

Did you miss our most recent webinar for MetaStock users?

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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