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TechniTrader teaches "Position Trading Support & Resistance in Charts"

New Compression Candlestick Pattern in Charts

The new “Compression Candlestick Pattern” is where a group of candlesticks indicate the stock is poised for a sudden move. Often there is a breakaway gap that occurs as the compression narrows.

The chart example below in a daily view indicates this pattern with the two green arrows, and shows the gap. The Compression Pattern is one of the most reliable and lowest risk entries for the automated market. The entry was before the breakaway gap. As you can see, the stock gapped just above the highest high of the sideways pattern as indicated by the red arrow. 

Position Trading Support and Resistance in TC2000 Charts chart 1 - TechniTrader

As the stock position is held, it is imperative to study the support and resistance levels to determine where it will stall, the risk of a retracement, and where it may encounter heavy profit taking.

The following two factors affect support and resistance levels:

1. Technical Traders

2. Fundamental Traders

Both have distinctly different areas where they buy or sell. The strength of support or resistance is relevant to these two very different types of professionals.

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Technical traders are using pure technical chart patterns, often assuming they can predict a stock action rather than learning to anticipate price action and there is a huge difference.

Fundamental traders on the other hand, are using pure company analytics as they project the company profits and stock value correlations. They are thinking very differently.

Below are the primary resistance levels marked by red arrows, for the same chart example but shown in a weekly view.

The resistance that was recently broken through must be confirmed with another tight sideways pattern. If it doesn’t move sideways and provide a stable horizontal support, then the stock will retrace or correct as short term profit taking technical traders react to the price pattern.

The second line up is the area where the sideways action should form and is moderate resistance at this time. The third line up is where fundamentalists will react, because this is a yearly high.

Each level of resistance will convert to a support level once the current price moves above it. However if a resistance level is moderate, the support it provides is not necessarily moderate once the stock has overcome that resistance. Right now the stock has moved above and into the moderate resistance area on a daily chart. But the support which that same level provides is weak to moderate support, until the stock forms the next sideways pattern.

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Not fully understanding the relationship between sideways support and resistance, is a common mistake that many traders make. They see the breakaway gap but do not properly evaluate how the stock will react to nearby resistance, and how that resistance will affect the current support from the most recent sideways action below that price move.

This is due to the fact that many forget about the most important traders in the market, the fundamental traders. These are longer term institutional investors of many sizes with varying intentions for the stock. Technical traders often do not consider how, when, where, and why the fundamentalists are moving into or out of a stock, nor do they consider the fundamentalist resistance and support levels.

Most Dark Pool activity is invisible to technical traders because they do not know what they should be looking for on the charts. Dark Pool activity is in the stock chart, but it is not what most technical traders expect it to look like.

Learning to read stock charts is more than just finding a candlestick pattern. It is really being able to understand the language of candlesticks. For many technical traders pure price action is gibberish so they depend too much on price and time indicators, which is a big mistake if you intend to be consistently profitable with better income than you can make on an hourly wage.


There are two factors to studying, analyzing, and interpreting how price will behave at various support and resistance levels. There are both technical and fundamental traders trading the stock chart example at this time. How each approaches their preferred analysis will affect how the stock moves when it approaches resistance levels, and how the stock will react when profit taking or accumulation occurs.As technical traders, understanding the fundamentalist mindset can dramatically improve trading for day, swing, and position trades. Fundamentalists dominate the market, so how, what, when, and why they are buying or selling matters.

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Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using TC2000 charts, courtesy of Worden Bros 

Chartered Market Technician

Instructor and Developer of TechniTrader Stock & Option Markets Courses
This Stock Discussion and Training Lesson is sponsored by a MetaStock® Partner

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