052615 MSWeekly – How To Read Stock Charts

How To Read Stock Charts

Market Participant Groups Control Price

Reading stock charts is a skill that all individual investors and retail traders need to hone and strive to improve constantly.  Candlestick price patterns matter. What price is doing tells a great deal about what Market Participant Groups are controlling price.

Who is in control of price reveals:

1. How price will behave in the near term
2. How price will react to Support and Resistance
3. How long price will move in that pattern
4. What to look for ahead of sudden price moves
5. When a Bottom or Top is underway

The daily view chart example below shows an extreme Angle of Descent™ into the lowest low before a bottom commences.

Even as this final sell down occurs, it is obvious that the steepness of the Angle of Descent is unsustainable. In addition TechniTrader® Quiet Accumulation TTQA indicator in the bottom chart window is exposing smaller fund capitulation as the stock tumbles.  

The sideways pattern after the low is indicative of the giant Buy Side Institutions buying in incrementally with controlled bracketed orders over time. Since some retail traders and High Frequency Traders HFTs are still trying to sell short against the strength of the giant funds buying, the up and down day to day price pattern forms. Then as the stock moves up to the first tier of resistance around 35-37, the HFTs realize that Dark Pool buying by the giant funds has been occurring. They rush to buy in quickly creating a buzz in the retail trader world, and short term Swing style trading occurs. At this time the giant funds have accumulated what they wanted, and so the news spreads of their buying.

This creates speculative runs due to emotional At Market order buying by smaller funds. The stock runs up and then hits stronger resistance where it stalls. Momentum evaporates and the stock moves sideways in a Platform candlestick pattern.

It could have just as easily started to move down in a correction. However it did not because as profit taking began by the HFTs and other Professionals short term Swing trades, the giant funds buying in Dark Pools entered again controlling price tightly with their Alternative Trading System ATS orders off the exchanges.

Platforms are a “value oriented” Market Condition where the dominant buyers are large lots buying in incrementally over time. This is usually based on Earnings Reports.

The stock slides downward during the latter part of the sideways action. The giant funds are not selling but rather they have stopped their accumulation, and a void of buying by these huge lot purchasers causes a slip-slide action. If you study the slip-slide downward action closely, you will see that the stock stops just at the lowest low of the platform, as shown by the first red arrow as the lowest low. This indicates that the giant funds stopped buying, and then as the stock slipped to the low range buying started again briefly.

HFTs and Professional traders started buying the stock creating another speculative run, which shifted to a Peaks and Valleys trendline pattern. The shift of trendline patterns throughout this chart show you where one Market Participant Group started and stopped buying the stock, and a different Market Participant Group took control of price.

By understanding that the upward trend cycle has many different tiers and layers of a variety of Market Participant Groups, you can quickly identify which is in control of price at what time. By knowing who controls price, you will learn how price will behave and that tells you what to expect next.

Trade Wisely,

Martha Stokes CMT

www.TechniTrader.com

TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock

Chartered Market Technician

Instructor & Developer of TechniTrader Stock and Option Courses

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

Copyright ©2015 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.

VR TUTORIAL ON METASTOCK FOR PEP BOYS - PBY - MAY 26, 2015

From the desk of top market timer, Mark Leibovit:

The rally in Pep Boys (PBY) last week was a classic example on how a Leibovit VR provided an early warning for a nice rally in a stock. In this case, buy-out rumors were culprit for the big percentage push higher. A Positive Leibovit VR was formed on May 18 which tied in beautifully with a rising 5/3/3 stochastic and two days later the stock gaps higher on the buy-out story.  Do you think the buyers on May 18 may have known something positive was coming for PBY?  This is what the VR is all about - volume preceding price.  Looking at both the daily and weekly chart, the VR works very well on PBY. Go check it out.

LEIBOVIT VR TUTORIAL FOR NETFLIX (WEEKLY) - MAY 18, 2015

From the desk of Top Market Timer Mark Leibovit.

On this video I decided to focus on 'high-flyer' Netflix (NFLX) looking solely at a weekly chart.  This is particularly useful for a stock of this volatility (and price) for those of you less inclined to trade day to but prefer to try and catch multi-week moves.  In the example presented, using the 5/3/3 stochastic as confirmation, the correlation with declines following Negative VRs and rallies following Positive VRs was extraordinarily high.  In recent months, a Positive VR the week of January 19 coincided with a rising 5/3/3 stochastic and a six week rallied ensued.  Immediately thereafter on March 2, a Negative VR was formed in conjunction with a declining 5/3/3 stochastic and a 4-5 week decline unfolded.  After that, a Positive VR during the week of April 13 re-established an uptrend confirmed by a rising 5/3/3 stochastic which brings up to date.  This is a great stock to track on a weekly basis using my VR.

Swing And Momentum Trader Ideal Entries

Identify Platform Compression Early

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

The chart example below is for studying a relational analysis technical pattern. This stock was under Dark Pool quiet accumulation which tends to form platforms. Dark Pools create this sideways pattern with controlled bracketed orders that buy incrementally over time.  

The goal of the Dark Pools is not to disturb price. As they conclude their buying for that period, High Frequency Traders HFTs find out and can push price up with momentum as occurred in January on this chart. Prior to that move up, the candlesticks compressed. These platform candlestick pattern compressions are ideal entries for swing and momentum traders.

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

Platform compressions are ideal entries that form at or near the end of the platform, and are often missed by retail traders.  

Bollinger Bands® can be used to assist in the identification of the compression. 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.

Platform compressions are ideal entries 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.

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

Trade Wisely,

Martha Stokes CMT

www.TechniTrader.com

TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock

Chartered Market Technician

Instructor & Developer of TechniTrader Stock and Option Courses

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

Copyright ©2015 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.

From the desk of Mark Leibovit.

Another downside gap accompanied by supposed negative news, analyst downgrades or expectations, etc. is setting up another big buying opportunity in Whole Foods. We have seen this pattern before, most recently a year ago (May, 2014).  Though it took six months for the stock to resume its uptrend, there were several long opportunities as the stock was basing and I think that pattern will repeat here. At that time there was a downside gap at 47.70 that needed to be filled which as minimum expectation on my part. I am also following the Peter Lynch principle.  When you go into the stores they are always busy.  Try to shop at the Whole Foods in Union Square, New York. There are dozen lines with dozens of people waiting for the electric stop light signal to permit them entry to a cashier. Sometimes you have to wait a half hour to buy some eggs.  The ideal pattern now would be to wait for a Leibovit Positive VR and trade the long side anticipating the recent gap at 47.10 will be filled.  Please note that the recent correction more than satisfied an upside gap at 42.90 fromJune 13.  This stock loves gaps.

Happy Trading.

From the desk of Mark Leibovit -- Opportunities is TASR and XMGI

TASER (TASR) AND xgTechnology are two plays in the current law enforcement/social unrest situation in the U.S. (and elsewhere).  TASR has presented excellent 'VR' correction both on the daily and weekly charts and XGTI is providing a sign of an important bottom.  Please check video for details.



Happy Trading.