Early Candlestick Identification Most Important
Platform Candlestick Compressions ideal entries are best for Swing and Momentum Traders, but identifying these compression patterns early is most important.
The chart example below is for studying a Relational Technical Analysis™ pattern. This stock was under Dark Pool Quiet Accumulation which tends to form platforms. Dark Pools create this sideways pattern with controlled bracketed orders that buy incrementally over time.
The goal of the Dark Pools is not to disturb price. As they conclude their buying for that period, High Frequency Traders find out and can push price up with momentum as occurred in this chart. Prior to that move up, the candlesticks compressed. These Platform Candlestick Compressions ideal entries are used by Swing and Momentum Traders.
A compression is a tight consolidation rather than a wider platform. It doesn’t matter where the compression forms, at the low or high of the platform range, it often precedes a decisive breakout and run or gap. Then the stock resumes its sideways pattern as Dark Pools start buying at the next level.
Platform Candlestick Compressions ideal entries form at or near the end of the platform, and are often missed by Retail Traders.
Bollinger Bands® can be used to assist in the identification of the compression. These expanding and contracting bands provide excellent analysis for sideways patterns. Entries must be made prior to the breakout due to the rising energy that develops as price compresses.
Martha Stokes CMT
TechniTrader technical analysis using MetaStock charts, courtesy of Innovative Market Analysis, LLC dba MetaStock
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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