Candlestick Charting: New Old-Fashioned Technical Analysis
4 stars based on
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 overreactive to every price directional change that occurs naturally in Daily View or Intraday Charts.
The chart example below for Liberty Global C. This chart has a typical Platform Candlestick Formation common in the market today. The assumption might be that the stock will break to the upside due to the presence of candlestick trading for stocks and options Institutions using Dark Pools IF you only considered Price and did not check Volume indicators which reveal if the Dark Pools are in Quiet Accumulation, Rotation, or Distribution mode. When studying the Volume candlestick trading for stocks and options for this chart example there is clear evidence that while candlestick trading for stocks and options are some Smaller Funds buying, Volume overall is declining due to large lots selling as this stock moves sideways in a fairly tight range.
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.
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. This giant Institutions 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 candlestick trading for stocks and options sideways action correctly, and that you are prepared for Earnings Reports. High Frequency Trading Firms HFTs use the earnings News to gap stocks, especially the most popular big blue chip stocks which are what most Retail Traders prefer to trade.
Her focus for long-term investments is new displacement technologies that will have a significant impact on the stock market. Subscribe to TechniTrader to be notified whenever a new post is added to this blog!