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In the Wyckoff method, we know that a trading range environment is the cause building condition that leads to the eventual effect of exiting the trading range. As Wyckoff practitioners, we study the trading range to determine its bias (bullish or bearish), and to judge the timing and character of the move out of the trading range – the effect – before it occurs. We know that a change of character is the action we look for to confirm both entry and exit from the trading range. One of the clues that helps us anticipate the change of character is a change of behavior of the security within the trading range. A change of behavior can be subtle. I recently recognized an obvious change of behavior in RUN, but missed a more subtle change of behavior that preceded it and might have led to a better POE.
The daily chart below shows a stock that appears to have entered a distribution in mid-2018 which was aborted by a shakeout in December that coincided with the low in the overall market. It turned out not to be terminal. Some might prefer to view the entire structure from July 2018 as a Re-accumulation with the structure since March 2019 as backing up action. I see the structure since March 2019 as a smaller Re-accumulation from the small Accumulation following the December shakeout. Either way, my current interpretation of the bias is bullish, and I interpret the structure since mid-August as Phase |C|.
If my structural analysis is correct, then a POE exists now in Phase |C|. I dropped down to the 2-Hour time frame to take a closer look (below), and the chart seems to reveal a TR with a Wyckoffian structure.
I have highlighted two zones on the chart. The larger red zone is where sellers, possibly weak hands, unloaded stock on the reaction into the TR. The green zone is where buying supported the price. Notice the breakout above the local area of resistance where I detected a change of behavior in the range. Ok, it was obvious. What I missed was the change of behavior in the last reaction in the green zone. Notice how grudgingly price goes down and how supply appears exhausted. I missed this behavior completely. It afforded an earlier indication that timing was right for a move out of this TR. So far, the move has reached the initial objective I identified – the red zone where was supply was presented on the way down.
I am not afraid of making mistakes. Everybody does it. I will take the lessons learned and improve my future trading results.
Wyckoff Market Discussion 300th Episode on May 25, 2022!