Wednesday, September 3, 2014

TechniTrader Weekly Stock Review

The New Technical Bottom Formations

As Market Structure Changes, so too do Technical Patterns

Since 2008, the stock market and all of the financial markets from FOREX to Derivatives have been under massive structural changes. These include new venues, order types, order routing, data analysis, data documentation, compliance issues, and regulations. No part of the professional side has been left untouched by at least some of these changes.

The heaviest concentration of new regulations, venues, and orders has been in derivatives and stocks. Both financial markets are seeing changes not only internally, but also on the charts that most professional traders use every day. These new patterns are reshaping how the professional technical trader approaches trading with new trading processes, systems, and strategies.

Individual traders can follow their “big brother” lead, and learn the new technical patterns too. This will enable them to avoid unexpected price action, weaker picks, and potential losses.

The above chart of NTAP shows how bottoms are being reshaped, by the new orders that come from the many new venues for professionals. A traditional head and shoulders bottom which would have had a V shape shoulders and head, with volume dropping to the downside and rising to the upside on the right shoulder. Instead of a deep long head, this bottoming pattern has the distinct pattern that reveals Dark Pools are quietly moving in starting with the Shift of Sentiment exposed by the TechniTrader Quiet Accumulation TTQA Indicator in the bottom chart window. The black vertical line on the chart shows the base. This is where the Shift of Sentiment occurred, with Dark Pools taking control of price starting in late April.  The TTQA indicator reveals the Dark Pool activity well ahead of the final low. Notice that instead of a V the final low is shallower, with a flat base pattern which has become the most common bottom pattern of the Dark Pools.

Summary: Technical traders and individual traders must learn new technical patterns, and also Relational Analysis™ which is the understanding of the relationship between who controls price at any given level of a trend. By recognizing the patterns that each market participant forms when they control price, a trader will find trading far easier and much more rewarding.

Trade Wisely,

Martha Stokes CMT

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

© 2014 Decisions Unlimited, Inc. DBA TechniTrader®. All rights reserved.

Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.

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