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Contrarian Patterns Top Warning

Contrarian Patterns Top Warning
October 12, 2018 Martha Stokes CMT

Contrarian Patterns Top Warning

Indicators Reveal Giant Institutions Market Participant Group

Often for Beginners the market reversing and heading down into a correction is a complete surprise or shock. They are not expecting the turn, nor are they prepared for it. Fortunately for Retail Traders there are plenty of indicators that can warn of a top, before it actually occurs. These can be Contrarian Patterns. A Contrarian Pattern is simply something that is moving in opposition to price.

In other words, the indicator is exposing selling while price is still moving up. This is one of the key elements to avoiding getting into a stock and then having it reverse on you and sell down as you take a loss. In the candlestick chart example below the Balance of Power indicator in the bottom chart window exposes whether large lot giant Buy Side Institutions are buying or selling.

It is showing red bars which means these Giant Funds are selling or rotating out of this stock, but price still climbs upward.

Many Retail Traders wonder how this can be. If giant Buy Side Institutions are selling or in Dark Pool Quiet Rotation™ out of a stock, how can price continue upward?

What drives price upward is demand AND types of orders. If smaller lots are buying “At Market” which is the most common way for a new investor to buy a stock, then price will continue higher so long as the giant Buy Side Institutions are careful about not selling too many large lot shares all at once.

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Balance of Power

Indicator training webinar to learn more about this indicator which tracks large lots versus small lot activity. Click HERE

Leading Indicators

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In this instance the Balance of Power indicator red bars warn this is a period of Dark Pool Quiet Rotation, and that the stock is at risk of a Topping Formation.

There are a couple of days of Balance of Power indicator green bars but that is far fewer than the red, and at the wrong price level for the giant Buy Side Institutions Market Participant Group to be buying. They prefer to buy in at a bottom using Dark Pools, so this is speculative buying by the Smaller Funds Market Participant Group who are buying at the wrong time. Then a huge High Frequency Trader Market Participant Group sell-off begins, smaller lots panic and Smaller Funds sell causing Balance of Power to have long red bars.

Summary

Contrarian Patterns in stock indicators help you see what is going on. Remember there are 9 Market Participant Groups and each has their own agenda, way of buying or selling, order type, capital base, and experience. The more you understand how each group trades, the better you will be at trading.

Go to the TC2000 Learning Center to watch webinars on Time Segmented Volume TSV, Balance of Power BOP, the Trade Management Planner, and Pro Style TC2000 Scans. Also access info about TechniTrader Trading Tools for TC2000 Users.

For information on the Elliott Wave Principle and analysis Click HERE

Trade Wisely,

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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Martha Stokes, CMT is co-founder and CEO of TechniTrader. She is a retired professional Buy-Side Analyst and was awarded the Chartered Market Technician designation for her thesis, "Cycle Evolution Theory." Martha is a passionate teacher of the financial markets and a prolific writer, having created over 40 stock, option, and financial market courses.