Original subtitles

Hello, everyone. Today is January 14th, and this is our session number two of

the Wyckoff Trading Course.

We had a really good session. First session, it was a lecture session.

Today, just because we haven't covered a lot of new material last time, or at

least as much as I planned to cover, we're just going to probably be still in

the lecture mode today, but starting from the next session where we will

The homework on accumulation, specifically Home Depot, that would be

study for us for homework.

Then I will start pulling out people and we'll start conversing and we'll start

talking and we'll start analyzing. So we'll get to this point. Don't worry

this, guys.

The main thing to remember is that once you have the homework, what I really

would like you to do.

and this is going to be extremely important to us, is to submit your

a specific way.

One file, either PowerPoint, PDF, or Word doc, and

then put your first name with the last name initial in the name of the

file. Email it to me, to my personal email.

I've sent out instructions for the homework.

And I've mentioned that my personal email, simplecard at hotmail .com, is

one that you should use.

I will remind you again. I will email you again. I will also email you tonight

the homepage for our class.

So this page usually will contain the videos and the slides.

So I will email you the link to this page because it's unlinked, so you

see this page on our website.

And then I will email you the password to that page. It's password protected.

And I would like to ask everybody to be confidential about the access

information. It's only for your use.

Okay.

Let's talk about what we're going to cover today and what's coming.

So session number two, we're still on the price structural analysis.

We're going to talk today about the change of character. This is a very

concept, very elegant, and very powerful.

So we will explore the reasons of why we need to understand the change of

character.

what it leads to and what kind of assumptions, deductions we could make

that on the analytical front.

And then once we will understand that shift, that change of character provides

from one environment to another, we're going to reside for a while in the

environment, in the non -trending environment with the bias to the upside.

So both accumulation and reaccumulation will be discussed.

There, we will be discussing Wyckoff events, Wyckoff phases, and we'll talk

about the phase analysis a little bit today.

On the reaccumulation, we will have a conversation about conventional and

alternative labeling, so we'll revisit that, and that will be extremely helpful

for your homework.

So, guys, please pay attention, especially those of you who are going to

homework. And then, time permitting, we're going to start covering...

structural analysis points that are going to be related to both accumulation

distribution, but there are certain things, certain events, certain phases,

certain shortcuts that I'm going to give you, and we'll talk about different

characteristics for different Wyckoff events.

So this conversation starts today.

For your homework, this is the one that we haven't done.

for this class so this is going to be an accumulation labeling and as i

mentioned it's going to be off the home depot all right and then um in

the next class which is going to be a january 21st we're still covering price

structural analysis we will review

So there will be a lot of questions every cycle. There are so many questions

students send in their emails with their homework.

This is fine. You can do this.

Just don't expect me to answer those emails, you know,

via emails, because I just don't have so much time to answer each email

that comes to me.

My promise to you is that I will look through all of your homework.

That's number one.

Secondly, I will identify what is the common theme for mistakes that we are,

a group, conducting.

And therefore, those are going to be the primary questions that we're going to

answer in our homework review.

Also, with the homework review, this is the chance for us to establish that

communication where I open up the microphone and somebody steps in, a

and then we go through the chart first and we go through the logic of labeling,

how we're labeling the chart, what's going to be the first thing to label,

what's going to be the next thing to label, and so on and so forth.

So please be prepared.

for this type of the conversation, for the discussion of the homework in the

next class. Then we're going to continue exploring all of the price structural

analysis points, distinctions, something that

we're either going to cover more or...

We're going to cover, in general, there's going to be some distributional

that I'm going to add to this as well.

And next session also will be devoted to distribution.

So we'll talk about work of events there, work of phases, the psychology of

distribution, and so on and so forth. And the homework is going to be,

obviously, on distribution.

So you will have six, seven, eight charts that you will have to label.

And then we will review this homework in session number four. So that's the plan

for today and for the next session. As you could see, it always changes. It

depends on how much time we have each session, how much material we cover.

Sometimes we slow down because something is very important and we need to

understand those concepts. Sometimes we actually, you know, speed up.

So we'll see how it's going to go. It's always kind of like a live and breathe

organism.

Okay, so the first concept that we'll talk about today is going to be a change

of character.

And that concept is going to be discussed for both accumulation and the

distribution.

So let's talk about the theoretical portion and the

theoretical...

concept of the change of character.

