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Wyckoff Market Discussion (3+ months) - Use Once
High Probability Wyckoff Trade Setups
Improving Your Wyckoff Swing Trading Results
Intraday Trading Using The Wyckoff Method
Long-Term Campaigns and Tactical Swing Trades
Momentum, Volume And Price Structure
Point-and-Figure Part III
Practices For Successful Trading
Scan For Success Part 1
Scan For Success Part 2
Scan For Success Part 3
Scan 4: Look Less, See More
Swing Trading Using The Wyckoff Method
Trading Technical Analysis Signals
Trust the Process
Wyckoff Market Discussion (3+ months) - Use Once
Wyckoff Market Discussion (3+ months) - Use Once
High Probability Wyckoff Trade Setups
Improving Your Wyckoff Swing Trading Results
Intraday Trading Using The Wyckoff Method
Long-Term Campaigns and Tactical Swing Trades
Momentum, Volume And Price Structure
Point-and-Figure Part III
Practices For Successful Trading
Scan For Success Part 1
Scan For Success Part 2
Scan For Success Part 3
Scan 4: Look Less, See More
Swing Trading Using The Wyckoff Method
Trading Technical Analysis Signals
Trust the Process
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8/19
2020
The First Act: Change and Transition.
by John Colucci

Welcome Wyckoffians! Here we are again pounding away at structural scanning.  Enough reminiscing– let’s develop some a scan this time around.  Today we are looking at that coding opportunities for stocks that have experienced: (a) a prior downtrend; (b) stopping action; and (3) a period of sideways price action (e.g., testing).  There is more than one way to tackle this scanning challenge, so don’t get too excited if you know a better way.  We will cover alternative scan code in the future.

Scanning for Original Accumulation:

Our initial scanning task is to find a downtrend (a prolonged period when supply has outpaced demand).  How do we do that?  First, we create a mental image of the price action we want to see: a clear mental picture of price action makes it easier to use our syntax toolbox. Second, we consult our trusty StockCharts.com syntax guide. 

Let’s establish our mental picture of accumulation: a prior downtrend stops at new support and then price goes sideways:

 

When we think about a series of price movements constituting a possible accumulation, keep in mind few our scanning objectives. First, we need a downtrend that is long enough to really move price down. We want enough downward movement to be convinced that those willing to sell their shares may be done (whether it is scared out, shaken out or simply tired out/exhausted) and buyers are starting to venture in.

In other words, think of two main scanning points: First, the trend of price movement (and consequently, the trend of the Supply/Demand relationship) is changing (stopping) in that price has generally stopped going down. and.  Second, price transitioning to a more balanced Supply/Demand posture. 

 

How to Scan for Change and Transition: Let Me Count the Ways.

When scanning for changes in price and Supply/Demand transition, we have a variety of techniques available.  In Blog 9, we talked about the Percent Change scan term to identify movements in price.  Could Percent Change also be used to identify period where price does not change (e.g. the absence of movement).   Sure can!

Let’s look at some code:

[group is sp500]

AND [PctChange(252,close)   < -25]

AND [PctChange (63, close) > -5]

AND [PctChange (63, close) <  5]

RANK BY [SCTR]

 

Think about price movement this scan code is targeting.  A scanning best practice is to note your thoughts within the scan code in order to document your logic: this is commenting.  Let’s do just that:

[group is sp500] //Looks only at SP500

AND [PctChange(252,close)  < -25] //252 (about a year) down greater than – 25% (less than a negative number is a more negative number).

AND [PctChange (63, close) > -5] //quarterly change (63 trading days) up more than -5%

AND [PctChange (63, close)  < 5] //quarterly change up less than 5%

RANK BY [SCTR] //sort by SCTR (default is high to low).

 

Let’s run the scan and see what we get!

The first chart on the list is 21st Century Fox (FOX). Let’s look:

 

On the Fox chart, some lines and measuring tools appear to help us review.  First, 63-period cycle lines were applied to measure (63 trading days is a quarter and 252 (4 x 63) is a trading year). Second, we added a percentage change to approximate (difficult to be exact) the price change over 252 trading days. Finally, we added a price change bracket in the most recent 63-period cycle line to see if we stayed in a roughly 10% range.  Does FOX look like what we asked of the StockCharts.com scan engine?

Let’s look at a tighter chart time frame and see if we can identify the type(s) of structure present.

 

In a tighter daily timeframe, we can clearly see the large price drop over the last year.  We can also see a couple of marking options:  2 horizontal structures (red and blue boxes) or 1 large down sloping structure.  In either case, we see that price stopped going down and has increased for most of the last quarter. 

What do we make of our results?  It certainly looks like, the scan returned a chart which meets our scan criteria.  Did we find accumulation?  It’s possible.  We might have a down sloping accumulation: a structure in which supply marginally

exceeds demand.  We could also analyze the last year of price action as two separate structures with one being distribution (red box) and the other an original accumulation (blue box). One could even argue the blue box structure is in backing up action mode.  How one marks their charts is a matter of personal preference and really, reflects how your visual cortex and innate intelligence process information.

Coming Up.

Next time we will look at another accumulation scan using a scan term with which we already familiar from the October Special: Rate of Change (“ROC”). A ROC scan can also instruct the StockCharts.com scan engine to look for a big price drop in the last year and a more recent stabilization of price.  However, there are some very interesting additional ROC features.

See you next time.

Scan well, trade better!

John Colucci, Jr.

 

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