Enter Stocks 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 by giant Buy Side Institutions is underway.
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A crossover confirmation of both the ChiOsc Indicator which is a Volume Oscillator and the Money Flow Index MFI Indicator, confirm the strength of the break out. This run is dominated by Professional Traders. using Technical Analysis.
It is therefore easy to trade with the Professional Traders as they are not emotional, set precise entries and exits, and they have fewer wicks and tails on candlesticks.
This condition occurs when the Buy Side Institutions have ample capital to accumulate more stock for their Mutual and Pension Funds.
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.
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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.
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 Retail Trader who tries to snatch pennies.
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Martha Stokes CMT
TechniTrader technical analysis using Stockcharts charts, courtesy of Stockcharts.com
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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