They Move Based on Index Value as It Changes
Thousands of new Exchange-Traded Funds (ETFs) have been created over the past few years, providing another way to trade stocks for short-term profits. All ETFs are based on a group of stocks often called an index. Often, the most popular ETF among traders is the DIA or Dow Jones Industrial Average.
Trading stocks on their earnings release date can be problematic due to High Frequency Traders’ (HFTs’) interference and front-running tactics that can reverse a stock within a couple of minutes. However, using an ETF can be far lower-risk with much higher profit potential.
Chart example #1 below has been sideways with heavy selling over prior weeks. At this point, the candlesticks do not reflect whether it will break out to the upside or the downside when the sideways market correction ends. Selling pressure is high, and Price Indicators are likely to reflect this pressure.
However, the stock Volume Indicator and Accum/Dist Large-Lot Indicators reveal that the larger lots are on the buy side and not the sell side. This indicates an upside energy coming from the underlying index AND from DIA ETF buyers. Those buyers are predominantly giant Buy Side Institutions using Dark Pools and Professional Traders. This gives you the vital information of where the heaviest concentration of large-lot activity is at this moment in time on this ETF chart.
This ETF breaks out to the upside as the Dow Jones Industrial Average runs up out of its sideways candlestick pattern. See chart example #2.
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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