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DISCUSS YOUR CHARTS, ANALYSIS AND TRADING
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SPY: Under distribution. IMHO.
SPY: The Bull scenario, reaccumulation? IMHO
AAPL analysis of current range:
Phase A: Sharp decline off BC, inability to rally back to highs on ST – Bearish
Phase B: Lower low test as SOW, followed by UT into 9/3 supply area on high volume – Bearish
Lower volatility on reaction off UT leads to higher low, show signs of absorption through range – Bullish
B/C?: Sharp rally off higher low signaling possible MSOS rally in progress, need to monitor behavior into 9/3 supply zone.
Any thoughts on my analysis of the current bias?
Ihomchick: I agree with your bullish bias. The only thing I would say is that is there enough volume in this swing up to create a major SOS or will you see resistance near the top resulting in a reaction back down.
Ihomchick: Nice to see your new post since it’s been awhile since you’ve posted. I see your using TOS. See the attached which a 2h chart also on TOS. Looks to me that the bias is now up (of course, it’s Apple). Personally, I would await $126.97 and a retest of that price before committing. Happy trading. IMHO.
ADSK – Took a short trade today. I was looking to enter short after the UT test and breakout(down) of the price at $247.02. Entered the trade and price rebounded slightly. Stop price is above the test at $255.00. Intention is for a swing trade to the bottom of the TR but would hold on if price action was showing for continuation of downward movement. Would appreciate any feedback.
ADSK – An update on the trade. So far the short trade is going well. I always struggle on what to do when the trade is going my way. I don’t want to lose out on my profits but still want to give it enough room to run. I’m seeing volume come in recently. Is this demand coming in and should prep for a reversal?
Frantz – I would say bullish bar 1 has less effort and less result than bar 2. The bearish bar 1 has a greater supply effort and greater result than bar 2. This exercise makes me think that demand is increasing and supply is decreasing which would indicate a more bullish bias. However, supply happened at the top of the range in both instances creating a value zone in that area. Since supply is less near #2 it is possible that the character of the next will not go as far as the prior down swing.
I struggle with interpreting supply and demand. I feel like I can make a case for both a bullish and bearish move because for every bar that shows demand it also shows supply.
Curt: Gutsy move. Not making any judgement of your trade. My interpretation (right or wrong): Rather than an upthrust (UT) at the high, consider a buying climax (BC) or a precursor to the start of a new trading range? Thus, the prior trading range may be interpreted as a reaccumulation? If the high is an upthrust, then a move below $239.74 would likely change the prior interpretation from reaccumulation to distribution? A move up from here may confirm the idea we have moved into a new trading range? IMHO.
DJI: Oh my, let the games begin. The Smart Money’s contribution to November 3? Say it ain’t so?
DOG: Further proof the top is in? Dog in accumulation soon ready to launch markup?
Skout, I have some doubts about using inverse ETF’s to judge the market by its own actions, although I do it myself as you can see from this chart of JDST (which I am in right now as a hedge for my long precious metals ETF’s). My thinking is the inverse product is a derivative and it makes more sense to just look at the DJIA or GDXJ, the message of the market is less ‘diluted’. Nevertheless, the inverse is still interesting because the volume signature is probably a good indication of bearish sentiment.
XLF: Today updated this trading range from distribution to accumulation- finally for those of us long suffering holders of financial stocks. Amazing, how the smart money manipulates the market, making accumulation look like distribution and vis-versa. If I’ve analyzed this correctly, look for a future measured move up if the price leaves the trading range as marked? IMHO.
Skout, thanks for the heads up. I haven’t looked at interest rates in a while. If banks are about to catch a bid, is it because (market) interest rates are showing signs of life? What do you think? Frantz
Frantz: As proof interest rates have risen of late, I present the charts of the 10-year treasury (TN) and the current yield curve. TN sure looks like it is now in markdown while the yield curve has spiked? IMHO. Why? Does it signal the market top, big drop in the cards?
Skout, a beautiful distribution structure in the grey rectangle! It would be useful to take a P&F count for some preliminary levels to target. My sense is that dollar weakness and rising interest rates are joined at the hip and relate to rising inflation expectations.
Skout – It’s tough trying to figure out the bias! I don’t mind so much that they manipulate it. I just wish I could figure out their intention. What did you see on the chart that made you change from distribution to accumulation?
Curt: Nice to get some discussion going. My response to Frantz may answer your question?
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.
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?
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.
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
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.
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.
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?
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
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?
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, 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?
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
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.
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.
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.
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.
I agree. XLF is underperforming the market. Are you looking to trade the SPDR or are you looking at individual stocks?
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.
I agree. XLF is underperforming the market.