[Head2k]

Starting with the second chart.

In a half of October we see an uptrend running up into increased supply, i.e a potential buying climax. That is marked by a sharp rise in volume together with price slowing its advance and then turning down. However, volume diminishes quickly on a subsequent reaction. That means the selling pressure has no real follow-through. Absent this follow-through price can lift with only little effort and it takes also little effort to overcome a preliminary resistance marked by the highs of the last rally. It seems like the potential climax was caused merely by profit taking, since the sellers are done and they don't represent any meaningful resistance any more.

The reaction in November looks more serious. It finds support at lows of a reaction from the end of October. The first day that hits these lows looks like a potential selling climax. Quite high volume and closes off its lows. This gives us a preliminary support, and if we are in long position we should probably tighten our stops somwhere under it. Then we must watch what happens next - are the sellers done or will the selling pressure be renewed tomorrow?
In next two days price forms a W with the second trough being a successful test.

On the top of subsequent rally we see the same setup, just upside down. It is M with second peak showing a lack of interest in upside direction. That is different from the 2 previous tops where price stopped because heavy supply.

This lack of demand results in a reaction making a lower swing low. There is no sharp rebound, price spends several days at the same area instead. Buyers steadily absorb all there is to take. Volume continously decreases during tests of 50 area.

... I will continue later

[DbPhoenix]

Originally Posted by Head2k »

... I will continue later

Thanks for getting the ball rolling.

[Bearbull]

Db, you have explained the principles in detail on so many charts on your posts and they are once again all reflected in the oil chart. Folks just have to print the lot out and make a concerted effort to study.

Here is the follow up to the first post which was dealt with a congestion during a continuation of a trend, this time Reversal is addressed. Once again material is extracted from the Wyckoff pdf file mentioned before. The buying and selling pressures that Wyckoff observed all those years ago play out on Dax 2min over an 80pt range today. Folks simply have to slog it out ie. to re-read the content over 50times , and then spend quality time on the screen as Db has pointed out to verify all this for themselves. No waiting for somebody to dish out off the shelf setups and hand holding. There is enough material in the wyckoff forum to undertake the task of constructing strategies/tactics etc, also get hold of Vadym Graifer's book.

Reversal and Wyckoff Principles:

Next day, June 20th, removes all doubts as to the immediate tendency of the average, for the market opens up a point and a half above the previous night's close and on a greatly increased volume makes a rapid advance nearly to 131,
putting the average into new high ground above the previous trading zone. The heavy volume emphasizes the importance of this. (See Par. 2, Footnote Pg. 16.)

The gain in the average over the previous day's high is more than 7 points and the close is near the top. If we have been watching the tape during the day, or refer to our Wave Chart at the end of the day, we observe this sudden change and we either buy during the session of June 20th with a close stop or we wait until the price breaks through its former highs and buy around the closing price of that day or the opening of the following session, June 22nd, as the market's behavior to here tells us we may expect a quick mark-up. We are not justified in reestablishing investment positions, however, for as explained in Paragraph 1, Page 19, we do not have the basis for a lasting advance.
.
June 22nd there is a higher opening and a gain of 7 points in the average, most of which is held for the day. The volume runs up to 4,600,000 shares -- the price is gaining in proportion with the rise in volume. A reaction on the 23rd shows that most of the gain of the previous day was lost, but the bullish indication therein is a shrinkage in volume to 2,600,000 shares -- nearly one-half the activity of the day before. That is our warning to sit tight.

The 24th recovers the loss; the average advances 8 points for the day and 3½ points above the June 22nd high, or to 141, and the volume is the highest thus far, over 5,000,000 shares. We begin to grow wary of the bull side because that volume in comparison with the trading of previous weeks indicates selling by large interests. (That is, a probable buying climax.) We move our stops up within a point or so of the June 23rd low and await developments. The 25th makes a further gain of 2 points in the average, then the price slumps about 6 points, closing a point from the low, on volume of 4,300,000 shares -- large supply overcoming an excited public demand coming in, as usual, on the top of the rise. This is distinctly bearish.(*) We therefore close out our long trading positions and examine our individual charts for stocks which are in a weak technical position so that we can get short on the next bulge.

