Wyckoff developed a price action market theory which is still a leading principle in today's trading practice.
The Wyckoff method states that the price cycle of a traded instrument consists of 4 stages â Accumulation, Markup, Distribution, and MarkDown.
đTEXTBOOK EXAMPLE Accumulation Schematic: Wyckoff Events and Phasesđ
And this is the accumulation stage -
1) PSâ Preliminary Support, where substantial buying begins to provide pronounced support after a continued down-move.
- Volume increases and price spread widens, signaling that the down-move may be approaching its end.
2) SCâSelling Climax, the point at which widening spread and selling pressure usually in high point and heavy or panicky selling by the public is being absorbed by larger professional interests at or near a bottom.
- Often price will close well off the low in an SC, reflecting the buying by these large interests.
3) ARâAutomatic Rally, which occurs because intense selling pressure has greatly decline.
- A wave of buying easily pushes prices up.
- The high of this rally will help define the upper boundary of an accumulation.
4) STâSecondary Test, in which price revisits the area of the SC to test the supply/demand.
- If a bottom is to be confirmed, volume and price spread should be decline as the market approaches support in the area of the SC.
- It is common to have multiple STs after an SC.
5) SOSâSign Of Strength, a price advance on increasing spread and relatively higher volume.
6) LPSâLast Point Of Support, the low point of a reaction or pullback after an SOS.
7) BU/LPS- Backing up to an LPS means a pullback to support that was formerly resistant, on diminished spread and volume.
All the phases of accumulation stage-
Phase A:
Phase A marks the stopping of the prior downtrend.
-- Up to this point, supply has been dominant.
-- The approaching cutback of supply is evidenced in preliminary support (PS) and a selling climax (SC).
-- A successful secondary test (ST) in the area of the SC will show less selling than previously and a narrowing of spread and decreased volume, generally stopping at or above the same price level as the SC.
-- If the ST goes lower than that of the SC, one can anticipate either new lows or prolonged consolidation.
-- Horizontal lines may be drawn to help focus attention on market behavior, as seen in the two Accumulation Schematics above.
Phase B:
-- Phase B serves the function of âbuilding a causeâ for a new uptrend
-- In Phase B, institutions and large professional interests are accumulating relatively low-priced inventory in anticipation of the next markup.
--There are usually multiple STs during Phase B'
-- Institutional buying and selling impart the characteristic up-and-down price action of the trading range.
--Early on in Phase B, the price swings tend to be wide and accompanied by high volume.
Phase C:
-- It is in Phase C that the stock price goes through a final test of the remaining supply.
-- this marks the beginning of a new uptrend, trapping the late sellers (bears).
-- It indicates that the stock is likely to be ready to move up, so this is a good time to initiate at least a partial long position.
-- The appearance of an SOS shortly after a spring or shakeout validates the analysis.
Phase D:
--During Phase D, the price will move at least to the top
--LPSs in this phase are generally excellent places to initiate or add to profitable long positions.
Phase E:
--large operators can occur at any point in Phase E.
--These are sometimes called âstepping stonesâ on the way to even higher price targets.
đPRICE ACTION BASED ANALYSIS đ
--------------------------------------------------
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TradeTheTip Global Research Pvt.Ltd.
------------------------------------------------
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The Wyckoff method states that the price cycle of a traded instrument consists of 4 stages â Accumulation, Markup, Distribution, and MarkDown.
đTEXTBOOK EXAMPLE Accumulation Schematic: Wyckoff Events and Phasesđ
And this is the accumulation stage -
1) PSâ Preliminary Support, where substantial buying begins to provide pronounced support after a continued down-move.
- Volume increases and price spread widens, signaling that the down-move may be approaching its end.
2) SCâSelling Climax, the point at which widening spread and selling pressure usually in high point and heavy or panicky selling by the public is being absorbed by larger professional interests at or near a bottom.
- Often price will close well off the low in an SC, reflecting the buying by these large interests.
3) ARâAutomatic Rally, which occurs because intense selling pressure has greatly decline.
- A wave of buying easily pushes prices up.
- The high of this rally will help define the upper boundary of an accumulation.
4) STâSecondary Test, in which price revisits the area of the SC to test the supply/demand.
- If a bottom is to be confirmed, volume and price spread should be decline as the market approaches support in the area of the SC.
- It is common to have multiple STs after an SC.
5) SOSâSign Of Strength, a price advance on increasing spread and relatively higher volume.
6) LPSâLast Point Of Support, the low point of a reaction or pullback after an SOS.
7) BU/LPS- Backing up to an LPS means a pullback to support that was formerly resistant, on diminished spread and volume.
All the phases of accumulation stage-
Phase A:
Phase A marks the stopping of the prior downtrend.
-- Up to this point, supply has been dominant.
-- The approaching cutback of supply is evidenced in preliminary support (PS) and a selling climax (SC).
-- A successful secondary test (ST) in the area of the SC will show less selling than previously and a narrowing of spread and decreased volume, generally stopping at or above the same price level as the SC.
-- If the ST goes lower than that of the SC, one can anticipate either new lows or prolonged consolidation.
-- Horizontal lines may be drawn to help focus attention on market behavior, as seen in the two Accumulation Schematics above.
Phase B:
-- Phase B serves the function of âbuilding a causeâ for a new uptrend
-- In Phase B, institutions and large professional interests are accumulating relatively low-priced inventory in anticipation of the next markup.
--There are usually multiple STs during Phase B'
-- Institutional buying and selling impart the characteristic up-and-down price action of the trading range.
--Early on in Phase B, the price swings tend to be wide and accompanied by high volume.
Phase C:
-- It is in Phase C that the stock price goes through a final test of the remaining supply.
-- this marks the beginning of a new uptrend, trapping the late sellers (bears).
-- It indicates that the stock is likely to be ready to move up, so this is a good time to initiate at least a partial long position.
-- The appearance of an SOS shortly after a spring or shakeout validates the analysis.
Phase D:
--During Phase D, the price will move at least to the top
--LPSs in this phase are generally excellent places to initiate or add to profitable long positions.
Phase E:
--large operators can occur at any point in Phase E.
--These are sometimes called âstepping stonesâ on the way to even higher price targets.
đPRICE ACTION BASED ANALYSIS đ
--------------------------------------------------
Regards,
TradeTheTip Global Research Pvt.Ltd.
------------------------------------------------
Guys check out the related POST as well, it went FANTASTIC !
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Comment:
Comment:
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