[DbPhoenix]

Originally Posted by Gringo »

Below is a weekly and daily chart of AAPL. Due to this strengh in tech I am simply showing possible re-buying/buying opportunties after a pullback in market.

Volume on up moves seems to be higher than volume on down moves. Because the price has been going up demand is greater so far.

For shorting, try to look for a weaker group as techs are very strong so far and could cause indigestion if not handled with care.

For AAPL the box is like this:

upper limit: 190
mid point: 155
lower limit: 120

Percentage wise if these S/R behave then the risk/reward are quite hefty.

Since you've reached what you've pegged as the "lower limit" of the range of interest, don't forget to check on the group of which AAPL is a part, as well as the major market of which it is a part (i.e., the Nasdaq). This is a step commonly left out by those who believe -- or who have been led to believe -- they're following the "Wyckoff Method". As a result, the wrong conclusions are drawn and the trade often ends up a loser, leading the trader to conclude that this approach "doesn't work".

As for the Nasdaq, assessing the strength or weakness of a major market average is a process that consists of several components. Which component one begins with is not especially important as long as they are all eventually included.

Determining the trend, of course, is essential, but one must remember that it's timeframe-dependent, that is, we have -- or have had -- an "uptrend" since March, but the trend over a longer timeframe is still down. If, however, we are interested in this particular time segment and this particular uptrend, we must at some point find support and resistance, and the sooner the better.

First we look for the important trading ranges. Here I've highlighted one because it is the most influential for this purpose. It finds support at the last swing low before the November low, and the top of the range which precedes the upthrust in January acts as resistance to the rally attempt in February. Finally, it is this resistance level which acts to alter the course of the March rally to a more "north-westerly" direction at the end of March/early April.

Now we look at this short-term trend and the channel that it forms:

Since the trend is up, the demand or support line is drawn first. Then a parallel line is created in order to act as an "overbought position" line, i.e., a line which shows when price has wandered too far from the trend. This can also act as a supply line (Wyckoff didn't much care what the trader called these things as long as he understood what they were and what they were for). Note that as price approaches the November swing high, trading activity increases but price doesn't make a great deal of progress. In other words, buyers are trying to push price higher, but sellers are throwing supply at them (hence the increase in trading activity, i.e., higher volume). Buyers can't absorb all of this and price rolls over, eventually falling out of the channel.

Wyckoff cautions, however, to focus not just on the break of a trendline (or demand line or whatever) but also on how it is broken. Here the line is broken on unremarkable volume. Not only that, it appears to be finding tentative and possibly fragile support at the January swing high. Granted this is pretty soft, and price may have turned here for no particular reason, but noting these potentials enables one to be better prepared for whatever happens next.

The SPX is behaving in a similar fashion, though the trading ranges, support and resistance levels, and channel are somewhat different. For example, the SPX remains in its channel while the Naz is showing -- or appears to show -- greater weakness. It's up to you, then, to weigh the probabilities and decide which way you want to go. If you want to go long AAPL, now's the time, with a stop below the "danger point", i.e., 119. You can wait for further confirmation if you like and chase the price, but the stop remains below the danger point, and the longer you wait, the farther you are from the stop. Or, if you see weakness that you can't ignore, you're welcome to go short. Keep in mind, however, that Wyckoff counseled shorting within the apex, in this case around 130, and managing a short this far away from that apex may be problematic. Better, therefore, to wait on a short until there is a rally attempt which looks to fail, short within that apex, and set the stop above the lower danger point (above the apex of the rally attempt rather than the apex at 133.

Regardless of what you decide to do, continue following the major market average (Nasdaq) and major group (XLK) of which AAPL is a part. Their action, as well perhaps as the action of "sister" stocks, will help you decide on an appropriate course of action, whereas following only the stock may result in unnecessary guesswork and an outcome which is based largely on luck.

Note: You might also want to track the Computer Hardware Index for a group that is not as all-encompassing as XLK.