And we're going to start with a very simplistic explanation as to

what are we actually looking for in the market as we look at the price

structure. And we definitely realize that there are two types of environments

that we're expecting.

First environment is the non -trending environment.

This is the environment of a consolidation.

We also will call this environment a trading range.

We also will intermittently call this a non -trending environment.

So all of these semantics regarding the trading range or consolidation

are valid for us. So when you're going to say something like, okay, I'm looking

at the trading range, I'm looking at the consolidation, I'm looking at the non

-trending environment, I know instantly that we're discussing a trading range

which is confined between the levels of support and the resistance and

predominantly which is going to have some kind of horizontal

a range where the price deviates around the mean horizontally.

We'll discuss later on some other trading ranges, which are going to be

upsloping and downsloping. So we'll give the definition and also I'll give you

the rules as to how to construct those.

But for now, we are either discussing a non -trending environment or a trending

environment. A trending environment is going to have two types for us, an

uptrend and a downtrend.

So that's how simple I want you to think at this level. And these are kind of

like the basics.

These are very simplistic stuff, but at the same time, I want everybody to be on

the same page.

So the biggest question that we have about these two environments, obviously,

for the non -trending environment, you know, we want to understand the bias.

We want to understand the timing of when the price comes out.

that environment and such trend.

We also want to understand the character with which the price will travel out of

this consolidation.

So those are the goals for us to explore analytically in the non -trending

environment. And then in the trending environment, obviously, we would be

assuming that we're already in the position.

And if we're not, then we would be looking for another trading range, which

going to be a reaccumulation range in the uptrend. And this is where we would

looking for to establish the position.

And we want to understand the character. So character is extremely important.

And then the last thing about the trending environment is we want to

where the stop in action occurs, reversal, and a switch.

into a non -trending environment.

So those are kind of like the priorities for us with trending environments.

Having said this, when we are in the main thing between these two

environments is that switch that I already mentioned.

So we want to see, let's say, a non -trending environment.

then we want to identify some kind of switch which would lead us to a trending

environment.

We want to do this in reverse as well. From a trending environment, we want to

identify the switch that will give us an understanding

that we are going into now non -trending environment.

So what is this switch?

How would it look?

How would we see it? Well, first of all, the name for the switch is going to be

a change of character.

And the change of character, if you think about the name, a change of

So it seems that one environment had a specific...

character and then it changed.

So what has changed?

What would give us an indication that a change of character has happened?

So obviously a change by itself, as the word assumes, kind of like

a minion of something is going to be happening in a different way than the

how it happened before.

So when we talk about, let's say, one environment which in this case on the

schematic is a downward trend.

And we would be thinking what kind of character of a trend it would be.

So obviously the legs to the downside are gonna be much more pronounced than

let's say the legs to the upside where we are gonna have a tenth.

to reverse and to actually cover the ground that we lost in the

downtrend. And obviously those rallies are going to be smaller.

They're going to be populated with some pockets of increased supply. This is

where more selling is going to occur.

And then additional selling is going to come.

So it will not allow the price to go up significantly.

And that's going to be... you know the main price characteristic the main

characteristic of the downtrend is going to be all about the increase of the

supply on the reactions and then diminishing volume signature or

demand signature going into a rallying mode and then every time we're going to

have some kind of consolidation in the downtrend we're going to structurally

jeopardize

the support area, and we're going to break to the downside.

So that's going to be repeated behavior until we actually exhibit a stop in

action, which is going to be labeled by us as a selling climax.

So then this is what we're going to have in the downtrend. And this behavior is

not going to change until a certain point.

So what is that point?

That's the biggest question that we want to address.

And that point is going to be...

a change of character, and think of this in reverse.

I've just shown you how a downtrend would behave.

Then think about that change of character.

So if in the downtrend we had the price going down more than up,

then obviously in the change of character environment, we want to have

that's going to start outperforming.

That's number one.

And probably on this rally, we want to see the increase of the demand. We want

to see the presence, you know, of buying.

And usually that presence, because it's so early in the trading rights, it's so

early in the accumulation process, it's mostly going to be associated with the

contrarian buying by huge institutions.

We'll talk about this a little bit later on.

Let's come back here to the change of character. So the rally should change.

The behavior of the rally should change.

And we're going to say that the distance of the rally should increase relative

to the distance of rallies that we've experienced before on the way down.

The upspread should increase.

That's what's going to kind of propel our view on how buying is unfolding.

That's what's going to increase the distance. That's what's going to

also the velocity and the momentum behind buying.

