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Entries in candlestick chart explanation (1)

"Invaluable Weekly Stock Chart View" 

Interpret What Price Will Do After Volume Spikes

 The chart example below with a daily view, shows that High Frequency Traders caused a huge white candlestick and volume spike, as indicated by the vertical red arrow on the right. Since then this stock has been in a sideways price action that has slowly slipped down to the previous highs support level, which is underlined in black and indicated by the horizontal red arrow.

Weekly Stock Chart View is Invaluable chart 1 - TechniTrader

What has happened is High Frequency Trading buying volume triggered Smaller Fund Volume Weighted Average Price orders. This caused the indicator Balance Of Power BOP which tracks large lots versus small lot activity, to spike green as seen in the bottom chart window.

The weekly chart view below shows far more information, which can help a trader determine how to trade this stock for example whether Swing or Position trading would be best. Swing Traders and Position Traders use completely different entry signals, support levels, and exit techniques.

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Knowing which to use for this particular stock makes all the difference in whether the trade will be successful with high profits, or if it will have weak profits or a loss.

Weekly Stock Chart View is Invaluable chart 2 - TechniTrader

The weekly chart view is invaluable because it provides information such as the following:

  1. Support levels below the current price.
  2. How long the stock tends to move sideways.
  3. Whether slipping down after a big move is common or rare.
  4. How often High Frequency Traders trade this stock.
  5. How far price can move up or down before it runs into resistance or support levels.
  6. The upside target price gain potential for buying long. The Downside gain potential for a sell short.
  7. Where price will run into strong resistance as it moves up.
  8. Whether Quiet Accumulation or Quiet Distribution has occurred during the move up out of the bottom, and recently in the past few weeks.
  9. Whether the bottoming formation is completed, which will indicate whether this current sideways action will drop further or not.
  10. The strength of volume over the past few weeks.

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Going back now and look at the daily chart view again which is the first chart example, and see that currently the stock is behaving similarly to the way it moved previously.

Summary

Stocks tend to repeat patterns, especially if Volume and BOP are very similar between time periods. Knowing this information helps retail traders decide if the stock is right for their trading style, intent of the trade which is selling short or buying long, how much risk, upside gain, when to enter, and how long to hold the stock. The weekly chart view is invaluable since it helps define and clarify many aspects of the daily price action. 

TechniTrader is "The Gold Standard in Stock Market Education." Go to the TechniTrader.com Learning Center and watch a wide variety of webinars, to experience for yourself the excellence of TechniTrader education.

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Trade Wisely,

Martha Stokes CMT

TechniTrader.com

TechniTrader technical analysis using TC2000 charts, courtesy of Worden Bros.

Chartered Market Technician
Instructor and Developer of TechniTrader Stock & Option Markets Courses

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