[DbPhoenix]

Let's bring the weeklies into this:

Trend, Support and Resistance, Volume . . .

[Gringo]

Db as always does such a nice analysis that it's difficult to come up with something novel. I am attempting here to show SPX montly to indicate longer term trends.

790 or below means probability of going lower increase.
Above 790 (staying in box) implies could go to 1150 or upto 1500.

Generally, the volume changes indicate higher probability for a move downwards in my humble humble opinion.

This may help traders who use daily charts to align their stars and be aware of danger points.

[DbPhoenix]

Updates on the weekly charts (that is, the weekly update of the daily charts). Note that while all the demand lines were broken, none were broken decisively. In fact, one could characterize the action in the Dow and SPX as tests.

[atto]

I'm sure we'd all agree the parabolic price action on the close was interesting.

And here we find price back up to the top. $SPX, $NDX, $COMPQ, and $NYA all have similar price patterns. Volume has been declining since the range was established towards the beginning of the month. Springboard?

As a note, here's some recent divergences between up and down volume, and price.

[DbPhoenix]

As you know, I follow "up and down volume" as well (volume of advancers vs volume of decliners). However, I also separate them in order to determine if and when "something is up" (so to speak) in a sideways movement, particularly if it's a lengthy one. This splits the voume in a meaningful way which also doesn't involve any work.

I'll use the Naz only, just to provide an example.

Note here that as price drifts up past 1720 toward 1760, the volume of advancers trails off. When it tries to make a new high on the 7th, buyers withdraw and the volume of decliners is dramatically higher. However, selling pressure is immediately withdrawn. There's no follow-through. Only later is price allowed to drift downward, gently. Volume of advancers declines and volume of decliners increases, but both changes are gradual. There's no "panic" here. After price hits support on the 13th, buyers come back again, heavy, but as price works its way toward resistance, volume of advancers again declines, at which point the volume of decliners increases. And so on.

This is classic. Price is pushed towards one end and whoever is pushing backs off in order to keep price within the range. There's no follow-through on either end. Detecting this using the ordinary measure of daily trading activity charted at the top (in green) is difficult because trading activity in general is heavy throughout in all the major averages, and coloring the bars often leads to exactly the wrong conclusion (and also interrupts "the wave" or the flow). Getting past the usual "volume bar", however, enables one to see who's doing what when.

The only question now is whether this is re-accumulation or distribution.

[innovation]

Originally Posted by DbPhoenix »

...
This is classic. Price is pushed towards one end and whoever is pushing backs off in order to keep price within the range. There's no follow-through on either end. Detecting this using the ordinary measure of daily trading activity charted at the top (in green) is difficult because trading activity in general is heavy throughout in all the major averages, and coloring the bars often leads to exactly the wrong conclusion (and also interrupts "the wave" or the flow). Getting past the usual "volume bar", however, enables one to see who's doing what when.

The only question now is whether this is re-accumulation or distribution.

What value is this if it doesn't give you an idea of likely outcome? What insights does it give that are useful in preparing to trade the culmination of the range?

I am asking as I am obviously missing the point not trying to be facetious

[DbPhoenix]

Originally Posted by innovation »

What value is this if it doesn't give you an idea of likely outcome? What insights does it give that are useful in preparing to trade the culmination of the range?

I am asking as I am obviously missing the point not trying to be facetious

The value lies in understanding that there is a purpose behind the movements within the range and not just an aimless drift. Therefore, one can expect the movement out of the range to be purposeful, and not just the result of bored traders looking for something to do. Atto suggested, above, that this might constitute a springboard, and anyone familiar with Wyckoff would be thinking the same thing. However, what seems obvious does not always turn out that way, and the Wyckoff trader would also be prepared -- as would Wyckoff -- for a sudden drop out of the consolidation, which would most certainly freak the longs and likely make for a nice short trade.