[Drag0nflai]

RE: tape reading; volume & spread analysis

Really enjoyed the first session of the tape reading course last week. I have been looking at the consolidation patterns in the chart attached below – same asset and similar patterns. I am wondering if there are any clues before the bars highlighted with the arrows and climatic price action preceding the consolidations to indicate whether price is likely to break out or break down. Note that the volume indicator on the bottom chart is displayed a bit smaller than the volume on the top chart in terms of scale.

By the way, the charts are ETHUSD (Coinbase) from Feb this year and in the recent days if anyone would like to check out the charts in TradingView. I decided to post the case study in this forum instead of the crypto forum because I’d love to get some feedback from Roman, Franz and more fellow Wyckoffians.

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[Drag0nflai]

Frantz and Skoutasg, thanks for your responses. Yesterday I did the first Tape Reading course homework exercise when I covered up the answer and the bars (to the right) as I went through each bar. It’s time consuming but I found there were details I noticed that I would not have noticed if I hadn’t done this exercise. I then went through the bars in the wedge consolidation patterns for ETHUSD in the charts that I posted just as you suggested Frantz, I wrote down my analysis in a notebook. It’s too difficult to mark out the small bars in 2 charts with all the notes in the screenshot electronically. The result of my analysis is I found that I could not tell which direction the breakout would occur until the bars that I highlighted with arrows. I am keen to see if others have a different perspective. Skoutasg, these are ETHUSD 4 Hour charts from Coinbase.

Alessio, could you please share your thoughts?

[Alessio Rutigliano]

Dragon, I have just seen your Ethereum chart. I remember that apex formation… decreasing supply, decreasing demand just at the beginning of the market selloff..that was a tricky one. We will revisit this historical price action bar by bar in the next Wyckoff Crypto Discussion #8 on Thursday 22nd. I think it could be a nice opportunity to study some parallel with the current price action of Ethereum.

 

[Frantz Herr]

Dragon, those arrow bars look like good entry points to me.  They are EOM bars where the timing is right for a good R.  Good analysis!  ‘See you’ in class Thursday.  Frantz

[Frantz Herr]

Dragon, thanks for the chart.  I am taking the Tape Reading course too, and I agree – it is really good stuff.  I loved the way Roman started with the most basic concepts of S&D and EvR and then applied them first to bar by bar analysis.  I think we all have a tendency to allow confirmation bias to creep into our analysis.  I find that forcing myself to do the bar by bar work makes me realize better what the market is really saying.  Judge the market by its own actions.  Tape reading.

Here’s what I would encourage you to do.  Number each bar the way the Tape Reading course does for our homework.  Then go through and label each bar with the shorthand abbreviations we’ve been given and see how your understanding of the message of the market develops.  Then post the results of your analysis.  I’m doing this exercise with my own Watch List and Position List.  I really really REALLY want to get better at tape reading, so doing this work is going to help give me the results I want.

[skoutasg]

Would like to lend a hand. Top Chart: Visual inspection shows a distribution or reaccumulation range because the price reflects a high during the timeframe. The action turned out to be distribution because the price fell out of the trading range. The high volume during the last leg shows the public is selling into the down price action which leads to Chart II. Visual inspection signals either accumulation or redistribution, if accumulation then price proceeds up if redistribution down. Price proceeded up out of the trading range on hefty volume, showing the public was buying into the upswing. In summary, the price action while in the trading range determines accumulation or distribution, so the trick is to determine which is the intent of the smart money before placing your bet? FYI: Couldn’t find you on Trading View? Also, couldn’t identify the security in your chart? Is it a future or currency pair? Unfortunately, many brokerage platforms provide different symbols, so it’s hard to replicate your chart on one’s own platform. Whatever happened to using common stock symbols. Sorry, showing my age. IMHO.

[Curt Miller]

CLDX – I took this trade after a breakout of the backing up action and took off immediately.  Today the price started to pull back and its getting close to my original buy point.  I’m not sure what I should do at this point.   Stay in the trade and keep what is left of profits or wait.  Would today be considered a Change of Behavior?  Looking at the 1-hour chart it looks like price is making a substantial pullback.  Should I be looking to exit or should I wait and see how it develops?