*Note the shortening of the upthrusts, that is, the tendency of the high points to arch over, from the 24th to the 27th.

June 26th shows a range of about 5 points -- a little narrower. Although the closing is near the top, the volume has fallen off to about 3,100,000 shares and the upthrusts are shortening. In the net, these indications are bearish. The outlines of a new trading zone have been tentatively established between 137 and 143. On the 27th, the average bulges over a point, narrows its range to 3½ points and closes with a net gain of about 1½ points on a volume of about 3,800,000 (Saturday's volume doubled). This looks like bidding up to a new high in order to catch shorts, and selling on the way down. We therefore put out some shorts, protecting our commitments with stops 1 3/8 to 2 or 3 points above the high of June 27th.

On the 29th, the opening is lower and the price recedes from 144¾ (the previous day) to 140, closing near the low. We now observe that the average has spent four days moving sidewise, making no further progress after a steep rise from the June 2nd low and, following the 5 million share session of June 24th, there has been a steady decrease in volume. In view of our previous deductions, we interpret this to mean that there is a lessening of demand on the top of the rise. We also note that any further lateral movement or reaction would definitely break the upward stride established on the last phase of the advance from June 19th. Hence, we are ready to sell more stocks short if we can get them off on bulges.

On the 30th, the average declines nearly 3 points to 137 on volume (2,000,000) about the same as the previous day. The market is still in the 137-143 zone but has now definitely dropped out of the sharp upward angle in which it rose from June 19th to the 27th, showing exhaustion of buying power. Low volume on the two-day dip to the bottom of the range 137-143, however, suggests we may anticipate an effort to rally back toward the high at 144¾. The way the market behaves on the expected rally will probably help to confirm, or it may contradict, our position; so we await developments.

July 1st, there is a wider spread in the price, nearly 2 points higher closing, but volume shrinks to 1,700,000: bearish. On the 2nd, the market narrows to a 3 point range for the average and the closing is 1½ points lower on reduced volume --
increased dullness, lower close, and less volume indicate less power on the bull side. On the 3rd, there is another attempt to rally and the average reaches the old 143 supply line at the upper edge of the trading zone, closing about 3 points higher but volume is not measuring up to the standard of previous (late June) rally days. Nothing to be afraid of. (We sell more stocks short on this rally which is the bulge we have been waiting for, placing stops, as before, above the danger point, that is, the high of June 27th.)

July 6th, a 2 point range for the average, closing nearly 2 points down on 1,000,000 shares. We read this as an indication that the rally of July 1st to 3rd could not be sustained and that the tendency toward narrow swings, heaviness and dullness is the result of the market's having become saturated with offerings. All bearish. (*)

*The average is now on the hinge and on the "springboard" for an important slump.

July 7th, a rally at the opening, then a 7½ point break in the average on decisively increasing volume (3,000,000). The market is now out of its former trading zone on the down side and the volume indicates that liquidation is being resumed. Thus the rally from 113 (June 2) to 145 (June 27) has run its course after lifting the average into the lower edges of the old December, 1930 - January, 1931 support area, and we must assume that the next test of the market will be around the levels at which support was rendered (122) on June 19th. If the large interests who bought on June 2nd and 3rd, and who undoubtedly distributed their holdings during the high markets of the last week in June are willing to take them back near or above the previous low levels, it will be an indication of their confidence in the future and a sign that the bear market is over. If there is no such sign, we conclude that the bear market has been resumed and that the June recovery was only an interruption of the main trend. We are on the short side and shall occupy that
position until we see some reason for changing it, either to neutral or the bull side.

A 2 point further loss on July 8th, a small rally on a 1,500,000 share volume during the 9th and 10th (as the average hesitates halfway back to the June 19th low), then a dropping off until, on the 15th, the average nearly touches 126 -- a 19 point decline from the top. On this day, prices spread over 4 points from high to low and close slightly above the middle of the 4 point range, on a 2,600,000 volume -- a minor selling climax. There is no follow through on the down side next day; instead, a quick rally and a high closing. Thus we have two indications which might lead to a rally. But that will be a normal occurrence after a decline of 19 points. It should, in fact, amount to 7 or 8 points from the low if it is to be a real rally. Halfway would be about 9½ points. Such a rally occurs from the 17th to the 21st and amounts to 9 points, thus affording another good selling level if we are not satisfied with the size of our short line. (*)

*So that you may understand better how to handle your investment funds and may recognize thehazards in carrying stocks up and down through intermediate bull and bear trends -- a procedure that causes so many investors heart-breaking losses -- the following general observations are introduced at this point: The relatively small volume on which the market is now declining tends to lull the public into a spirit of indifference toward the market. But, contrary to popular impression, the low volume accompanying the steady downward drift is of bearish and not bullish import.

