TechniTrader teaches "Extraordinarily Long Indecision Day Candles"

List of Why these Candlestick Patterns Occur

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.

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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 Long 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 Long Indecision Day Candle 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 Long Indecision Day Candle 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.

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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 Extraordinarily Long Indecision Day Candles caused by a major global event or shock to the stock market, it is important to not trust the Price and Time based indicators. Instead 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.

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


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

©2016-2017 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.

TechniTrader teaches "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 candlestick patterns form and in particular how Tops form are undergoing massive changes.


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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.

TechniTrader is "The Gold Standard in Stock Market Education." Go to the TechniTrader.com Learning Center and watch a wide variety of webinars, to experience for yourself the excellence of TechniTrader education.

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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.

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


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

©2016-2017 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.