Question? Call Us: (888) 846-5577

How to Identify New Sell Short Topping Candlestick Patterns?

How to Identify New Sell Short Topping Candlestick Patterns?
September 24, 2021 Martha Stokes CMT

How to Identify New Sell Short Topping Candlestick Patterns?

Add Stock Volume & Quantity Indicators to Analysis

One of the challenges for Technical Traders is learning the new Topping and Bottoming Candlestick Patterns that have emerged in the past few years. The Topping Candlestick Patterns in the markets today can be a surprise for traders. Learning How to Identify New Sell Short Topping Candlestick Patterns is by including additional stock Volume and Quantity Indicators with those you are already using. These can improve your ability to see Dark Pool Quiet Rotation™ and selling pressure, which are not visible on the chart or indicators until after the stock drops sharply.

The stock chart example below has a new “Flat Top” Candlestick Pattern and is a good sell short example.

The top actually starts as the Accum/Dist and Money Flow Index (MFI) indicators diverge from price. This reveals Dark Pool Quiet Rotation by giant Buy Side Institutions whose orders are hidden from traders in Dark Pool venues. Price continues up as the institutions intend. As the buying power of Smaller Funds and uninformed Retail Traders dissipates, the Buy Side Institutions’ giant-lot orders selling in Dark Pool Quiet Rotation patterns weaken the uptrend, shifting it sideways. At first glance, this does not look anything like the Topping Candlestick Patterns every Retail Trader knows. It looks like sideways price action that is going to break to the upside.

The Money Flow Index indicator and other large-lot indicators reveal a negative divergence pattern, warning that this is indeed what is called a “Flat Top”. This is one of the New Sell Short Topping Candlestick Patterns in the markets today. Selling for profit quickly reverts to Selling Short and the stock collapses, then it quickly rebounds on Buy to Cover orders. However, the stock chart indicators still reflect a sell side pressure.

Topping and Bottoming Candlestick Pattern changes have occurred as the internal Market Structure evolved into a far more complex system of venues. There is now a plethora of new stock order types, routing systems, and order controls. These are especially for the giant Buy Side Institutions using Dark Pools and Twilight Pools, where they are permitted to delay orders and hide huge quantities of shares.

Volume Indicator Webinar

Learn why volume is as important as price analysis, and why volume leads price. Learn MORE

High Frequency Traders

Webinar to learn how to find and track price patterns that trigger High Frequency Traders, and when to exit a trade High Frequency Traders driven. Learn MORE

Candlestick Patterns Webinar

Learn which patterns work all the time, how many patterns you really need to learn. Click HERE

The popular and well-known tops of the 1970s–1990s started changing shortly after the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) enacted the decimal system of pricing structure for stocks. The venerable fractions were eliminated with the intent of squeezing out the rouge Professionals who were Day Trading. They were jumping in ahead of Buy Side Institutions’ giant-lot orders, using the advantages of wide spreads. Decimals shrunk spreads down to pennies, and then half-pennies for the professional side of the market.

High Frequency Traders HFT evolved out of the Proprietary Professional Traders Stock Market Participant Group to cope with the tight penny spreads. This altered order routing and stock order types and increased the number of venues.

Technical patterns changed, morphing slowly into the new Topping and Bottoming Candlestick Patterns that now form on stock charts. Unfortunately, many Retail Traders and Technical Traders have fallen behind in learning these new price action patterns.

Summary

The New Sell Short Topping Candlestick Patterns that form in the automated markets today do not look like tops, but often appear to be sideways price action or resting periods. These candlestick patterns suddenly break to the downside without any price action pattern directional warning. Traders who only use Price and Time Indicators are often on the wrong side of the trade, having bought the stock just as it starts to plummet.

Go to the StockCharts.com Users Learning Center and access a webinar on Exploit the High Frequency Traders, Momentum Power Trading Explained, and the Trade Management Planner.

StockCharts.com Tools – TechniTrader has created chart templates, custom trading style scans, and technical indicator setups for StockCharts.com Users.

Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com

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

Copyright ©2017–2021 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

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.