Signals of Earnings Reports Revealed in Stock Charts
Stocks and the Stock
Market move sideways about 70% of the time. Yes, some stocks get into periods
of moderately trending activity but if you really look at charts just to see
the 3 trends of Uptrending, Downtrending, or Sideways you will see that most of
the time stocks are in some kind of Sideways Pattern.
Traders do not spend
sufficient time learning how to recognize which of the several types of
Sideways action is underway. Being able to accurately determine what type of
sideways action is forming before the sideways pattern completes, will help
tell you which direction the price will move, either the Uptrend Breakout or
the Downtrend Breakout.
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Recognizing weakness
in a Sideways Candlestick Pattern requires the use of more than Price
indicators. Price indicators are incapable of leading price, because price must
move in that direction before the indicator can show that in its line graph.
Shortening the period settings does not make the price indicator lead, it merely
makes the price indicator over-reactive to every price directional change that
occurs naturally in Daily View or Intraday Charts.
The chart example
below shows a sideways pattern that is 4 points wide.
This chart has a
typical Platform Candlestick Formation. The assumption might be that the stock
will break to the upside due to the presence of giant Buy Side Institutions
using Dark Pools IF you only considered Price and did not check Volume
indicators which reveal if the giant Buy Side Institutions using Dark Pools are
in Quiet Accumulation, Rotation, or Distribution mode.
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When studying the
Volume indicators for this chart example there is clear evidence that while
there are some Smaller Funds buying, Volume overall is declining due to large
lots selling as this stock moves sideways in a fairly tight range.
There is a surge of
Volume that moves the indicators into an extreme Angle of Ascent™ while Price
maintains. This is a divergence pattern, because Price and Volume diverged.
This is a negative divergence, as Price and Volume should be in harmony or in
sync.
The stock immediately
sells down the next 3 days, because large lots are on the sell side. Then the
next few days the stock consolidates just slightly lower. However Volume
indicators all turn to the downside quickly. The stock gaps twice, and halts at
a prior Dark Pool Buy Zone™ which is at a 10 point lower level.
Summary
Recognizing weakness
in a Sideways Candlestick Pattern is crucial if you want consistent
success trading stocks. Price Patterns are no longer sufficient by themselves
to reveal the information needed to determine the direction of the stock, after
the Sideways Pattern completes.
This particular
Sideways Pattern is consistent with an Earnings Report release. During the
sideways pattern giant Buy Side Institutions Quiet Rotation™ occurred in Dark
Pools on a very consistent basis. This giant Buy Side Institution activity was
hidden from Smaller Funds and the retail crowd. The gaps are all driven by bad
news and panic dumping.
During Earnings
Seasons it is imperative to always read sideways action correctly, and that you
are prepared for Earnings Reports. High Frequency Trading Firms use the
earnings News to gap stocks, especially the most popular big blue chip stocks
which are what most Retail Traders prefer to trade.
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for yourself the excellence of TechniTrader education.
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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