And we obviously want to see the change in the volume behavior.

So we want to see the demand increase. We want to see volume increase in

because it would...

signify to us that it's not only selling by weekends that we're experiencing on

the way down into the climactic action, but also there is some buying behind

this. And also on the automatic rally, that first change of character, first

change of behavior, we want to see the volume increase. We want to see the

demand increase as well.

So it's in this area.

after the stopping action that we are going to see the best rally that

we have seen in the downtrend.

And right away, when we think about this rally and we think about

that this is a possible change of character, we're always thinking that

change of character will lead to the change of the environment. So we were in

the downtrend environment.

So now we would change that to some kind of consolidation.

So we know that the trading range is going to unfold.

We still don't know the bias at this point.

And this is a little bit more of the advanced studies that we do in the

practicum. There are certain things, certain ways of how you could identify

possibly the potential bias of the consolidation in phase A.

I will give you some of the shortcuts as to how to logically think about the

bias even in phase A and as we go through phase B and specifically in

and D.

But at the beginning, usually we're going to be questioning as to what kind

bias we have.

We also will not know a specific specificity like a duration of the

range that's going to unfold.

Again, in the practicum, just because it's more for the advanced studies, we

will create kind of like an understanding as to how we would measure

potential duration in the consolidation.

So I think it's extremely important as well.

And obviously, you know, it's important to also understand the character.

with which the consolidation could unfold.

Is this going to be a long -term range or a short -term range? How is supply

demand going to behave?

What is the behavior of institutions and weak hands around the edges of the

trading range of the support and the resistance and form support?

So quite a few things to address.

But the main thing with this new rally, with the better rally, is that the

change of character is possibly unfolding.

That would mean that from a downtrending environment, we are going to change

into a non -trending environment where we have to define the bias, where we

to understand the duration and the timing when the price is going to leave

trading range, and then the character of the trading range itself.

The confirmation of this change of character is going to come on the next

attempt to push the price lower.

will fail and it will create a test, what we will call a secondary test.

I often call this a local test to the local event, which is the climactic

action. We will discuss the selling climax later on today.

But for now, just keep in mind that this final test

of the change of character, this is an attempt to continue a downtrend.

which will always fail.

And even if we have different secondary tests, we could have a secondary test

that is going to be, like shown here on the schematic, a higher low. We could

also have a test that is going to be a lower low.

And we also could have the test which is basically going to be at the same level

as the selling climate.

So in all three cases, this is a successful test.

Even though the lower low is being created, the lower low just basically

us that there is still some supply available or demand is still relatively

and that's what brings the price below the support.

But all three are going to be successful tests.

Why? Well, because they recover.

After the test, they reverse and they come back to the area of the resistance,

therefore finishing the downward swing and reversing that swing.

So again, something, you know, for the future for us to remember.

So let's come back again to the change of character.

As we're experiencing our first change of character in the consolidation, and

there are, by the way, two of those.

One is...

on the way into the trading range and one is on the way out of the trading

change of character you could also say the first one is in phase a so what is

happening here as well um well we said that the price is going to look

the volume signature is going to look different and then it's going to be

confirmed on the secondary test well why is all of this happening let's quickly

kind of like you know talk about this

Well, the first assumption that we have of

why the change of character is happening is that the behavior of market

participants has changed.

So if we talk about strong hands, and we obviously would be thinking about

hands like composite operator, huge institutional trend followers.

big money contrarian type of traders.

What are they seeing here around the climactic action? Well, what they see in

panic by weekends, which

basically leads to, on the very technical, physical level, increase in

volume signature, and therefore

a very substantial increase in liquidity.

And by liquidity, I mean the availability of shares in big

We always think about the CEO as being limited by certain rules, by certain

regulations even.

What are those?

Well, because of their big size, they want to open big positions.

How do you open a big position in the stock that might be maybe like illiquid,

right? So they would never go to this type of the stock.

They need to be in the stock that is liquid, number one, and they need to

at the spots in the price structure that is liquid.

Imagine the big institution is trying to establish a position on a sign of

strength or on the breakout or in the uptrend.

What would that produce?

that would produce such a big jump in price because of their size.

So they need to cover their steps and open the position when they can,

when liquidity is available to them, when shares are available to them and

readily available.

So a panic by weak hands where either public

or professional hands that are on the wrong side of the trade, institutions

are on the wrong side of the trade, they're having a panic, meaning that

capitulating and they're getting rid of their holdings quickly, without any

doubt that there could be a stop in action soon, and they're willing to do

at any cost.