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[Frantz Herr]

Hi Curt.  The first question you might want to consider as you decide what to do: 1) What is your intention for the trade?  Swing or campaign?  Frantz

[Curt Miller]

I suppose it is a campaign.  The PnF count is expecting a minimum target of $23.50.  Let me ask you this.  How would a campaign strategy differ from a swing trade? How would I handle if it was a campaign?  How would I handle it if it was a swing trade?

[Frantz Herr]

Curt, here’s how I would think about the difference between a swing and a campaign.  One of Richard Wyckoff’s foundational ideas was that the market moves in waves of buying and selling.  From this we can come up with a definition of a swing trade.  Properly executed, entry occurs near the beginning of a wave and ends near the end.  When the wave/swing reverses, the trade is over.  If after analysis the bias, timing and character is deemed to be up, then entry ideally occurs as the rally is beginning and ends as it is concluding.  Same with a reaction wave, but in the opposite direction.  The profit potential of a swing trade will be the extent of the swing so managing risk with proper stop placement is an important tactic.   This is the object regardless of the time frame one is operating in, although the duration of the swing is going to be different for an intraday trader than someone who has a longer term horizon.

A campaign is made up of multiple swings.  It can consist of a series beginning with an original accumulation TR and  continuing through several R-A’s, and would ideally end in a terminal climactic blowoff.   Scaling up and scaling down position size is a tactical consideration.  The eventual profit from the operation can be quite large, so risk management is important; at the same time the trade needs to have room to breathe.  My personal preference is to campaign my positions.  Where I’ve made mistakes in the past is treating a campaign like a swing.  Hope this helps.

Frantz

[Curt Miller]

Frantz,  This is very good info.  Thank you.  Is it possible to go in with the intention of a swing trade but the character of the move is so strong indicating continued movement that it would morph into a campaign?

[Frantz Herr]

Curt, anything is possible, but for me it’s important to have a clear intention before I begin.  I have developed a set of unambiguous rules in my trading plan.  If I start changing the game in the middle it is easier for me to ‘overrule my rules’ and make bad decisions.  When I stick to my plan I trade well, when I don’t, not so much.  That’s just me though.  Hope this helps. Frantz

[Curt Miller]

AMT – Chart looks to be in a distributional range.  Prior swing down was wide with increasing volume with the swing back up showing even higher volume but weak result.  Volume is coming in near the prior support.  Roman showed a distribution pattern that looked very similar.  Additionally the stock is drastically underperforming the S&P.  I took a short trade (hourly chart) today on the downside breakout after a lower high.  Price reversed during the day and is near my stop of $246.

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[skoutasg]

Curt:  Agreed that AMT may be in distribution after reaching its most recent high.  Last leg (reaction down) either signals a SOW or TSO.  Me thinks the former.  If the latter, expect a breakout to the upside from here?  If a SOW, expect a move up from here (distribution) followed by a measured move down (accumulation)?  Are they big boys preparing a measured move down in preparation of a contested election on November 3?  Could be, IMHO.

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[skoutasg]

As of day, the future of the financial sector as represented by the SPDR XLF does not look good. To me, it’s just completed a distribution setup now awaiting a measured move down? However, it is likely the market makers may want to dump more stock in anticipation of an unresolved Presidential election on November 3?  To do so, they will pump up the stock further before they begin the move down.  Just saying. IMHO.

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[Frantz Herr]

skout, I own some BAC from my years at Merrill.  I keep it for sentimental reasons and don’t even look at it.  Very fortunate to have dumped most of my MER in 2007-2008, the handwriting was on the wall for anyone that wanted to read it.  When Powell and the Fed announce they are squashing the spread for banks for the foreseeable future it must cause bank execs much anxiety.

[Curt Miller]

I agree.   XLF is underperforming the market.  Are you looking to trade the SPDR or are you looking at individual stocks?

[skoutasg]

Curt:  Thank you for commenting.  Not looking to trade the SPDR-XLF but using it as a proxy for several bank stocks I own.  Goes without saying this sector has performed miserably this year.  Looks like the misery might not end soon?  IMHO.

