Bottom Trend Analysis and Dark Pools
It used to be that Technical Analysts identified two trends, the Uptrend and the Downtrend. If the market or a stock was not trending up or down, it was termed “trendless.” In those days the sideways trend was not considered an important factor for entry or exit analysis, and scant studies or theory work was done on the sideways trend.
Sideways action as well as sideways bottoming trends were not common before there were Alternative Trading System venues off the exchanges creating Dark Pools, and High Frequency Traders with highly complex algorithms for their order processing.
Nowadays the most important Technical Analysis Retail Traders need to learn, is to properly analyze the sideways trend. There are a variety of types of sideways price action and each is indicating something entirely different based on Market Condition Analysis at the time of the stock pick selection.
The chart example below had a Shift of Sentiment™ pattern, which clearly and easily showed that Buy Side Institutions using Dark Pools had entered this stock and would quickly take control of price. Sideways bottoming trend analysis of the chart shows a sudden reversal occurred when they moved in quietly, even while the price continued downward for a brief period after the Shift of Sentiment.
Buy Side Institutions using Dark Pools prefer to buy into a bottoming weakness when sellers are running out of capital to trade.
Martha Stokes CMT
TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
Copyright ©2015-2019 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.