A special type of analysis is often needed to really determine whether the stock will turn around and move right back up, or if it is going to continue to move down and start a deeper retracement or even a short term correction. This type of Technical Analysis is called Inverted Technical Analysis.
What this means is that you are studying the downside action as if you intended to sell the stock short rather than only looking at it from the stand point that you are in a trade that is either slightly in profit or slightly at a loss, and you do not know whether to sell the stock or hold it. Instead of hoping, worrying, or giving up on the trade use Inverted Technical Analysis and take a totally different perspective. Look at the candlestick patterns in the stock chart you are holding, and determine if this stock would be a good Sell Short candidate at this time based on the history of the candlesticks in the recent past.
The sell side or downside price action are not the same as the upside price action. Price moves differently on the sell side because there are fewer market participants that Sell Short. Selling is done for different reasons than when the market participants are buying, and when a stock moves down there are often Dark Pools lurking that most retail traders are unaware exist in certain price levels and ranges.
By studying a stock chart using Inverted Technical Analysis with support lines drawn at the Dark Pool levels of their prior accumulation, you can quickly determine where Dark Pools are likely to enter again. You can also determine how far the stock can move down, before it will find support for either a bounce or a rebound that will convert back to an upside run.
When a stock you are holding is viewed as a Sell Short pick and fails dismally as a Sell Short candidate, it is likely to easily bounce at the first support level.
By learning to read the sell side price action as easily as the upside price action, and by using Inverted Technical Analysis when you are in a held position but are uncertain what to do, decisions become far easier and your analysis more accurate.
Inverted Technical Analysis exposes aspects of price action, market participant activity, and support levels. It also eliminates the most dangerous part of analysis which is letting your emotions, hope, or fears of loss distort or confuse your trading decisions.
