Rotation Patterns Explained with Stock Indicators

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.
monthly time line showing a rounding top formation - technitrader

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.
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Trade Wisely,
Martha Stokes CMT
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

TechniTrader DVDS with every course.

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. 

New Bottoming Formations in the Stock Market

Dark Pool Quiet Accumulation Builds Bottoms
During Trading Range Market Conditions when several industries are in their own Bear Market while other industries are continuing a Bull Market, determining when a stock has reached a final low or near the final low is critical for Swing Traders. They typically will be selling short into a bottom and then switching to buying long with Momentum Trading, as a stock hits the final low and moves with momentum or velocity action out of the extreme low in one of the new bottoming formations in the Stock Market.
One factor that Technical and Retail Traders need to recognize is the dominant influence of the Dark Pools, which build bottoms with Quiet Accumulation. Often times their patterns are hidden from Retail Traders using older style indicators such as MACD, Stochastic, and Average True Range ATR. By incorporating a few Leading Hybrid Indicators, Retail Traders can see what Professional Traders see in Quantity Analysis.
The chart example below is an excellent example of price trending down and then starting a base. 
chart example of price trading down and then starting a base - technitrader

The Basing new bottoming formation begins after a big gap down caused by High Frequency Trading HFT. The HFT volume is easy to identify on daily view charts so long as the Volume Bars are not truncated. This high volume appears twice as HFTs gap the stock and run it down, but immediately the stock forms a Hurdle Candlestick Pattern reversal signal.
Unknown to the HFTs which are computer triggered millisecond orders, this stock dropped into a Dark Pool Buy Zone™ which then triggered giant Institutional Time Weighted Average Price TWAP style orders. These types of orders buy into a stock incrementally, maintaining a bracketed price range and minimizing the impact of their buying on Volume and Price.
TechniTrader Quiet Accumulation TTQA is designed to track Dark Pool accumulation, distribution, and rotation patterns as it determines which side of the trade the large lot triggered. 
Although this stock base has a low of 75.0 it drops slightly further, as accumulation eases ahead of the earnings season as is typical for Dark Pool accumulation patterns in a new bottoming formation.
Then a huge white candle forms. Intraday shows End of Day Professional Traders moving in ahead of news, and HFTs triggering after market opens. This pushed price back up to near the high of the Buy Zone for the Dark Pools. Now the stock is consolidating due to giant Institutions using Dark Pools and controlling price as they accumulate more shares.
Summary
It is no longer enough just to see a crossover or candle signal to enter a stock. With 80% of all activity on the professional side, understanding who is controlling price helps Retail Traders prepare for how price will behave in the near term.
In this instance, it was important to recognize the underlying influence on price by the giant Institutions using Dark Pools who controlled price as they accumulated creating a new bottoming formation. By recognizing the Dark Pools footprint Traders can be ready for the sudden Shift of Sentiment™ on the TTQA indicator for the Professional Traders buying, that often precedes a huge run or gap caused by HFT trigger orders. This allows for more accurate entries and more consistent trading results.
Retail Traders need to learn the NEW Bottoming Formations in the Stock Market, how to use Leading Indicators based on quantity and lot size, and the new Shift of Sentiment candlestick patterns that reveal who is controlling price. Price behaves totally different when various Market Participant Groups are in control and dominating price action, for example Dark Pools rarely move price much.
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Trade Wisely,
Martha Stokes CMT
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
TechniTrader DVDS with every course.

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. 

Candlestick Patterns – Extraordinarily Long Indecision Day Candles

List of Guidelines for Their Market Conditions
The Indecision Day Candle is a day where neither the sellers nor the buyers took total control of price, and moved it strongly in one direction. Indecision days are mostly very small bodied candles, with small wicks and tails that are longer than the body. They often form in consolidations, or during periods of sideways action. However they also occur as a severe anomaly during extreme sell-offs that rebound in the same day, due to the new circuit breakers the Securities and Exchange Commission SEC has installed in the automated market place that slow down selling during a fast paced selling spree.
The circuit breakers replaced the Uptick Rule a decade ago, but still are under adjustments and modifications because severe one day sell-offs are a rare event in the market.
The stock chart below is marked with a red arrow on to show an example of an extraordinarily large Indecision Day Candle.
chart with red arrow showing an extraordinarily large indecision day candle - technitrader

