TechniTrader teaches "How to Recognize Stock Chart Platform Compression Patterns for Early Entries"

Trade along with the Professional Traders for Higher Profits

The stock chart example below recently had a strong “Pop Out of the Box” candlestick pattern, after a Platform compression pattern. Preceding the compression, the price action was a Trading Range. Often times Trading Ranges compress into a tighter formation when Accumulation is underway.

Dark Pools have been quietly accumulating this sector of stocks for most of the year. A crossover confirmation of both the ChiOsc Indicator which is a Volume Oscillator and the Money Flow Indicator MFI Indicator, confirm the strength of the break out. This run is dominated by Professional Traders using Technical Analysis.

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It is therefore easy to trade with the Professionals as they are not emotional, set precise entries and exits, and they have fewer wicks and tails on candlesticks.

chart example with platform in development - technitrader

There are numerous patterns like this that are setting up, as the Market Condition at this time is a Platform in development condition. This condition occurs when the Buy Side Institutions have ample capital to accumulate more stock for their Mutual and Pension Funds.

The Flow of Funds reports confirm that a huge surge of new money has moved into the Mutual Fund industry, with the preponderance of new investors wanting to buy stocks and Exchange Traded Funds rather than bonds.

Whenever there is a huge Flow of Funds into Mutual Funds, patterns like this quickly develop. The key is the entry which must be calculated on the Platform compression pattern magnitude, and its probable conclusion.

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Not all compression patterns compress tightly before the breakout. This is a velocity run, and these frequently do not have a triangular compression before the breakout as do momentum runs.

Velocity runs are the footprint of Professional Traders, often who are buying in just prior to the breakout. Volume patterns confirm heavy concentrations of Professionals rather than High Frequency Traders. To select fast running stocks that will have strong runs that sustain, it is important to differentiate between the High Frequency Trader run and the Professional Trader run.They look entirely different on the chart. Platform compression patterns that form consistent highs provide Professionals with a designated entry price that reduces gap risk, and lowers overall risk.

This stock is a classic example of the type of pattern Swing Traders and Position Traders can use to trade these slower moving markets. Many times Retail Traders are frustrated because the markets seem to be going nowhere. 

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Recognizing these Platform compression patterns early on helps with a precision entry, which allows the Retail Trader to maximize profits. Instead of a .50 gain this kind of run offers a several point gain. In this instance it was about 8 points, depending on whether the entry was at the “Pop Out of the Box” or later.

A fifty cent gain on 100 shares is $50.00. An 8 point gain on 100 shares is $800.00. The difference adds up over time and at the end of the year, the trader who finds and only trades high point gain stock trades has much higher income than the trader who tries to snatch pennies.

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Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using a StockCharts chart, courtesy of

Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
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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.