How to Identify Momentum Action Ahead of Runs
One of the most exasperating experiences for many StockCharts.com Users is to open their charts to find a stock that has run or gapped with momentum energy. These huge one day gains occur when High Frequency Traders HFTs fill the queues ahead of market open. This forces the computer automated market makers to gap or run the stock up at market open.
These are difficult to chase with Day Trading, as the stock gaps within seconds of the market open, then profit taking occurs immediately. The whipsaw action within the first few minutes of the day often results in Retail Traders losing money on these types of gaps. The problem is not High Frequency Traders running the stock. The problem is the entry for the trade.
To find these setups and trade ahead of the gap requires indicators that are not commonly used by Retail Swing Traders. Oftentimes, Swing Traders are using Price and Time indicators and ignore Volume and Time indicators entirely.
The Stock Chart example #1 below shows on a 3 minute scale that by the time Day Traders realize the stock is running, it is already in profit-taking mode.
However Stochastic, MACD, and other very popular Price and Time indicators will not provide the pre-signal that is necessary to trade ahead of the High Frequency Traders.
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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