[Head2k]

... When sellers are exhausted and support still holding, price is ready to start its advance. The rally is quickly checked, but the reaction in the middle of December finds support on highs of the last congestion area and no serious selling interest is shown. Therefore price can easily resume its advance. However, supply comes in at the November highs. Not extraordinary but still enough to reverse the price. Buyers seem to be somewhat reluctant. We are possibly looking at a double top or trading range starting to develop.

When price reaches December lows in the end of January the activity increases slightly and price bouces off in a much shorter time than in December. That suggests that sellers are not particularly decisive either. On a subsequent rally buyers fail to step in meaningfully and price soon reverses to retest the December lows. The rally found resistance at the midpoint of the last reaction so I would be especially careful about a possible breakdown. Yet support still can be found at the same place and selling pressure doesnt increase much. The last day of reaction price closes at highs, suggesting a completion of a succesful test. Then price shoots up, forms a 3 days long apex in the midpoint of the range and finally heads north.

EDIT:
When reaching 58, a potential resistance, volume increases but price fails to bounce meaningfully. It starts to build a congestion at the highs, volume remains high as buyers are eating through the supply. It takes them several days. Then the resistace breaks and price starts to advance. However, volume remains high. How long can buyers push through? How long can sellers resist?

The second week in March volume drops but price doesnt slow down. It was seller who gave up. However, just before half of March price stalls at 65 for 2 days. Volume is quite low compared to the previous week but average for this one. Partly buyers need to take a break, partly supply coming in. Seeing the next day it seems like sellers were waiting for first opportunity to take over. But we find a serious support at the highs of the Nov-Mar trading range. Again, W with second trough being a successful test. After a breakout of the preliminary resistance this former resistance provides support for a selling climax in the beginning of May.

Bump: We see a potential climax in the middle of July, marking a possible peak of the large scale distribution starting in May. It is not a typical climax in a sense that it has not a form of sudden slap into an enthusiastic parabolic buying fenzy. It looks more like a sudden 3 days aggressive sell-off which surprises all the poor buyers who established a position since May. It took 3 days to lock out all buyers from 2 months.
No wonder that price just cannot rise more when it approaches to test the lows of this distribution zone again.
Those who didnt take the opportunity to sell at this test and believed that price will recover, mostly didnt do the same mistake again, not allowing price to advance in September. And those slowlier took the last chance in October.

[DbPhoenix]

For the sake of the folks who are reading this, how long did it take before you could do this sort of analysis?

[Head2k]

Originally Posted by DbPhoenix »

For the sake of the folks who are reading this, how long did it take before you could do this sort of analysis?

I suppose it was for me...

So I was first interested in trading in February. Until summer I had no idea what to do, tried automated strategies I didnt understand. In summer I started to watch ES and NQ intraday. Now the most important part: I started with strudying Wyckoff in September and became fully devoted to him in October or November.

[Bearbull]

Well done Head2K, I am pleased for you, you have clearly benefited from your study.
BTW your English is hell of a lot better than my Czech, have a friend there, the first words I learnt from him were "nasdravia" don't know if I spelt that correctly but he liked his vodka few other, " jean dobri, dobri vecher, dobra nots," "Yak shu mash" "pienkna" again probably all spelt wrongly

[BlowFish]

Originally Posted by Head2k »

I suppose it was for me...

So I was first interested in trading in February. Until summer I had no idea what to do, tried automated strategies I didnt understand. In summer I started to watch ES and NQ intraday. Now the most important part: I started with strudying Wyckoff in September and became fully devoted to him in October or November.

Just goes to show what is possible when you are diligent and bright Your not a borg are you? Reason I ask is I was impressed how quickly you assimilated Jerrys market statistics stuff too.