So that's what produces that increased volume.

signature, acceleration of the price to the downside, and that's what creates

the liquidity that is needed by institutions.

The next thing that they really need at this point is some kind of value

proposition.

They need this stock to be at the price that has a long -term value

for them because still thinking about the whole process of absorption of the

supply that is available in phase A, they might be thinking that it's going

take some time for the price to stabilize and then for the price to

actually going up.

So they have an understanding of the time horizon that they will need.

And one of the biggest two requirements to get into this position is

also going to be the value. Is it worth it to me at this point of time with this

price to get into this position substantially or at least start scaling

the position?

If the price is attractive, if the stock, in their opinion, is undervalued,

they're going to come in and establish this position at least incrementally.

And because of their size, what's happening, is whatever increase of the

that was produced by the weak hands on the capitulation is going to start

gradually being observed.

And we could observe some of the situations where big institutions, CO

contrarian institutions are already in the buying mode, they are accumulating,

and yet some other institutions and the public, the weak hands, are still

selling. And that's the exchange of shares that happens around the climactic

action and specifically selling climax.

Panic buying by weak hands produces a lot of volume signature, a lot of

liquidity, takes the price down to the zone of value.

And that creates those two conditions where big institutions that are

are coming in and they're buying those shares.

As they buy, the supply that is presented by weak hands is being

strong hands.

And that stops the price first from moving further down in a very

accelerated way. That's number one.

Secondly, it stops the price then from moving further

down. And thirdly, once absorption has happened at that local level,

then the price could actually go up and create an automatic rally or a change of

character rally.

And that's the whole process around the selling climax.

And that's the whole idea behind the change of character.

So a change of character, again, is a change of behavior.

And it's a change of behavior for both weak hands and strong hands.

And visually, we could identify that change of behavior, which would suggest

us a changing environment. And from a trending environment, we're going to go

into the non -trending environment.

Okay, let's talk about the second change of character.

That second change, as I mentioned, is going to be on the way out. It doesn't

really matter whether it's an accumulation or a distribution.

It's still going to be on the way out.

before the markup happens and the markdown happens.

Actually, if we would be more precise, we could say that this change of

character is going to be a part of the emerging trend.

And by the way, I've talked about this in the last class.

It's an extremely important concept for us from the point of view of timing.

This is where the...

all of our trades are going to originate.

And this is where I'm going to lead you guys to both in the selection process

and also in trade management.

In our selection process, we just want to find this moment.

We want to find the moment where accumulation has been either concluded

the last stages of conclusion. And therefore, we could say in the last

absorption of the supply, whatever supply is available at that point of

And the price and the volume starts to show a different behavior.

What is that behavior by the price and volume?

Well, the first thing that we will notice is that, again, on the price

want to see the difference between how the rally, the most current rally has

been unfolding.

relative to the behavior that was exhibited, or the same behavior that was

exhibited in the trading range before.

And here we would be comparing, again, the distance that the rally

is increasing.

This spread, the up spread, that is increasing as well and has a different

of look.

We also will be talking about some gap activities there on the sign of

And then we also want to see from, let's say, the price behavior,

the reactions on that sign of strength.

How are they going to behave? Are they going to exhibit increase in supply? And

if they do, would that supply be observed?

If it's going to be observed, then how quickly it's going to be observed.

We also would like to see the volume change as well. So rally and the volume.

So here in the volume signature, one of the things that we're going to pay a lot

of attention is increase of the demand or the consistency of demand.

And that would identify for us the buying by institutions. That's number

Secondly, we want also to see what kind of urgency of the demand is there.

That's another question, and that's going to address the character of the

rally and of the next trend, actually. And we'll study this more in the second

portion of the course on the supply and demand, so we'll talk about this.

But coming back to the change of character, the concept is going to be

as the concept.

of the change of character in phase A.

We want to see the rally that is going to be better than what

preceded it.

So in the case of the phase A change of character, where we had the downtrend,

we want to see the rally that was a better rally in the downtrend.

And then we want the secondary test to confirm that there is no further

continuation of the downtrend.

In the change of character in phases C and D, we want, again, the same thing.

We want to look at the rally and we want to say that this is the better rally of

them all in the non -training environment that we are currently in.

And then as a confirmation, we want to look at the backing up action.

