Lowtrade. Thank you for the honor...returned in kind, deservedly so.
I've taken a few days to collect my thoughts to try and elaborate a bit more on why I see, and have seen since November of my first buy, the market makers (also hedgers) at work here, en masse, controlling, setting and trading the share price channels. I apologize in advance that my explanations may be crayon-like, but I want to help those new to TA (technical analysis) reading this tome (yep I type alot) to be able to follow the logic.
Let's start with <To date I have not found any trading pattern which shows institutions or hedge funds playing yet>.
I think you would agree that technical analysis studies are predicated upon patterns...often repetitive and predictable or there would be no TA. Randomness does not make for predictability, other than more randomness...lol. Patterns are human creations, as mirror patterns in nature are virtually non-existent.
Stock patterns require a concerted effort to achieve by large numbers of small shareholders, or large shareholders in concert, moving in-sync to create. When all the groups interests align, either on fundamnetal good or bad news, a trading pattern is "broken" and the stock moves up or down to a new one..called a "breakout"....usually associated with very heavy unusual volume, an obvious indication that everyone is "in-sync."
When a stock reaches a new channel after a breakout, volume dies down, and the stock drifts up and down in that channel, with spurts of volume usually at the extremes of the channel as previously noted. These spurts are often fakes and the stock retreats back into the channel. Channels can be sideways and up inclining or down. A trip to the top of channel back to bottom and back to top, or visa versa, I call a cycle. Some channels have 1, others many.
I have found that channels are rarely "controlled" by retail investors. They frankly lack the coordinated communication skills to make it happen. Despite the "power" they feel they might have en masse on a message board...they have none. Channels are the playgrounds of the market makers, institutions, funds and large holders...and is where they make most of their profits....and most often in hard to see dribs and drabs. They do not want to volume alert retail to their activities...particularly the momentum stock players. That really screws up a cushy channel trade game. So they talk alot to each other, cover their collective arses repeatedly, and frankly do not care about the whip-saw retail is constantly put through. Their's is truly a "Bluehorseshoe" mentality...very unemotional.
The acid test for me that the street controls a stock's trading is when patterns repeat. We have had four now in GTE since Nov 24 that I can identify...all sideways channels. The remarkable similarity in 3 of the 4 speaks loudly to me.
Here they are: (see a daily chart of GTEL and GTE for reference..and I am using approximates channel values not exacts). Divide by 15 to get BB prices.
Channel #1: 11/24-12/14 1.00 - 1.25 mean 1.12 .25rge/1.12=23%
Channel #2: 12/15-1/24 1.35 - 2.00 mean 1.68 .65rge/1.68=38%
Channel #3: 2/11-4/11 3.50 - 5.53 mean 4.25 1.00rge/4.25=23%
Channel #4: 4/13-6/3 3.15 - 4.00 mean 3.55 .85rge/3.55=23%
Those 23% ranges are far too glaring to be coincidence. The street is unconcerned about the price of the stock, but they sure are protecting that range % and controlling it.
Note that the stock has spent most of its time in channels since November, frustrating the heck outta of retail (see other board) and has put a huge smile on the market makers.
Note to James: notice that channels do not cycle to the extreme limits, but rarely while in a channel. That tells you the big boys are taking their profits out of the center...Thus the wiggles. If you play this game, so should you.
I'll leave this for now and post some further thoughts to you Lowtrader on your excellent TA post Friday and your concerns.
regards,
M
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