Market Participant Groups Control Price
Bottoming Market
Conditions are frequently considered “volatile” as the intraday and day to day
activity can be up and down, with what appears to be random price action.
However if this price action were studied more closely, it can actually reveal
the candlestick pattern "footprints" of who is controlling price.
Most Technical
Traders are taught that price is the most important aspect of a chart. This
used to be true in the early days of stock chart analysis when data was not as
reliable. In those days it was quickly assembled from various venues, cleaned,
sorted, and then distributed to the few Market Participant Groups during the
1970’s-1990’s when Technical Analysis grew in popularity. Nowadays most people
assume Technical Analysis is part of everyday trading.
Price however is not
all the data available in order to analyze stock price action, in particular
near term price action. What also should now be included is Quantity data,
which is both total Volume for the day and how much of that total Volume was
larger lots versus smaller lots.
Leading indicators
are used to identify Quantity and Volume in a stock. Go watch the Stock Leading
Indicators Webinar to
learn the 5 Essential
Stock Indicators, Price vs Quantity, and indicators for finding Dark Pools
& High Frequency Traders which cause huge gaps and runs.
Go to the TechniTrader
In a Bottoming
Market, Quantity and Volume Indicators provide invaluable information to the
Technical Trader about who is in control of price, and if giant lot buyers are
present or not.
Market Participant
Groups that are highly active in a bottom are the giant Buy Side Institutions,
Sell Side Institutions, Professional Traders including Proprietary Desk
Traders, private Floor Traders, and Independent Traders. Nowadays Buy Side
Institutions have their own floors of Professional Traders.
Buy Side Institutions
prefer to enter with controlled orders, hidden from the exchanges in Dark Pools.
Their orders are bracketed to prevent predatory systems manipulation.
Professional Traders
are expert Technical Traders using their own undisclosed privately developed
“systems” which are not redlight/greenlight as Retail Traders like to use, but
are pure technical analytics. The Spatial Pattern Recognition Skills™ of a
Professional are extremely high.
So there are two
types of buyers that dominate, forming the Candlestick Patterns in a Bottoming
Market. There are Buy Side Institutions, who control price so well that I call
it a Dark Pool Buy Zone™ as these become a very precise price range. There are
also the Professional Traders, who want to move price. The Professional Traders
tend to create the Momentum and Velocity runs, that Retail Traders and
non-professional Technical Traders enjoy with Swing and Day Trading.
In analyzing this chart first look to see that the concentrated buying power of the Dark Pools, creates a Basing Bottom Formation which halts the Downtrend.
Go
watch the Candlestick Patterns Webinar
Go to the TechniTrader
Then runs begin
moving up with higher Volume, and there is a steady rise in minor profit taking
retracements or consolidations which are typical of the expert Professional
Traders. Technical and Retail Traders should endeavor to trade with the Pros,
as these are reliable runs with rising Volume.
The key element to
always remember is that Professionals are technical experts. They will take
profits ahead of resistance, when their propriety aka black box indicators they
develop and use tell them the stock is rising too quickly to sustain, or that
the Dark Pools have halted buying as the stock moved up.
Summary
All Retail and
Technical Traders can learn to identify Candlestick Patterns in a Bottoming
Market, to determine who is controlling price during all of its phases.
Keep in mind that bottoms for many industries and their component stocks will
take a long time to develop, due to the contraction of that industry overall.
Some stocks move down
in sympathy moves into extreme lows. These will recover more rapidly and will
tend to have more momentum behind the runs, as Dark Pools are willing to pay
higher prices for a stock they deem undervalued.
Bottoms form on all 3
timeframes which are short term, intermediate term, and long term. Traders need
to determine which of these timeframes the bottom is forming within, so they
can determine how long it will take to complete. This stock example has not yet
completed its bottom.
Go to the Learning
Center and watch a wide variety of training webinars including Bollinger Bands,
How to Improve MACD, How to Trade the Stock Market, and Technical Analysis.
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Gold Standard in Stock Market Education
Trade Wisely,
Martha Stokes CMT
TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com
Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
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