Volume Leads Price

Use Technical Analysis To Identify Patterns

I often talk to traders who are struggling with mediocre results or chronic small losses due to whipsaws. Although it is natural to think the markets, market makers, or High Frequency Trader’s HFTs are the cause of poor results and lost profits, the actual culprit is a lack of Spatial Pattern Recognition Skills SPRS.

Technical Analysis is your EDGE in the markets. Most traders assume that everyone in the market from large to small funds, HFTs, and Professionals are all using Technical Analysis. However the truth is that most of the Market Participants are not using it. This is the advantage that retail traders have, because by looking at a chart you can learn to read what is going on before price moves.

An excellent chart example is below, and it is a Cloud Industry Stock.  The Cloud Industry is one of the big industries, and is going to reshape the world economy over the next decade.

This stock was sideways for a period of time, gapped up on High Frequency Trader HFT activity and then corrected. Now it is forming a Consolidation after a brief run out of the bottom. See in the bottom chart window that TechniTrader Volume Accumulation TTAV is leading Price.

The TTVA indicator is leading Volume over Price very strongly during the Consolidation. What this means is that a Market Participant Group is controlling price, holding it in a tight price pattern BUT the Volume moving into the stock is huge.  This is Quiet Accumulation going on in Dark Pools by the giant Buy Side Institutions. Soon HFTs and Professionals will discover this Quiet Accumulation and rush in to buy the stock, moving price up with momentum.

By being able to identify a Consolidation pattern under Quiet Accumulation, you can enter the stock with confidence and ride the run upward. The key to this type of trade is to be able to see that Volume leads Price. Many traders still hold fast to the old adage that Price is the most important indicator. However in our modern automated marketplace that is dominated by giant lot investors, Volume is now the more important indicator. Remember that there are 3 pieces of data that come from the market and those are Price, Time, and Volume aka Quantity.

By interpreting the subtle nuances of relationships between these data streams and what the relationships mean in terms of who is in control of price, retail traders can make higher profits by avoiding weak stock picks and whipsaws. They will also have a much more enjoyable trading experience and find they are making consistent profits over time with stronger run gains.

Click Here: Thank You For Reading My Article!

Trade Wisely,

Martha Stokes CMT

www.TechniTrader.com

Chartered Market Technician

Instructor & Developer of TechniTrader Stock and Option Courses

This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2014 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.

TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

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.

2114 MSWeekly - Platform Compression Patterns

Platform Compression Patterns Are Ideal Entries

Sideways Market Condition For Swing and Momentum Traders

Platform compressions are ideal entries for swing and momentum traders, and identifying these compression patterns early is most important.

The stock chart below with candlesticks is a good example of three Platform patterns.  

The consolidations outlined in the green boxes are the Platforms, and the compressions are at the ends and have a purple line by them. This is a relational technical analysis pattern. The stock was under Dark Pool quiet accumulation by giant Mutual and Pension Institutions, which tends to form Platforms. Dark Pools create this sideways pattern with controlled bracketed orders, as they buy incrementally over time. The goal of the Dark Pools is not to disturb price. As they conclude their buying, High Frequency Traders HFTs find out and can push price up with momentum. Consequently these Platform compressions are ideal entries for Swing and Momentum traders, and they are often missed.  

A compression is a tight consolidation of candlesticks, rather than the wider spread of ones that make the Platform. It doesn’t matter where the compression forms, at the low or high of the Platform range, and it often precedes a decisive breakout and run or gap up. Then the stock resumes its sideways pattern as Dark Pools start buying at the next level.  

Bollinger Bands® can be used to assist in the identification of the compression, as shown in the chart below.

These expanding and contracting bands provide excellent analysis for sideways patterns. Entries must be made prior to the breakout, due to the rising energy that develops as price compresses.  

One aspect of Bollinger Bands to remember is that the center line for a strong compression will be equal distance from the outer bands.  In a strong compression, the center line on Bollinger Bands will move right through the center of the candlesticks.  If the center line is below or above, then the pattern is not as strong or indicative.

Learning to identify compressions in Platforms is a Spatial Pattern Recognition Skill™ that helps Swing and Momentum traders trade Platform market conditions. Sideways markets occur 50-60% of the time, and these are the market conditions that tend to have retail traders whipsawed out of trades constantly.

So instead of attempting to trade the small runs in a Platform wait for the compression pattern, and enter before the stock runs or gaps with momentum as shown in the chart below.

Using different techniques and strategies during a sideways Platform market can help Swing and Momentum traders find more stocks to trade, with much higher point gain potential.

Thank You For Reading My Article     

Trade Wisely, 

Martha Stokes CMT

www.TechniTrader.com 

Chartered Market Technician

Instructor & Developer of TechniTrader Stock and Option Courses

This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2014 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.

TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

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.

3 Patterns For Early Entries Out Of Bottom

How To Use V Formations For Swing Trading

The automated market has many unique patterns that form due to the changes in the market participant groups, the various trading venues, and order processing systems. Learning to identify where a stock is likely to suddenly experience Dark Pool giant lot buyers during a downtrend, can help technical traders enter a reversal rally sooner to gain higher profits.