[Curt Miller]

I agree.   XLF is underperforming the market.

[skoutasg]

Fellow Wyckoffians:  The Dow 30 may be in reaccumulation after a major move up from its 3/30/2020 low.  Personally,  I would not start any new buys before November 3 when a contested election looks more and more likely.  You can bet the smart money and their managers will use the excuse of a contested election to short the market.  I believe they will do so massively.  It’s likely they will take out the March low so buyer beware, just saying, IMHO.

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[Frantz Herr]

Skout, good observations.  Nice chart too…  Frantz

[Frantz Herr]

skout, my weekly market condition chart summary for DJ US Total Market Index.

Daily: Reverses previous down Sbar and holds above. Testing action during week but Demand is present. http://schrts.co/NvKYfyYc

Weekly:  Attempt to recover uptrend line and resistance area of zone of Supply within last two rally attempts proves unsuccessful. http://schrts.co/KhSMKsPm

Monthly: Bullish possibility to consider. Is the current action a test of the resistance line of the prior three market tops that is about to be overcome before a move up to the Supply line of the entire uptrend from 2009? http://schrts.co/tzmwjRZY

[Curt Miller]

One thing I still struggle with is drawing the resistance and support lines in a trading range, especially when the range is upward or downward sloping.  When I draw them I initially use a flat trading range and never sure if I am drawing them correctly or if a sloping channel should be used.  I am currently looking at TTD and I am unsure if I should be using a flat range or an upward sloping range.  Depending on which way you draw it could change the way you look at the bias.  If this is an upsloping range it looks like it is currently in a SOW rising near prior support.  On the flip side if it a flat trading range, it is still consolidating and we need to see how the price action progresses.   Depending on how you look at it will change the bias.  Does anyone have tips on how to reconcile this challenge?

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[Frantz Herr]

Curt, in addition to skout’s ideas, another thing that you could consider to help with your TR boundaries is the Raff Regression indicator in Stockcharts, or the linear mean indicator in Trading View.  Once you have identified the ChoB that leads into the TR ChoCh, you can use the initial climax and the first test as your connecting points.  The mean is sort of the fair value zone within the TR.  I used it a couple times on the attached.

Another super valuable skill to develop is to use price and volume together to try to ascertain what big money is doing – ie tape reading.  TTD has an interesting storyline I believe.

One final note, the overall market condition is very important for its effect on every stock.  The frame above TTD’s price chart is the DJ US Total Market Index.  Notice how TTD and the overall market are interacting.

.  TTD an

 

[Curt Miller]

Thank you Frantz and Skout for the feedback.  The Raff Regression is a neat little tool that I will have to use going forward.  Frantz – My analysis of the trading range is similar to yours.  I agree the demand (effort)is increasing compared to the prior upswing but how would you determine the result?  Would it be a move above the prior high or would it be a longer movement in price?

[Frantz Herr]

Character of the next move…  That’s always (one of) the $64,000 questions Curt, along with bias and timing😉   Just my opinion, but there is Supply in that EOM bar and on up into the area of the last UT that needs to be overcome.  On the Demand side, I’m looking at the last time institutions were big buyers and it looks like early June.  Compare the latest activity.  Looks more like WH buying at perceived short term value.  I checked today’s chart and Demand was down some more.  I don’t have TTD on my Watch List right now so I’m not following it closely.  Thanks for posting, if you do something with TTD maybe you will put it up here?…  Frantz

[Curt Miller]

Frantz – Here’s an update on TTD.  It looks to be resolving itself into a SOS in a flat trading range.  I currently don’t have a position but the set up looks like there may be a play in the BUA structure.

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[Frantz Herr]

Curt, yes agree.  Something I watch is industry group rotation.  There’s another stock in this commercial services-advertising group on my WL so I’ve been following the overall industry rs.  I like what I’m seeing.  Frantz

Source: Marketsmith Commercial services-Advertising industry group ranking as of October 4, 2020

[skoutasg]

Attached my chart, which highlights various trading ranges.  After visual identification, I like to define the TR by drawing a rectangle using the BC and AR boundaries within a Distribution or Reaccumulation range and using the SC and AR boundaries within an Accumulation or Redistribution range.  For me, I find it easier to identify such boundaries by using the zigzag indicator.  IMHO.

