TechniTrader Beginner Education "New Bottoming Formations in the Stock Market" by Martha Stokes CMT

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. 

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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 new Basing Bottoming Formation begins after a big gap down caused by High Frequency Trading. The High Frequency Trading volume is easy to identify on daily view charts so long as the Volume Bars are not truncated. This high volume appears twice as High Frequency Traders gap the stock and run it down, but immediately the stock forms a Hurdle Candlestick Pattern reversal signal.

Unknown to the High Frequency Traders which are computer triggered millisecond orders, this stock dropped into a Dark Pool Buy Zone™ which then triggered giant Institutional Time Weighted Average Price 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.

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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 High Frequency Traders 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.

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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 High Frequency Traders 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
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