Friday, July 11, 2014

TWTR: How to Interpret Bottoming Price Action

Tips on How to Identify Strong Bottom Formations before Completion

We had a strong summer rally due to the continued inflow of money from bonds into stocks. Also, there are far more Foreign and Sovereign Funds buying stocks than ever before; this created an unusual summer rally, far stronger than is normal.

Many stocks moved quickly from a short-term correction to a bottoming phase as Dark Pool giant-lot and large-lot institutions started buying stocks they identified as having strong fundamentals with bargain stock prices.

For example, Twitter (TWTR) is a stock that has excellent institutional ownership percentages for the age of this new IPO. The technical pattern that is most important for this stock’s chart (below) is what is called a “Shift of Sentiment” in TTQA.

The TechniTrader Quiet Accumulation indicator has a special formula that identifies whether the large lot triggered on the uptick or on the downtick, and this tells the technical trader whether Dark Pools are buying incrementally or selling.

In TWTR, the Dark Pools are buying, which caused the shift of sentiment from red TTQA, caused by High Frequency Trading (HFT) selling, to gray and green TTQA, which is caused by Dark Pools quietly accumulating, and this started the bottom formation.

In May, the final low is identified by the long black candle that gapped down with an HFT volume spike. This is followed by smaller funds selling due to the use of VWAP (volume weighted at price), which triggers on high volume.

Then, from late May to early June, Dark Pools halted the downtrend as they started buying the stock slowly over time with large-lot transactions. This caused TTQA to “ping” the uptick, which turned TTQA green.

Dark Pools are the primary reason a bottom forms at a specific price range. They leave distinct footprints on bottoms, which tell the technical trader that the bottom is a true bottom, and not just a temporary rebound or bounce up due to oversold conditions.

The giant institutional investors who use Dark Pools are the savviest and most experienced long-term investors in the market, and they also have extensive research and analytical departments that study every stock they are investing in, so it makes sense for retail traders and technical traders to follow the Dark Pool activity by learning to interpret accumulation/ distribution indicators such as TT Quiet Accumulation.

Learn to follow Dark Pool Activity in This Free Training Video.

Trade Wisely,

Martha Stokes CMT

Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor & Developer of TechniTrader Stock Market Courses

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