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   TTD.png
   

[Frantz Herr]

skout, I like the zigzag indicator.  ‘The market moves in waves of buying and selling’ ~Richard Wyckoff

Agree with your view of the most recent consolidation area…

I forwarded your info about where ‘New Post’ appears in the Forum pages.  A couple weeks ago.  Roman has a full platter, so not sure if/when it will get attention…

Frantz

[Frantz Herr]

Oil testing axis line support on diminishing Supply…

[skoutasg]

Frantz:  “New Post” does not appear until page 6 of this site.  May I suggest this programing glitch is causing confusion and perhaps responsible for the lack of new posts of late?  Can’t believe this problem is persisting.  Please light a fire under the powers that be if the management wishes this site success.

[Frantz Herr]

Skout, thanks for the feedback.  When I sign in as moderator I see ‘New Post’ and ‘Reply’ on each post.  I attached a screen capture, this is the post at the top of my first page of Forum posts.  Can you do a screen capture of what your screen looks like so I can forward it to Wyckoff Analytics?  Thanks.

 

[skoutasg]

Frantz:  Thanks, hope this helps.  The “new post” caption on my computer does not appear to the last page of all threads.

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[wwlGamer]

Attached another 2 charts to get some discussion going. Both charts show Acc and Dist which i think is interesting. Cheers and thank you all.

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[skoutasg]

SUBJECT: AER

RE: Is this stock ready for markup?

So far, the jury is out.   Not sure if phase C of this likely accumulation TR is now complete?  Perhaps penetration of the signal line drawn on the RSI indicator (in daily mode) may give us a clue when this stock is ready for markup?

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[wwlGamer]

Hi all, my first post here. Did a markup on the charts of GME and believe it is in Phase D currently but would like to confirm my opinion here. 1 thing to note is that GME is 97% shorted, which i believe partly explains the multiple long upper wicks candles. Cheers

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[Frantz Herr]

Hi Gamer, here’s a chart of GME with a few notes of my own.  Elevated Supply still appears to me to be present.  With such a high short participation, anything can happen though.  Good trading!  Frantz

[wwlGamer]

Thank you Frantz!

[wwlGamer]

Hello Frantz, went back and redid my analysis over a longer term period and I think you are right. The area you highlighted was also distributed in Dec-19. Price was up 9% on 22/8 on very high volume but it left a very long upper wick. Also, there was an intraday 1h candle which accounted for 4m volume but it has a very long upper wick as well. Seems like CO is unloading on public

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[Frantz Herr]

Gamer, nice chart reading!  I am sure you are gaining a really good feel for this stock; the more work I put into analysis the better my understanding.  Roman is a great teacher, and one of his important lessons I have been able to ‘absorb’ is to look for the important Supply/selling bars in a TR.  Once they are identified, it becomes clear what needs to happen for accumulation to be successful.  I can see that is what you have done on this chart.

Another of Roman’s lessons is to consider both sides of the outcomes coin.  What would it look like for this TR to resolve bullishly?  Bearishly?  I can’t allow myself to get locked into just one directional bias.  Always consider alternative outcomes, it makes me keep an open mind.

One last observation: what if the timing isn’t yet right for a major move?  What if the next swing in the stock is just a swing back to the low of this TR?  Mean regression traders could conceivably buy and sell this at support and resistance and extend the TR for a considerable period; that’s another possible outcome.

I’m a long term investor in a market niche that I like.  When my favorite setup occurs and the probabilities are heavily in my favor I want to take a trade.  Otherwise I’ll just wait and watch.  I believe it was Jim Rogers who once said, ‘I just wait until there’s a large bag of money sitting on the floor of the room and I walk over and pick it up’.  Others may and will take a different approach.  Isn’t this a great game Gamer??!

