Shifts of sentiment are often missed by retail traders who tend to focus too much on price and price indicators and not enough on institutional activity indicators. I tend to front load the analysis of stocks with institutional activity indicators because these indicators lead price.
Being able to anticipate near term price action out of a bottoming phase is critical to early entries.
We are experiencing a lot of sideways action right now with weaker follow through for day trading and swing trading. The common term used for this kind of tight sideways action is “choppy” for intraday.
When markets become choppy with tighter sideways action, day trading and swing trading and momentum trading can be very challenging with common whipsaws taking you out of the trade before you are in profit.
Position Trading is ideal for choppy consolidating and platforming markets. It is far more forgiving than day or swing trading, and there is far less work to do. The entries are simple and straightforward and you can hold the stock for 10-40 points gain rather than a mere pennies gain as so many day traders net.
If you consider the time you spend, the cost of the trade in and out, and the low returns of day trading, position trading is far more lucrative. Granted, it is not the glamorous trading style many traders like to brag about but frankly, what is more important?
Profits, or being able to call yourself a day trader?
Choppy markets are when traders should fall back to position style trading because there is insufficient momentum to net excellent gains consistently.
OCR is setting up for completing its bottom on a long term scale. This is a weekly chart below and we can see the shift of sentiment from large lot selling to large lot buying. Institutional buying is incremental, exposing the institutional investor who prefers to move in quietly. The long tail of October is the defining momentum when sentiment to the upside seizes control.
Chart 1Now the stock is resting just below the first tier of resistance that would complete this long term bottom.
It has ample upside points gain for a position trade and it is gaining some underlying energy. Watching for the breakout allows traders to get into this stock when it is ready to move up further and challenge the bottom resistance highs.
The Daily Chart shows that the shift of sentiment from selling to buying occurred suddenly as is the case in the current market condition. Swing trading out of the bottom was brief with stalling action at resistance levels. The stock overcame these initial resistance levels from the intermediate term trend. Now it faces the bottoming resistance.
Indicators confirm a slower action for now before the stock can build energy to move it beyond that bottom resistance level. Keeping an eye on this stock for more upside, especially as the markets grow stronger allows a position style entry.
Chart 2
Chart 3You can see the big surge of flow of funds into the stock and the steady continued accumulation going in even in the quieter sideways action.
Learning to Position Trade as well as day or swing trading expands your ability to trade even quieter, choppy markets when there is insufficient momentum for strong profits swing trading.
Trade wisely,
Martha Stokes, C.M.T.
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
http://technitrader.com
MetaStock Partner
©2011 Decisions Unlimited, Inc.
Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader, its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor it is strictly an educational service.