Extraordinarily long Indecision Day Candles can be problematic for Technical Traders to know how price will behave next. These create extreme patterns in Price and Time Indicators such as MACD, Stochastic, and Bollinger Bands® as well as other highly popular indicators making the interpretation skewed in reaction to the severe price pattern.
Here is a list of guidelines for dealing with severe sell down Market Conditions action that create numerous extraordinarily long Indecision Day Candles, which distort price so much that Price and Time Indicators are not giving a proper signal:
1. The extraordinarily indecision day is caused by a Market Event or Global Event, and therefore does not represent the trend on that day.
2. If the stock has already been trending down, then the rebound within the indecision day can be huge on that day. However most of the time the following day will be a down day, continuing the original trend.
3. If the stock is in an uptrend, the extraordinarily indecision day will be followed most often by gap up that sells down creating a black candle. During the following days the stock will slowly sort out the selling and return to the uptrend.
4. If the stock was in a Topping Formation that had not completed prior to the severe indecision day candle, then the following day the stock may move down without a gap up at open. Then volatile action up and down with larger than normal candles, tends to follow the topping completion before a true Downtrend develops.
Summary
Extraordinarily long Indecision Day Candles temporarily alter the trend, and it can take weeks to pattern out the price action and return the trend to its true direction. During that period of time the stock may run up on what appears to be a reversal pattern, only to hit mild resistance and fall steeply. When trading after an extraordinary large indecision day caused by a major global event or shock to the market, it is important to not trust the Price and Time based indicators but to watch Volume, Volume Oscillators, Accumulation and Distribution Indicators, and Large Lot versus Small Lot Indicators to determine the short-term direction the stock will take, before the anomaly is patterned out of price.
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Trade Wisely,
Martha Stokes CMT
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
TechniTrader DVDS with every course.

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. 

Topping Stock Price Action

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. 
example of an inverse asymmetrical triangle top formation - technitrader

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. 
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Trade Wisely,
Martha Stokes CMT
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
TechniTrader DVDS with every course.

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. 

Price Oscillators Enhanced for the Modern Market

How to Create and Use Center Line Price Oscillators

Most traders are very familiar with the standard Price Oscillators which have a high and low range. These Price Oscillators are common and found in nearly every charting program. There are Stochastic, Williams R, Wilder’s Relative Strength Index and many more oscillators created specifically for determining “Overbought” or “Oversold” conditions.

Stochastic however was written in the 1950’s which was an entirely different market than we have today. Nowadays Technical Traders find that Stochastic tends to give a false negative or a false positive signal, just as the stock is beginning a Momentum or Velocity run up with exponential point gain potential. This often frustrates traders who are still using only the older theory of Overbought/Oversold Trend Conditions.

Today with High Frequency Trading Firms HFTs trading stocks in massive order flow on the millisecond scale, Price often appears “Overbought” with the standard Price Oscillators when it is just starting a big run. Often times Overbought Patterns shift to the “Floating Oscillation” Pattern which is a failed signal, due to extreme momentum energy that was not present in the trading environment when these indicators were written.

Using Price Oscillators Enhanced for the Modern Market is a method that TechniTrader teaches exclusively. TechniTrader shows how to create a CENTER LINE Oscillator very similar to Volume Center Line Oscillators. Using Volume and Price Oscillators together can be a huge benefit in entering stocks earlier out of Bottoms and Tops, which are often flat or basing these days rather than Triple Bottoms or other older style Bottoming or Topping  patterns you may have been taught.


Adding a relational center line that trends with the Price Oscillator can reveal patterns in advance of sudden big moves. See the chart example below.

pattern revealed in a trending center line - technitrader

Wilder’s RSI with its one line for oscillation is the most adaptable and easiest patterns to learn, when incorporating this kind of Center Line Oscillation into your indicator tool set. It was written in the 1970’s and is unique for a Price Oscillator. Instead of just calculating Overbought/ Oversold, its formula analyzes current price action to prior price action similar to what many Volume Oscillators track. This helps reveal Dark Pool activity which tends to precede the sudden runs and gaps caused by HFTs. This makes it an invaluable indicator to use for Short Term Trading.

The Floating Center Line has a softer Oscillation, which provides pivotal signals in the Price Patterns. This Hybrid Indicator can be applied to many other Price and Volume based Indicators as well. This Price Oscillator Enhanced for the Modern Market provides a more three dimensional and Relational Analysis™ that is needed for the more complex Market Structure of today.

