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.
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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Summary
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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Learning Center to watch a wide variety of webinars, to experience for yourself
the excellence of TechniTrader education.
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Trade Wisely,
Martha Stokes CMT
Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDs with every course.
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