Tuesday, May 26, 2015

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.
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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. C:\Users\Adrienne\Pictures\052815 MSWeekly chart.png
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

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

Instructor & Developer of TechniTrader Stock and Option Courses
This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

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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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