AAPL Analyzed

Which Market Participant Group is in Control of Price Right Now
This is a training lesson to show what many of you are missing in reading a stock chart. Usually Retail Traders are all about trading a big name stock that shows up on recommendation lists, guru’s picks, or social media sites. However these methods of finding stocks immediately increase your risk of High Frequency Trading Firms HFTs front running, Retail Broker spread exploitation, and Professional Trader profit taking.
The chart example of AAPL was chosen randomly, but also because it frequently is in a list of stocks being discussed.
This test of your skills to choose a stock to trade was not about an entry at a specific time but an analysis of the Risk factors, Trend, Candlestick Patterns that commonly form, Trading Style most suitable for the Trendline Patterns occurring, and identifying the Market Participant Groups who are actively trading any particular stock. Below is a weekly chart view.
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Analysis Part 1

Understanding WHO controls Price at what point in the Trend, and WHY they control price. It is learning why a specific Market Participant Group creates different Candlestick Patterns, Runs, Resistance or Support, and individual Candlesticks.

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Which Market Participant Group is in control of price right now?
1. High Frequency Trading Firms HFTs that use automated algorithms to search for Retail Cluster Orders are very prevalent in this stock. HFTs frequently gap the stock up or down by filling the queues ahead of market open with their orders to buy or to sell. The HFTs are typically active in the first minute or two minutes of the day and then are gone. This is seen on the AAPL chart with the huge surges in Volume, as well as other Volume and Quantity Indicators.
2. Professional Floor and Independent Professional Traders are also active in AAPL, but their strategy is End Of Day EOD to First of Day FOD and are not filling the queues ahead of market open. Their activity is harder to see on the daily chart view but easily seen in an Intraday one minute chart.
3. Dark Pools which are the Buy Side Institutions are not accumulating the stock at this time, and instead have been in Rotation mode for more than a year. They are selling into the buying of the Retail Traders and HFTs. This is seen by Volume and Price runs at the End Of Day and First Of Day. This Dark Pool Quiet Rotation™ weighs on the stock at the trading range highs, but does not create strong runs down.
4. Independent Investors is a tiny group nowadays, but they continue to buy this stock emotionally as it runs up. Lacking any training and relying upon their presumed “entitlement” they often buy as the stock enters a Professional Trader profit taking mode. This is seen at the peaks in the daily chart view.
5. Retail Traders are a very active group which trades this stock as it is a big bellwhether, and has plenty of intraday Volume for their small lots. Their Candlestick Patterns are smaller candlesticks and overlapping candlesticks due to their chronic use of “Limit Orders.” They are often buying into AAPL after the run is underway for a day or two, which consequently lowers their profit potential.
6. Corporate BuyBacks are occurring as this company has been buying back shares of its own stock. Corporate Buybacks inflate prices and are typically set up to trigger at new lows, all time lows, and quarterly or monthly lows. A corporation WANTS price to move up and is shrinking supply to deflect demand, in such a manner that Price rises. This also triggers High Frequency Trading HFT action. The Candlestick Pattern of Corporate Buybacks are longer candlesticks to the upside, as they pull supply from the Stock Market.
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This is just one area of analysis that needs to be done before choosing a particular stock to trade. This is especially true if you are trading only a few stocks over and over again. By understanding WHO controls price, WHERE they control price, and WHY they can control price you have a strong analysis of how price will move next.
When you understand how price is likely to move next based on which Market Participant Group was dominant at that time you can plan Entries and Exits, choose what Trading Style to use based on which group it is, and determine the Risk involved when trading with that group.
Reading a stock chart for trading is totally different than learning Technical Analysis, Candlestick Patterns, or Indicators. Those are all part of the pieces of stock analysis, but are insufficient for strong consistent profitability every time you trade. Complete stock chart analysis must quickly encompass much more. Once you learn to read the footprints of the different Market Participant Groups, analysis is far faster and far more reliable than just a technical pattern by itself. 

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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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