List of Indicator Signals Revealed Institutions Quiet Rotation
All businesses have
an internal cycle. Being able to identify when that cycle poses a high risk for
a huge High Frequency Trading gap down, is an important skill. All Retail and
Technical Traders need to develop recognition skills in order to identify, the
dynamics of a High Frequency Trading gap down forming prior to the gap
occurring.
The stock chart
example below has been under Quiet Rotation™ for over a year as giant
Institutions quietly and slowly reduced the number of held shares in their
portfolios using Dark Pools, in expectation of a slow-down for this business.
This example shows an
obvious pattern for a high risk of a HFT gap down in several levels of
analysis. The stock started to lose the steady upside Moderate Uptrend, and the
trend started shifting sideways with less upside momentum. Runs began to
deteriorate faster. More and longer black candles formed while white candles
became smaller and less consistent, until tiny Indecision Day candles ended the
uptrend prior to the 12 point gap down. This was caused when HFTs triggered
massive quantities of sell orders prior to market open, on company news of
weaker Earnings. The Angle of Ascent™ for price was too severe to sustain, also
warning of high gap risk during Earnings Season.
Here is a list of the
Indicator signals that revealed Quiet Rotation, and the increasing risk of an
HFT gap down on Earnings News:
1. The Volume
Indicator did not increase and rise as the stock moved up. It remained below or
at a low average level, as the stock climbed from 106.00 to 122.00 a share
prior to the Second Quarter Earnings release.
2. The Accum/Dist
Indicator clearly shows the steady Rotation, which reduced the giant
Institutions inventories of this stock from a high of 80% percent Institutional
Ownership to the current 65% Institutional Ownership.
3. The Flow of Funds
Indicator peaked at an extreme 3 times, before declining as Smaller Funds
capitulated after the dynamics of a High Frequency Trading gap down caused a 12
point gap and created a sudden Distribution pattern.
HFTs traded the stock
2 days in a row with huge volatility present each day, in the early minutes of
the market open.
Many Retail and
Technical Traders as well as Long-term Investors were caught by surprise at the
huge gap down, however the chart clearly revealed the substantial risk of a gap
down for this stock as it reported Earnings.
Summary
Candlestick patterns
in a Relational Analysis™ comparison of runs, down days versus up days, length
of runs, duration of runs, and individual candlestick patterns as well as the
steep Angle of Ascent™ all warned this stock was at extreme speculative levels
going into its Earnings Report. Given that the overall Earnings Season for blue
chip stocks was expected to be poor, exiting the stock prior to Earnings was
necessary to avoid HFT selling on weaker Earnings News.
All indicators showed
the Quiet Rotation patterns and a weakness for buyers, indicating the impending
dynamics of a High Frequency Trading gap down forming. Sellers were in control
allowing price to move up as they slowly rotated out of the stock, well ahead
of the sudden Sheer Cliff Topping Formation™ that HFTs create.
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
TechniTrader DVDs with every course.
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