One aspects of the massive internal structural changes that continues to evolve the stock market is how the new orders for the institutions and professional traders are altering price patterns, trends, and Candlestick Patterns for retail and technical traders.
Keeping up with all of these changes has become rather daunting for many. Often times traders assume a particular Candlestick Pattern is a reversal signal, as they were taught during previous years. Unfortunately this leads to lost profits, because in today’s market the stock continues moving upward.
Two Candlestick Patterns are key on the chart example ANI Pharmaceuticals (NASDAQ:ANIP) below.
First of all on 10/24/14 a strong Springboard Candlestick entry signal formed. This was an ideal entry for swing traders. The stock rested the two days then resumed the momentum run. Momentum runs are different than Velocity runs. Momentum runs overlap and often the stock price starts lower early in the day and then runs back up, so intraday stop losses should not be used and it is a better swing trade than a day trade.
The second critical candle is the Indecision Day Candlestick on 10/31/14. Clearly the intent early in the day was profit taking by pros and other short term traders. However, buyers continued to move in but were not entirely dominating. Most of the time retail traders who had been taught the older style of Candlestick Patterns, would see this as a warning that the stock was losing momentum and it was time to exit. However with today’s market and Candlestick Patterns, that would result in the retail trader missing out on the huge gap and momentum run caused by High Frequency Traders HFTs.
Summary:
The HFTs and Dark Pools have changed what some Candlestick Patterns mean. It is no longer sufficient just to study the older style Japanese Candlesticks. It is important to also continue to learn the New Western Candlesticks that form due to HFTs, Dark Pools, Proprietary and Independent Technical Traders, as well as Corporate buyback Candlestick Patterns.
The Stock Market continues to undergo massive internal structural changes due to new trading venues, new rules and regulations, new algorithms, and new order processing systems that are not available to the retail crowd.
The advantage retail traders have is the ability to learn to read Candlestick Patterns and indicators that expose the Dark Pools ahead of the HFT huge runs. By learning a few entry signals that Dark Pools create, the retail trader is able to enter a stock before HFTs run it up with momentum.
Trade Wisely,
Martha Stokes CMT
www.TechniTrader.com
info@technitrader.com