[wwlGamer]

“When my favorite setup occurs and the probabilities are heavily in my favor I want to take a trade.  Otherwise I’ll just wait and watch.” Livermore once said he made his money by sitting tight. You are definitely right in saying only to trade when odds in our favor and trading for profit rather than for activity. Thank you for the teachings 🙂

[skoutasg]

WW/GAMER:  To me, the price spike on 8/21 signaled the end of Phase C of this distribution structure?  Phase D, next, when the markdown begins which will end in a redistribution  or selling climax structure.

[skoutasg]

Might add the spike on 8/21 was an effort by smart money to take out short stops that they will cover/buy at lower prices in phase D (accumulation) prior to markdown.

[wwlGamer]

Think you are right. Seems like big players unloading on everyone who will buy. Cover shorts / buy breakouts

[Frantz Herr]

Good observation!

[Z1839]

<p style=”text-align: left;”>Sorry if this is an elementary question, but is the diminishing supply indicated by the falling volume ?</p>
I tend to get too caught up in the volume bar colors and think that the red volume bars coorelate with supply

[skoutasg]

Z1839:  The chart which you reference connotes falling volume or in Wyckoffian terms falling supply.  The latter can give cause to rising prices.  Although I am no expert, it is the trend of price and or volume which is the important factor in Wyckoffian logic, not the action of the individual bars.   IMHO.

[Frantz Herr]

[Frantz Herr]

[Craig]

Frantz,

It seems to me that this graph is a good example of the A-T-C (Action-Test-Confirm) test.  In this case there was no confirmation and the stock price subsequently dropped.  What do you think?

Cheers, Craig

 

[Frantz Herr]

Craig, are you referring to the chart of $DWCF?  When I posted it I was thinking about how the TR might evolve, and whether the Supply that came in on the UA/UT was meaningful?  So far it looks to me like absorption may be occurring.  Frantz       

[skoutasg]

No one has posted all week, so I thought I’d attempt to get the juices flowing.  Attached our old-friend the Dow Future Chart in Intraday mode.  Is the index in Distribution or Reaccumulation mode?  To date, it appears price may head up or will it?  If up, we are looking at Phase C of a reaccumulation, which becomes the launch point for the next measured move up.  If price reverses into a phase D, then we may identify the TR as a Distribution structure.  Notwithstanding our enthusiasm for another measured move up is our knowledge that the Index is dangerously close to overvaluation, which I estimate at a price of $30,725 ($27,632 being a target price).  I wish Mr. Market had not recovered so fast from its March low.  Like most of you, I have many stocks still in recovery mode from the March beat-down so a Distribution in the Index in the coming weeks will not be a welcome site.,

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[jonthan]

Hello, I am extremely new to the wyckoff method but have been reading and watching everything i can on the topic. My question is how useful are these patterns in the Forex marke? I haven’t been profitable scalping fx lately and im hoping to change that the more i learn technical patterns, thanks for any responses!

[skoutasg]

Personally, I only apply Wyckoffian logic, not technical analysis patterns as the smart money can use these to wreck your trade, i.e. your effort at scalping.  I think you can trade short-term using Wyckoff because with every action there is a reaction.  To me, the judicious application of Wyckoff is buying at the bottom and selling at the top. However, it can be used for playing short-term moves.  Is the Wyckoff method applicable to forex, yes it is, the same principals apply.  You may enjoy the courses offered on this site.

[Frantz Herr]

skout, nice chart and analysis.  Question for you (and others) – when I drop to a lower time frame and I see structures like you are showing here, do I relate the time it might take the move to unfold to this time frame?  If it’s weeks I would expect the move to unfold over weeks, days over days, hours over hours, etc?  The reason I ask is that I sometimes find myself forgetting the time unit I am observing and imagine the move unfolding on a different scale.  Traveling to a different dimension!

[skoutasg]

Frantz:  Here’s a graphic illustration of your question.  It’s an excellent one.  When do we enter?  Intraday signals yes, the weekly no, as price has not yet exited the TR.  Do we wait for the latter to happen or pounce now?  Let’s let the readership answer.  Also, please answer yourself.  Best.

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[Frantz Herr]

Here’s a chart I borrowed from the poster Dario Colo on Twitter.  XJO – a picturesque Wyckoff accumulation, at the 15 minute time frame…

[skoutasg]

Hello:  Anyone home?

[Author]

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