And we're going to say that for the first time, this is the reaction that is

different than...

what we've seen before in the trading range.

On the schematic, it looks even different.

It's more horizontal than vertical, right, than the reaction that goes down

the support.

It still goes down to the support, but it goes down to the support now that has

acted before as the resistance, and that's also a big difference.

It's also a change of behavior, and that concludes a change of character.

We also would like to see that the supply signature is going to be

And there are quite a few variations on the supply of how it occurs in phases D.

This is, again, something of a more advanced study for the practical and for

second portion of the course.

But generally, we would like to see that supply in the backing -up action or

last point of support is going to have those contracting

or if supply comes, the absorption happens much faster and much easier. So

talk about that.

All right, so these are the two changes of character. Again, change of character

in phase A, that's going to be on the way in to the trading range. Change of

character in phases C and D is going to be on the way out. And it doesn't really

matter whether it's accumulation, reaccumulation, distribution, or

redistribution.

It's going to unfold the same way.

It's going to have some variations. You might have a variation where, let's say,

a buy -in climax happens, and then you have, you know, very frustrating

increased, you know, diagonal formation where the change of character might come

slightly later on.

And we usually talk about this in the practicum, this is a little bit more

advanced, and then have a trading range.

So something like this, obviously, is just a variation on the theme.

But once you identify a change of character, then you know what's going to

happen next. Most likely, they're going to happen as a trading range.

The same with the distribution.

We're looking for the...

climactic stopping action, and then we're looking for the first reaction

going to be so different than any of the reactions that we've seen before on the

way up, since the last meaningful consolidation.

And then after that, as it suggests a consolidation, then we will be thinking

about, okay, well, in this consolidation, what is the bias?

and then what is the timing as to when the price is going to leave the trading

range, and then what is the character, and so on and so forth.

Change of character in the distribution on the way out is going to have the same

characteristics as an accumulation is an accumulation on the reverse.

We're going to have the reaction that is going to be the best reaction in the

current environment, which is a non -trading environment.

And then after that, it's going to be confirmed by an attempt to rally that is

going to be the worst than what we've seen in the distribution formation.

And therefore, we are confirming a change of behavior and a change of

before they actually move to the downside.

One last thought here on this slide. Please note that you know, structurally,

always talk about Wyckoff layers, right?

So when we talk about, let's say, specific volume signature should be this

such, you know, in a specific phase.

So I want you to think about the change of character and think about Wyckoff

phases and Wyckoff events and where a change of character usually would occur.

So on the way in, whether it's accumulation or distribution, that's all

be in phase A.

And you're always going to be looking at the automatic respond or automatic

rally in the accumulation and automatic reaction in the distribution as those

first two counter to the trend events that are going to lead you to the

conclusion that this is a change of character and therefore we are going to

start a non -trending environment.

Secondly, in phase A, it's going to be confirmed by a secondary test.

So that's on the way in. On the way out, I want you to remember that the WICOS

events that we're going to discuss is the lowest point of the trend in phase C

for accumulation, the highest point of the trend in the distribution.

And then a sign of strength, a major sign of strength, and a major sign of

weakness, which are going to be followed by the small counter move to that.

So you're going to be predominantly in phase C and D, and you're going to be

covering the major sign of strength and the major sign of weakness as your first

change of character lag.

All right, any questions, any comments on this?

And by the way, at any point of time, guys, if you feel that you have

just type it in or just say, I have a question and I will come back to you and

can unmute you.

But if there are no questions, I'm going to assume that everything is fine here.

So let's go to the next slide.

And let's look at the examples.

of a change of character and how it unfolds. And I'm going to show you here.

Oh, okay, great. We have some questions. So let's just address some questions

first.

Okay, let's go to Eric.

Hey, Eric.

Eric AE.

Okay, so what's the question?

Okay, Eric, I'm trying to unmute you.

So you have to unmute yourself.

Okay, check.

Hello, Roman. Yes, hi. How are you doing? Hi.

My big question is in the phase A, in the change of character.

The secondary test, you say that can go below of the

selling climax.

Okay, so I gave you three scenarios for the secondary test. We're discussing

this spot right here. So still phase A, the secondary test acts as a local

test of the climactic action.

It basically tells us the story of the supply.

Is there still a lot of supply left or a

story of the demand? What kind of demand we have there? And again, three types

of secondary tests that we could have, right? So a test that goes and creates a

low low, a test that goes and creates a high low, and then a test that is

basically on the same level.

