Hi all, hope everyone’s weekend is travelling as good as this XJO weekly is(way below), which is panning back to about APR08
Won’t spend too much time with analysis on the first 2 little trading ranges marked, (1, 2), other than that (1) appears to be an area of reaccumulation, i.e. an area of accumulation in an uptrend, which is easy hey
Range (2) is also an easy one as it’s a redistribution range i.e. they continue to distribute in this phase whilst in a downtrend.
If we look really closely at that range, we can see some heavy supply come's in at the bottom (which is a no no if wanting to be bullish) over those 2weeks marked (A)
and then as plain as Miss Daisy, we get another 3 perfectly placed signs of weakness that finish the range off, that being an upthrust and then 2 No Demand weeks (going up the hill on reducing volumes/demand) before being locked in and all over on that back slam week that would've trapped all the silly billies being long at the time.
Now moving onto Range (3) which had travelled for exactly 2whole years and it certainly appears to be a phase of accumulation, agree, yes/no, well let’s look a little closer and break it down in those silly old Wyckoff terms.
We all know that on most occasions before entering a Trading Range there is a good chance, not always though, to get some form of climactic action, i.e. This is the time the market is being sold or bought really heavily by everyone and of course at the same time the professional syndicates etc are doing the exact opposite,
If we look at area (3), which happens to be made up of about 7/8weeks, we can clearly see that this must be some form of climatic action, as the volume has really ramped up, this would I guess be the professionals stepping in and buying/absorbing all the panic selling.
At this time the market had fallen abt 1600pts from the highs of only 6months earlier.
Now if we just speed things up a little here, getting a little late, let’s only look for the low supply at the bottom of our range. That is if it is an area of accumulation, cause as we’ve just seen in that little redistribution phase, in that instance (bearish) we found a lot of supply at the bottom of its range.
Now if we move to areas (4, 4a), we can now feel more confident that it is a phase of accumulation as we can see that they’re distributing more of their supply at the top of the range and as previously seen at the bottom, they’re testing for supply via the low volumes.
Area (4) is a huge amount of their supply and it’s then followed by (4a) which arrives at the same level on much less supply i.e. No demand, and with it having previous weakness directly behind you, this is the perfect place to short or dispose of your longs as it’s a simple Wyckoff principle, all over red rover.
After leaving area (4a), they just roll the markets over and all the way back down to the bottom of the range, once again on lowish volumes and a bit more selling there with a huge upthrust, before heading north again.
Moving along to week No (5), which just happens to be our SOS (sign of strength), increased spread/volume closing highish which breaks or jumps out of the range clearing all the previous levels of supply at (4) etc.
Surprisingly a huge upthrust looking thing follows, but not to worry as over the next 3weeks it clearly shows some real nice examples of LPS/back testing the previous top of the trading range.
Here the previous resistance is turning into support and it then moves higher.
A bit more supply arrives at (5a), but on less volume, which is very similar to (4a).
Once again some more successful back testing or backing up to support on reduced volume/spreads occur at area (6), it then, which happens to be last week moves accordingly higher on a slight increase in volume/spread closing high.
Many thanks BD if you’ve lasted the distance and got this far, hopefully it wasn’t too confusing.
As always please DYOR as this post is purely for educational purposes and a bit of weekend fun in the lounge hey.
umm hang on did I have that chart upside down, which means we have to reverse the analysis, ah well too late in the day now, cheers all
(20min delay)