At point (1) on the chart is what we now know as a redistribution phase (a TR within a larger continuing downmove),
Was looking at it and just projected forward and back some horizontal lines, these lines represent, that trading ranges support and resistance levels and found some eerie coincidences with previous and present price levels.
BTW, that range covered a time span of over 6months beginning in early 2008.
For anyone that’s interested, following is another chart that zooms in on this area, and looks to see if we can make sense and analysis them in the Wyckoff manner.
Next time we’ll have a look at (that is if anyone is still awake :)), our present range and also the area directly behind us, for signs of re/accum/distribution ie. Early 2011 highs
……………….. At this point, back in 2008, (1), we do not know if it’s an area of accumulation, redistribution or nothing at all, just following it along to see if it gives any clues/rules as Wyckoff has set down for us.
Below we’ve zoomed in closer to that area, and after spotting some climatic action at (2) which halts it’s fall for the moment, we have an AR (automatic reaction) back to (3,) which helps us define the ranges S/R levels.
It then prances around before falling back to point (4), which is atm we hope a support level but on much larger volume, this is not a good sign, it’s actually a SOW, if it was bullish we should be seeing some testing ie. Lowish volumes or no supply at that level, which would actually be testing for anymore supply from our climatic action area at point (2), therefore at that time we can assume it’s finding MORE supply down there.
SOW – sign of weakness, which will usually occur on increased spread and volume, as compared to the preceding rally. Supply is showing dominance. Our first ‘fall on the ice’ holds and we get up once again.
ICE – is a wavy line or in this case our assumed horizontal line drawn under the reaction lows of our TR. A break thru the ice will likely be followed by attempts to get back above it. A failure to get back above firm support may mean a drowning of the market.
It then rallies or is helped higher on declining volumes to point (5), which is actually I believe a UTAD, note there is no SOS (increased volume with widish spreads) that busts thru the top of the range, nothing, just a lukewarm attempt with apparently no effort from the larger players. If we look back at the first bar of point (3) we can see much larger volumes there, but now we’re trying to clear it on much less, no good. The largest volume or close to it, in area (5) is the one that drags the price back into the TR, like a big super duper upthrust.
UTAD – upthrust after distribution, these may occur in a TR of distribution and are a more definitive test of new demand after a breakout above the resistance level of the TR, and usually occurs in the latter stages of a range. If this breakout occurs on light volume with no follow thru, or on heavy volume with a breakdown back into the centre of the range, then this is more evidence that the TR was distribution, not accumulation.
The UTAD usually results in weak holders of short positions giving them up and also in more distribution to new, less informed buyers before a significant decline follows
It then fails and falls all the way down thru the range and at point (6), note the big increase in volumes, that’s not a good sign to see if we want to see our ‘wishful’ support hold, different if it was approaching the bottom on narrower spreads or on much less volume.
Then after a minor rally we see that it’s doing a similar thing, in that it’s now rising again without any major support from the larger players, seen by the declining volumes whilst now trying to punch higher above previous support which is now turning into resistance. Note the similar action as at point (5), the last bar before putting you away is another upthrust, point (7). The ‘wishful’ level of support now is confirmed as the force of ‘falling thru the ice’.
P.S. I hope that wasn't too heavy, tried to keep it simple and not confuse myself and anyone else :))
(20min delay)