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                                        by Martha Stokes CMT

This is a training series for those who are using MetaStock® or just starting to learn about trading using this charting software. These lessons are the foundation of Spatial Pattern Recognition Skills™ which are skills critical for consistent success as an individual investor or trader in today’s Institution dominated marketplace. 

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"Rotation Patterns Explained with Stock Indicators" by Martha Stokes CMT

Buy Side Institutions Using Dark Pools

Most Technical and Retail Traders have heard about Buy Side Institutional Accumulation and Distribution, but few understand another institutional action which is ROTATION.

Accumulation is the acquiring of hundreds of thousands, to millions of shares of stock over an extended period of time. Quiet Accumulation is the most common nowadays which is when institutions use Dark Pools aka Alternative Trading Venues that do not show their activity on the exchanges. Buy Side Institutions are able to hide their 100,000 – 500,000 share lot activity from High Frequency Traders HFTs, Independent Investors, Retail Traders, and Small Mutual Funds and Small Pension Funds Managers by using the Dark Pool venues. This enables them to buy large to giant quantities of stock over time without disturbing price. The primary difference between exchange activity and Dark Pool activity is the ability of the Buy Side Institutions to not alter the trend that is underway at that time.

Buy Side Institution Quiet Accumulation INCREASES the amount of money in the stock market fueling Bull Markets and Uptrends, even though the Institutions buy in such a way so that price does not move much when they are buying.

Distribution is the selling of a large quantity of stock overtime, OR because of redemption demands. High redemption demands tend to occur near the end of an Intermediate Term Correction or the end of a Bear Market. Therefore Dark Pool Distribution is often faster than Dark Pool Quiet Accumulation. Dark Pool Distribution is when Buy Side Institutions sell huge quantities of stock without moving price much.

Buy Side Institution Quiet Distribution REMOVES money from the stock market, which fuels more downside selling.

Rotation patterns occur during the mid to final years of a Great Bull Market, which is a Bull Market that lasts for more than 4 years. Quiet Rotation™ is the systematic, and carefully calculated selling of shares of one stock and the buying of another stock. Rotation patterns tend to slowly bend trends either into a Bowl Bottoming Formation OR into a Rounding Top Formation. Platforms are also a common pattern for Rotation, into or out of a stock.

Quiet Rotation does not remove money from the Stock Market. Instead it merely MOVES MONEY AROUND from one industry to another and from one stock to another.

The chart below with a monthly view shows the commencement of a Rounding Top Formation that developed due to steady Quiet Rotation over the past several months. 

 

This stock is slowly losing Institutional percentage holdings as these giant institutions quietly rotate out. Their goal is to not disturb the Uptrend buying frenzy of Independent Investors, new Investors, and Retail Traders who rely upon recommendations and gurus for stock picks. As the stock moves up with smaller lot buyers who have less capital than the giant institutions, the trend slowly bends under the weight of the large to giant lot Quiet Rotation of the giant Buy Side Institutions.

This is a critical pattern to recognize for Technical and Retail Traders especially in highly popular recommended stocks, as weakening trendlines due to Quiet Rotation are harder to see in candlestick patterns early on.

What is essential to have are indicators that reveal the Dark Pool Rotation patterns before price begins to bend and round, which can create whipsaws for Swing and Day Traders resulting in losses that could have been avoided.

Summary

The TechniTrader Volume Accumulation TTVA and TechniTrader Flow of Funds TTFF indicators clearly show the steady Quiet Rotation pattern over time, even as price moves up. This allows Technical and Retail Traders to avoid entering a stock that is actually weakening into a Rounding Top Formation, rather than what at first may appear to be merely a consolidation or sideways pattern.

By recognizing Quiet Rotation Patterns early on enables Technical and Retail Traders to be prepared for Corrections and Selling Short, by Swing Trading the downside action if they have the education.

TechniTrader has designed Tools for MetaStock Users including the indicators shown in this chart example for best stock chart analysis. More information is at TechniTrader.com HERE.

Followers of this blog may request a specific article topic by emailing: info@technitrader.com

Trade Wisely,

Martha Stokes CMT

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

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

©2016 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. 

Posted on July 29, 2016 by Registered CommenterMartha Stokes CMT | Comments Off | EmailEmail | PrintPrint

"Topping Stock Price Action" by Martha Stokes CMT

Candlestick Patterns that Reveal Potential Tops 

One of the more challenging aspects of being a Technical or Retail Trader in today’s automated market is that the candlestick patterns of Technical Analysis are changing. In particular Topping Stock Price Action is often the most problematic as Traders are not aware of the changing dynamics of tops.

As new types of professional orders, new trading venues, and more Market Participant Groups all trading for different reasons with different share lots sizes and capital resources, how candle patterns form and in particular how Tops form are undergoing massive changes.

It used to be that the Head and Shoulders H&S Topping Formation occurred quite often, which is usually best seen on a long-term chart such as weekly or monthly view. Now true textbook perfect H&S patterns are rare. Those that do form are not classic H&S Tops but deviations and distortions of that once easy to recognize pattern. M tops are also not as common and are often distorted, which alters how price behaves after the Top completes.

An example of the distortion found in the market today is that often times H&S Tops do not fall the length of the head, but find support slightly below the low of the right shoulder.

On the short-term trend for Topping stock price action, there are new formations that are often missed by Traders who have yet to learn all the new ones including Flat Tops, Sheer Cliff Tops, and many more.

The chart example below shows an inverse Asymmetrical Triangle Top Formation on the short-term trend. 

This is one of the most dangerous Tops for Traders who use Buy-on-the-Dip or Limit Order entries. Professionals abandoned Limit Orders quite a while ago. They are using alternative orders to control their entries, which avoid the huge risk of entering on a low and discovering the entry is not a Dip but a Downtrend.

The risk factor of the Asymmetrical Triangle is that most Traders are not thinking of this pattern as a Reversal Pattern. Many are not even aware that a triangle can expand rather than contract.

The candlestick pattern can also compress within the Asymmetrical Triangle Top Formation.  This makes it even tougher for Technical Traders who are unfamiliar with these kinds of sudden accelerated Top Formations, which can gap and run with high velocity.

TechniTrader Students are taught these new types of candlestick Topping Stock Price Action formations, and they also have the advantage of special Indicators that confirm the stock is under heavy Institutional large lot selling. 

Summary

The chart example shows Quiet Rotation™ from Buy Side Institutions underway intermittently for several months prior to the Downtrend. The current price action is controlled by the Professional Trader Market Participant Group which includes the Independent, Floor, Desk, and Proprietary Traders. The downside pressure is revealed by the TechniTrader Volume Accumulation TTVA and TechniTrader Quiet Accumulation TTQA indicators, long before this stock falls at an extreme Angle of Descent™ as seen just above and below the bottom red line. 

TechniTrader has designed Tools for MetaStock Users including the indicators shown in this chart example for best stock chart analysis. More information is at TechniTrader.com HERE.

Followers of this blog may request a specific article topic by emailing: info@technitrader.com

Trade Wisely,

Martha Stokes CMT

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

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

©2016 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. 

Posted on July 27, 2016 by Registered CommenterMartha Stokes CMT | Comments Off | EmailEmail | PrintPrint
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