Giant Buy Side Institutions Indicator Patterns
Giant
Buy Side Institutions Indicator Patterns
Dark Pools are here
to stay despite what the retail news media hype portends. The Securities and
Exchange Commission SEC has investigated the practices of giant Buy Side
Institutions using Dark Pools, and it has been proven that they are not getting
any price advantage.
Dark Pool alternative
trading systems are used to hide giant lot orders from Buy Side Institutions,
and to ensure when the giant lot orders are triggering there is no major
disruption of the current trend. It is a major Market Structure change that has
altered everything about trading stocks since 2005, and continues to change
Price and Volume patterns today.
The following are 3
major Dark Pool patterns to learn:
1. Dark Pool Quiet Accumulation Patterns
2. Dark Pool Quiet Distribution Patterns
3. Dark Pool Quiet Rotation Patterns
Most traders learn
“Accumulation and Distribution” patterns, which are broad terms not clearly
defined. Unfortunately QUIET is very different now with Alternative Trading
System venues. The term “quiet” means it is not visible in the chart, unless
you use specific indicators and know what to look for in price action.
Many Retail Traders
are prone to sticking with outdated methodologies, strategies, and trading
systems so it is a leap of faith for them to accept the new reality of stock
trading. However until you learn the Dark Pool patterns, trading profits are
likely to be a disappointment.
Today we are studying
Dark Pool Quiet Rotation Patterns as shown in the chart example below,
which differ from Dark Pool Quiet Distribution.
The term Dark Pool
Quiet Distribution refers to a mandatory selling of shares of stock held in
trusts and charters. Giant Funds Managers of Buy Side Institutions do not wish
to sell the stock, but are forced to do so based on sudden huge redemption
demands by their uninformed Mutual Fund Investors. Distribution dumps a huge
amount of stock for sale suddenly, removing money from the Stock Market so
there is an outflow of monies aka funds.
Rotation is always
quiet these days and well hidden from view, and eventually it may cause a
topping action. Dark Pool Quiet Rotation does not remove monies from the Stock
Market. The Giant Funds Managers are merely moving money around from one stock
to another.
The chart example
below has been under Dark Pool Quiet Rotation for some time.
The ChiO Indicator
which is a Volume Oscillator in the middle chart window clearly reveals a
contrarian Volume pattern, or that Volume is heavier on the sell side than on
the buy side.
The Money Flow Index
MFI Indicator in the bottom chart window, reveals that the flow of money into
this stock is not keeping up with the fast paced buying of the Retail Traders
and the Smaller Funds Market Participant Groups.
The giant Buy Side
Institutions use these two Market Participant Groups as a cloak to hide their
Dark Pool Quiet Rotation Patterns. By not disturbing the trend but allowing the
stock to climb higher due to Retail Traders and Smaller Funds buying patterns,
the Dark Pools actually benefit as they sell hidden on their Alternative
Trading System venues.
Summary
ChiO the Volume Oscillator Indicator starts heading down and diverging contrarily from the price action, which is a critical point all traders need to recognize. Sure you can trade the stock as it moves up, however if you are not aware of the heavy Dark Pool Quiet Rotation out of this stock, a buy could end up being a serious major loss. This stock gapped down after barely rising above prior resistance.
The Money Flow Index Indicator is lagging behind behind price, which is moving with speculative emotional buying by smaller lots in the chart example.
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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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