This requires recognizing where the Buy Side Institutions buy zones using Dark Pools are, or have occurred in prior months. During a sudden sell down triggered by High Frequency Traders a stock can plummet in price quickly, it also generally will rebound and run back up quickly especially if the sell down was HFT triggered and the company is doing well. “Sympathy moves” as these sell offs are called, occurred many times during the most recent correction.

AXP is a good example of a big blue chip firm that sold off more in sympathy, or due to the bulk of the Dow 30 and S&P500 stocks, which AXP is a member of both indexes, and less to do with company fundamentals.

The chart example below of American Express Co. (NYSE:AXP) dropped at a vertical angle of descent. The most important candle that formed was the extraordinarily long tail on 10/15/14 which was the initial reversal signal. Often times with HFTs triggering, a second reversal is required before the HFTs algos figure out that Dark Pools are moving in to buy. For AXP the indecision day candlestick was on 10/16/14, and was a confirmation that this stock was poised for an upside move.

The extraordinarily long candle of 10/15/14 formed precisely at a prior buy zone of the Buy Side Institutions. When the stock dropped into the buy zone, this triggered automated orders which drove price upward resulting in a long tailed reversal candle pattern. The following day HFTs attempted to sell down the stock again, but failed a second time. The HFT algos shifted to an upside automated order the next day and the price moved up quickly.

The chart example below shows where the Buy Side Institutions buy zone was previously and  price stopping there to reverse.

In the middle and bottom chart windows of the chart example below other huge signals which clearly showed that AXP was going to reverse quickly, were the TechniTrader Volume Accumulation TTVA and TechniTrader Flow of Funds TTFF indicators. V bottom formations on these two indicators provided early signals that the stock was not continuing down, but instead was going to reverse. Whenever these indicators form a V bottom, a reversal is imminent.

These are Leading Indicators and they help traders enter sooner for higher profits.

Summary:

Seeing a stock suddenly reverse and run up after it had just plummeted many points, doesn’t have to be frustrating for the technical trader. By learning to read both Candlestick Patterns as well as Leading Indicators, technical traders can enter these reversals before the stock runs up to its prior levels.

Candlesticks Patterns and Leading Hybrid Indicators are essential tools for technical traders if they want to be successful in today’s automated marketplace. There were hundreds of stocks that had similar V or U shaped velocity bottom action in recent months. Learning when and how to enter sooner will provide technical traders with a huge advantage and much higher profits.

Thank You For Reading My Article

Trade Wisely, 

Martha Stokes CMT

www.TechniTrader.com 

Chartered Market Technician

Instructor & Developer of TechniTrader Stock and Option Courses

This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2014 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.

TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

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.

Tracking The Dark Pools

Velocity Runs Out Of A Bottom

Dark Pools use precise controlled orders that trigger automatically over extended periods of time. Since these institutions are primarily buying for the long term, price can sometimes drop down before moving up. This tendency often leaves retail traders on the wrong side of the trade. Using an indicator that exposes the Dark Pool incremental buying gives retail traders an edge even High Frequency Traders HFTs do not have.

Below is a chart example of Sapient Corporation (NASDAQ:SAPE) which was under quiet accumulation by Dark Pools for several months. During this period, the stock slipped down slightly but remained well within the “buy zone” that the Dark Pools had created.

The enormous volume that occurred on the day of the HFT gigantic gap up distorts the volume.

Below is a chart example of how the volume appeared prior to that big gap.

HFTs attempted to sell the stock down a couple of times but Dark Pools were triggering buys during that period of time. Smaller funds were following HFTs with Volume Weighted Average Price VWAP and often sold when they should have been holding. Smaller funds managers typically have less experience and rarely use individual stock technical analysis for their buys and sells.

The Drop Down Pole Vault Candlestick Pattern, which is one of the new candlestick patterns that form due to Dark Pools triggering on a sell down by HFTs, was the pattern retail traders needed to recognize. An ideal Springboard candlestick pattern formed for a good entry with low risk for retail traders.

Then the stock experienced several days of fast running momentum and huge volume spikes.

Summary:

Often times retail traders who only learned a strategy and have been whipsawed out of trades, sometimes develop a belief that setting a specific point gain for a brief hold period is lowering their risk.

Unfortunately this strategy that is very popular and taught in many areas of the internet has two major problems which are the following:

1. The shorter the duration of the hold, the higher the risk factors.
2. Limiting your profits rather than letting a stock run as far as it will go.

Shorter duration trades increase risk because if the stock goes against you, your limited hold takes you out at a loss. Volatile intraday conditions hamper day traders, and most encounter chronic losses only to see that at the end of the day the stock actually moved up.

Limiting profits is foolish. Professional traders know that excellent runs with fast moving momentum should be allowed to run out with a volume exhaustion pattern or extreme patterns. By allowing a stock to run its full and complete run, professionals rode this stock up for huge profits in a few days. Meanwhile most retail traders either exited too soon, or some even took a loss on an excellent trade that moved strongly.

Learning how to trade velocity runs is critical to the success of swing, day, and momentum traders.

Thank You For Reading My Article

Trade Wisely, 

Martha Stokes CMT

www.TechniTrader.com 

Chartered Market Technician

Instructor & Developer of TechniTrader Stock and Option Courses

This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2014 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.

TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

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.