So what's the question?

Well, the question is when the secondary tests go below the selling climax.

So how to identify in the volume that the price will go up?

Again, to the trading range, well, it's like the

dove that I have. Okay, I got it. I think I understand the question.

Okay, so the question is, how do we know, let's say if it goes to the low,

do we know that this is a legitimate secondary test?

So that's the question.

Thank you.

Sure, okay, I'm going to, okay, so you're muted. Okay, great.

So the first thing, there are a couple of things here that I want you to think,

and we are definitely kind of like jumping a little bit ahead, but that's

I like the inquisition of the mind even at this point, so that excites me.

There are two things that we should consider here. The first one is if we

correctly identified a selling climax, which is going to be a stop in action to

a downtrend.

And then we correctly identify the characteristics of the automatic

rally, rather, in the accumulation.

Then our assumption that the secondary task is going to come and it's going to

be confirmed are probably very high.

And even if it's going to create a lower low, you know, that's totally fine. We

just don't want this lower low to be significantly lower.

So we don't want the price to fall another 50 % and then say this is a

test. No, that's not going to be the case for us.

It has to be relatively close to the support.

So the action by which we identify a potential stop in action and automatic

rally should lead you to the conclusion that even a lower low could be a

secondary test.

The second point here is all about

supply and demand and the price reversal around the area of the support.

So we will be observing specific price reversal patterns that are being

confirmed with the volume signature.

So for instance, the reversal of the last significant bar, we will talk about

this more in April, March.

And then increasing demand signature. That would suggest that demand is

coming in and it, not only observes the supply, it actually pushes the price

back above the support level.

And that's when we're going to say that now we see a confirmation of the

reversal, therefore we're going to have a rally up, therefore secondary test is

confirmed.

So we'll talk about this process, but, you know, a good question.

All right, let's see some other comments here.

A question from Rami.

Automatic AR, is this an automatic rally?

Excuse me.

Depending on the context.

Okay, so there are three ways of how I'm going to address automatic.

a rally or automatic reaction, I'm going to say in general terms,

automatic response.

So it's the same, you know, the same letters, A, R,

but obviously we want to say automatic rally for accumulation

and reaccumulation.

And we want to say automatic reaction for distribution and

redistribution.

And then, obviously, in the reaccumulation and redistribution, we're

change that, and I'll talk about that.

But for now, I just want you to remember that AR, this rally right here,

It's basically an automatic response. Automatic response to what?

It's an automatic response to the change of behavior that we have around the

selling climax.

So in a way, it's an automatic response to the selling climax itself,

what is happening at this point.

We also sometimes mean that automatic, meaning that it's almost like a

rally, right? So what would constitute a technical rally for us? A technical

rally is something that happens just because there is a

close of positions in the direction of the previous buyers. So we had a

downtrend, and a lot of professional traders were short in this market.

Once they see that the conditions are changing at the bottom of the selling

climax, what do they do?

They close their position.

So therefore, their short positions are being converted into the market

position, which is a buy order.

And therefore, they are not betting necessarily and gain the

profits from the market potentially reversing and going up short term on the

automatic rally.

But what they're betting on is that this is going to be the low and I need to

get out of this position because this trade is done.

So in a way, their behavior is an automatic way of pushing the price up.

sometimes I think about automatic response is that, you know, automatic

of the short position by those who have profited on the way down. So that's why

it becomes an automatic response.

Okay.

Should we wait for stop in action or selling climax before we get out of the

existing position long and short?

From Nilesh. Okay. I'm sorry if I mispronounce your name, and I'm glad

joined us for this session, so that's great.

So we will address this a little bit later on.

Then the next question from Joe. Is there any big news usually associated

what, Joe, with the selling climax?

Was the secondary test?

We'll talk about this as well.

Okay. Okay, was the selling climax?

Okay, well, as long as we're here, let's just address this, and then we will

come back to this slide.

Yes, selling climax is going to be associated with a big event, and that

event usually is going to be the price action itself.

So for those of you...

who watch, let's say, CNBC, right?

I usually don't watch it that much at all.

Only watch it at the points of interest.

CNBC or any other TV shows could act as a contrarian tool, could act as a

sentiment tool.

And usually when, let's say, a stock is exhibiting some kind of panic,

where the price is going down so quickly and there is a lot of selling by weak,

strong hands, how do you think it's going to be portrayed on the TV?

