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Alphatrends Understanding Market Structure PDF

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2K views1 page

Alphatrends Understanding Market Structure PDF

Uploaded by

Sino
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ALPHATRENDS - Understanding Market Structure www.alphatrends.

net

Segment of Segment of
A ccumula t ion Ma rkup Distrib ution Declin e
Uptrend Occurs after a drop in prices. Bullish phase of a stocks life is defined by higher highs and higher Occurs after a prolonged price Bearish phase of a stocks life, this is where you want to be
Downtrend
Process of buyers gaining lows. This is where you want to get long on breakouts and after advance, process of sellers short, look to sell short fresh breakdowns after short term
control from sellers which short term pullbacks. Rallies are “innocent until proven guilty”. gaining control of prices, rallies have exhausted themselves. Rally attempts are
leads to markup. which leads to decline. “guilty until proven innocent”.

A
C D
C B A
D
B
A
B C D B
A C D

A Anticipate/Analysis A Anticipate/
Analysis

B Participate (Buy)
B Participate
(Sell Short)

C Exit Long (Sell)


C Exit Short (Buy to Cover)

D Avoid D Avoid
1-1 1-2 1-3 2-1 2-2 2-3 3-1 3-2 3-3 4-1 4-2 4-3

EARLY ACCUMULATION EARLY MARKUP EARLY DISTRIBUTION EARLY DECLINE


1-1 Beginning of transition from bearish trend to more neutral, 2-1 Stock first establishes a pattern of higher highs and higher lows above 3-1 Shorter term moving averages begin to cross one another which 4-1 The stock first establishes a pattern of lower highs and lows below
longer term moving averages are still declining and the rising longer term moving average. These stocks show considerable indicates a confusion of trend. Many of these stocks will the declining longer term moving averages. These stocks are
stock will cross above and below those moving averages. upside momentum and should be monitored closely on shorter term continue higher so they should still be monitored for potential beginning to show signs of fear and can decline rapidly. These
Many of these stocks will continue lower and should timeframes for low risk buying opportunities. long candidates. stocks should be on watchlists for short sale opportunities.
continue to be monitored for short opportunites.
MID MARKUP MID DISTRIBUTION MID DECLINE
MID ACCUMULATION
2-2 Pullbacks above the rising longer term average may become deeper but 3-2 These stocks have become more neutral and should be looked at 4-2 Rallies to longer term moving averages typically fail as more
1-2 Bearish forces become more neutral as buyers these stocks are often in the “sweet spot” of an uptrend where gains as “correcting through time.” Upside is still possible, but becomes participants lose hope in a rally and the reality of a declining stock
methodically accumulate shares, but still no signs can come quickly. less likely as the interest from momentum traders shifts to more starts to settle in. These stocks offer excellent shorting opportunities.
of upward momentum develop. active issues.
LATE MARKUP LATE DECLINE
LATE ACCUMULATION LATE DISTRIBUTION
2-3 The upward momentum is still present but rallies may take longer to 4-3 The downward momentum is still present and declines can
1-3 Higher lows will often develop but the stock is unable to penetrate develop after pullbacks. Gains can come very quickly, often at the 3-3 Some of the shorter term moving averages may be declining and come rapidly, but so too can violent short squeeze rallies,
a longer term resistance level to create a higher high. Moving expense of “trapped” short sellers who have incorrectly bet against acting as resistance but the stock has not broken key support to particularly after “bad news” is reported.
averages have flattened out as buyers slowly gain control. the uptrend. place it in official downtrend. These stocks are quite vulnerable
to decline.

Graphic by Infographics® follow on twitter @alphatrends © Brian Shannon 2010


© Alphascanner 2010

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