About Types of Swing Trading Style Runs
Support
and resistance are often areas of Technical Analysis that are not fully understood.
This week the lesson will be on support for Swing Trading which includes
Momentum Runs, Velocity Runs, Volatile Runs, and Intraday Swing Style Runs.
Swing Trading is a “one run” trading style, which can be as short as a few minutes intraday or as long as 10-12 days depending upon whether it is a Standard Swing Run, Momentum Run, or Velocity Run. Swing Trading runs also appear in volatile conditions, as two major Market Participant Groups collide buying and selling against each other.
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The
key to understanding how support will behave and whether it is sufficiently
strong enough for the trading conditions as well as the trend, sentiment, and
market bias is to learn how to interpret who is controlling price which defines
how support will hold or collapse.
Dark Pools control vast quantities of shares of stock, trillions in assets worldwide and use the largest lot orders. Dark Pools are giant and large Institutions both on the Buy Side and Sell Side and when they buy, this creates underlying energy building as they remove liquidity on the buy side with their large lot accumulation activity.
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Support is less viable when the giant Institutions are not actively buying the
stock, and price can over-react to even minor profit taking by the
Professionals who also use larger lots.
The chart example below had a Standard Swing Run out of an extreme sell off
price action.
The chart example below had a Standard Swing Run out of an extreme sell off price action.
Selling
was triggered by Volume Weighted Average Price orders which activated as
volume rose above average levels. These are automated orders. There was no
support to halt the run down, until the stock fell into an earlier Dark Pool
Buy Zone™ that formed a few months after it IPO’d.
This type of support for Swing Trading is stronger because more accumulation is likely at this level. As the stock ran with Standard Swing Run pattern it encountered two days of profit taking in between each day it ran up, forming a white longer candle. This is weaker support, even at the extreme sell off conditions. The first run up has long tails and wicks, common when there is a mix of sellers and buyers that are almost equally weighted.
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Summary
However as the stock climbs, bias shifts to the upside and candles shrink to Resting Day patterns. In this instance intraday support levels are very weak, the more reliable and consistent support is at the lows of the white one day run up candles.
If intraday support is used on a Standard Swing Style Run which
lacks strong momentum, then whipsaw intraday is a huge risk. This pattern
overall has weaker support as it climbs vertically.
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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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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.