Oscillators can be far more valuable and useful when adaptations and adjustments are made to the older indicators. This gives the Technical Trader more indicator signals, more analysis scope, and further breadth of understanding of Price action. The more a Technical Trader UNDERSTANDS price behavior, the better trading decisions they can make.

Using both Center Line Price Oscillators and Volume Oscillators, enhances and improves the overall indicator analysis for all Trading Styles. Each Trading Style will require modifications to the settings and periods for each Indicator.

The RSI/RSI Indicator is part of the TechniTrader Indicator Tool Set provided to Students with instructions on how to use it with all the Variables, Combination Indicators, Indicator Settings, and Periods. It is one of the most versatile of all the price indicators, and is a Price Oscillator Enhanced for the Modern Market.

Not yet TechniTrader Students can use this theory to design their own Indicators. The ideal Oscillators have one Oscillation Line rather than two.

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Trade Wisely,
Martha Stokes CMT
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
TechniTrader DVDS with every course.

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. 

Risk Analysis versus Gain Profit Potential

What is Missing in Your Risk Analysis?

The least used and most often improperly used analysis by Technical and Retail Traders is Risk Analysis. All too often, Traders are choosing high risk stock picks without realizing it. This analysis is NOT using percentages, but rather using the technical patterns within the chart in order to do the following:

1 Find the lowest Risk trade from a group of potential stock picks.

2 Determine the Risk versus the Gain Profit Potential BEFORE placing an order.

3 Determining the correct Stop Loss placement to avoid setting the Stop at a whipsaw point, or not using a Stop at all due to not knowing how to use and set them correctly.

4 Selecting the strongest picks based on Risk Analysis, which reveals weaknesses in stock picks that do not show up in Candlestick Patterns or MACD patterns.

5 Choosing stocks with Risk that you can tolerate. Too many times traders get greedy, and choose picks that have higher Risk than they are ready to accept.

First of all, Stop Losses should NEVER be calculated using Percentages. This is an ancient, out of date method that is the main reason why so many Retail Traders believe that Stop Losses do not work. They are accidentally and unintentionally setting Stops based on a Percentage that puts them right in the middle of a profit taking area where High Frequency Trading HFT will trigger, OR where Dark Pool bargain hunting Time Weighted Average Price TWAP orders are sitting and waiting for price to drop into that range.

Trading the automated markets along with Market Participant Groups that use Time Weighted Average Price TWAP orders, Volume Weighted Average Price VWAP orders, and High Frequency Trading HFT predatory millisecond orders requires using MODERN analysis and tools. It is hard to abandon techniques learned on the internet that appear everywhere but in order to be successful, Traders need to change how they approach trading.

When choosing a stock to trade among a group of stock picks, consider the Risk of the trade based on technical Support levels appropriate for your Trading Style. Trading Styles include Intraday Swing, Swing/Momentum Trading, Position Trading, and several others.

Strategies are selected AFTER a Trading Style has been chosen. Certain Trading Styles require specific technical patterns, candlesticks, and Support levels for optimal trading success. Buying long versus Selling Short also changes Support and Resistance levels for each Trading Style.

As an example for Risk Analysis see stock chart below, which has an Engulfing Black candlestick Sell Short signal. 

chart example showing risk analysis - technitrader

As a Sell Short pick consideration, the chart shows that the Resistance is above price as indicated by the red line. This is where the Stop Loss must be set rather than a Percentage. A tight Percentage puts the Stop Loss in the middle of the Resistance which will create a whipsaw, and a larger percentage such as 8 or 10% puts the Stop Loss far too wide adding Risk to the trade.

The next area of calculation must be the Support, which is where the stock is likely to bounce up as indicated by the green line. This is the highs of November, and may not hold over time but is the first level of Support for this stock if it sells down further. Support therefore is based not on a Percentage but the technical levels where bounces occur from Buy to Cover professionals closing their position, OR from “Buy on the Dip” Small Lot Investors rushing to buy into what they believe is a bargain.

Summary

By calculating the difference between the Resistance and the Entry Price, the Risk of the trade is determined. By calculating the Support level where the stock is mostly likely to pause or bounce, the run Gain Profit Potential is determined. The final step is dividing the points at Risk by the points Gain Potential. Risk to Profit should be 3/1 or higher. 

Most of the time Retail Traders are trading stocks with higher points at Risk than there are potential points to Gain. Taking the time to calculate Risk using Risk Analysis will significantly improve your profitability by eliminating high risk and low profit trades.

Go to the TechniTrader.com
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Followers may request a specific blog 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


Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDS with every course.

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.