Why Use Balance of Power to Reveal Dark Pool Quiet Rotation™ & Distribution?
Find Earlier Sell Short Entry Signals in Topping Stocks
Balance of Power Selling Short indicator patterns are often misread by TC2000 Users. This is because of the different Market Participant Groups who dominate during a downtrending market. Instead of all 9 Market Participant Groups as there is during an Uptrend, the Downtrend has only 3 groups that actually Sell Short regularly. It is not those who are Selling Short that cause the stock to top. It is the Buy Side Institutions who are either using a Dark Pool Quiet Rotation selling mode to lower their inventory of that stock, or it is Dark Pool Quiet Distribution where they are actually selling the stock in order to place the money into another trading instrument.
The stock chart above is an excellent example of how Balance of Power reveals the Dark Pool Quiet Rotation going on, that initiates the stall of the price action. The Topping Candlestick Formation started out as a sideways pattern that rounded. Slowly as more and more Dark Pool Quiet Rotation and selling occurred, the stock trend succumbed to the large lot selling mode as fewer smaller lots bought the stock. The Shift of Sentiment™ to the downside is obvious in the Balance of Power Indicator.
This is one of the newer Topping Formations. These are due to the controlled bracketed orders, variety of venues, and routing systems that provide excellent coverage for the large lot activity from the predatory systems of the High Frequency Traders on the exchanges. Dark Pool Quiet Rotation is evident in Balance of Power, which is an early signal to Swing and Day Traders that this stock has more selling pressure than price is indicating. The slow and steady selling of large lots erodes the price trend over time as smaller lots attempt to Swing Trade or Day Trade this topping action, unaware of the fact that Dark Pool Quiet Rotation is underway.
Dark Pool Quiet Rotation patterns of the Buy Side Institutions are new to Technical Analysis, as these patterns only started forming as Dark Pool Alternative Trading Venues became more popular.
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The complex Balance of Power formula in TC2000 requires more than just the basic reading of red is Dark Pool Quiet Distribution and green is Dark Pool Quiet Accumulation. Nowadays, there are new order types, trading venues, and routing options for the Buy Side Institutions and Professional Traders. With automation, Balance of Power has become a far more useful and more informative indicator than it was in the 1990s through 2008.
Support levels trigger some smaller lot Buying on the Dip, and a few Small Funds Volume Weighted Average Price orders for Buy on the Dip action. If the stock breaks through the support levels which are weak support, then High Frequency Trading orders trigger and the stock plummets sharply in a one day drop. Professional Traders tend to be in ahead of the High Frequency Traders with their End of Day to First of Day Strategies.
Go to the TC2000 Learning Center to watch training webinars on Time Segmented Volume TSV, Balance of Power BOP, Trade Management Planner, Pro Style TC2000 Scans, and TC2000 Tools.
Martha Stokes CMT
TechniTrader technical analysis using a TC2000 chart, courtesy of Worden Bros.
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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