So usually they're going to say Apple has a gap down like it has recently had,

and overnight action is going to show us the gap to the downside at the open.

The volume is very high.

And it's going to be in the news, especially a stock like Apple. I mean,

obviously, a small stock, an interesting stock, nobody would even care. But

something like Apple will have a spot on the TV show as it consumes.

So that would be a big event for the stock itself.

Having said this, what obviously Joe meant is the event

is something like earnings.

or the reaction to earnings, a change in management, some kind of big numbers

that are coming out on the revenue, on the sales, and so on and so forth. So

those could all be big events and they could produce a lot of volatility up and

down, a lot of liquidity, and so on and so forth. So yes, selling Climax could

be potentially one of those spots.

And when we say big events, we usually think big volume, big liquidity. And

selling climax is exactly that type of event.

Big volume, big point of liquidity, a lot of value.

So it could be both. Event as a price event by itself and then some kind of

catalyst event that are going to produce that price action.

Yeah, really good questions today. I really like that.

Okay. from ml are there a limit to the number of secondary tasks in the trading

range before the spring how do we identify a spring versus a secondary

okay again so um inquisition by your minds at this point

you know bringing us a little bit faster to you know where we should be

So I welcome all of these questions, but at this point, let's just kind of like

note them, and we will answer as we go as we uncover this stuff.

Let's come back to the change of character.

Let's look at some of the examples.

So this is Yahoo.

You guys don't see this, but this is Yahoo, and this is what, 2012, 2013, 14.

And Yahoo actually was such a great trade out of 2012.

There was a management change that came aboard, I believe, in 2012.

There was quite a big trading range that came out of the oversold condition.

And then we went into the accumulation

range. And out of that, We're looking at the latest phase C right here. It's out

of that that we have the first leg to the upside.

And this acts as a sign of strength in the backing up action. So by itself, it

looks as a change of character relative to the environment that we've been in

before.

Do you guys already see where is the high probability point of entry for us?

It's not necessarily...

in the area of the emerging trend.

It's actually in the area where trend has been confirmed.

So where do you think the trend has been confirmed?

Write it down really quick.

Where do you think the trend has been confirmed for Yahoo?

Give me the timestamp, like a month and a year.

What is the highest probability spot for us to participate? And let's move to

the upside.

Okay, backing up and last point of support.

So somewhere here, December, January of 2013, backing up of

2013, February, mid -October, high volume.

Okay, great, great. So I will come back to October in a second, but everything

else sounds really good.

So what are we looking for?

as kind of like this final, final confirmation. It's the confirmation that

should be giving us, you know, a high level of confidence to follow up with

trade. It's probably going to be in a spot here, after the major sign of

strength, which basically tells us that the character now is to move the price

to the upside and have small reactions, very, very small reactions.

And this major sign of strength confirms the uptrend, and the backing up action

confirms the change of character.

So anything around this area where we could identify a potential C in a

trading range, that's number one. Where we see the breakout, that's number two.

Where we see a smaller backing up action, that's number three. Where we

another breakout, that's number four.

And it also presents a short -term weakness.

after this rally so therefore it acts as the final confirmation

especially on the breakout right here of what's to follow so

i want you to think about this for a second why is this so important well

because usually students come and they say well i want to invest here in phase

could you teach me to invest here and i usually say yes i can but before

you knowing how to do this, can you please start identifying this spot to

You know, where you have a very high level of confidence that there's going

be a continuation.

Once you can deal with that, could you identify to me in the middle of the sign

of strength rally a point of entry there?

Or maybe a point of entry on the last point of support in phase C or even

or D.

And only after that, go for phase C. So it has to be sequential, the

way how you educate yourself.

Because the mind is always going to be egoic.

The mind, our minds are always going to be based on the fear and greed. And

here, we will be thinking about greed.

We would want to go in to establish a position at the bottom.

But in a way, it's not even greed.

It's still fear -based.

Why? Well, because if we're thinking about establishing the position

at the lows of phase C, we're basically saying, I'm fearful that the price will

go low from here. I always want the price to go higher.

So fear is an extremely strong emotion for us humans.

And a lot of the survival mechanisms are built around fear. And our trading,

unfortunately, builds around those surviving mechanisms.

So fear is going to be very, very dominant.

Now there was one comment here which I really liked from Adam.

Adam said that the high probability place to open the position is going to

in mid -October, somewhere here, which is based, I believe, Adam said, high

volume signature.

So disregarding even the volume signature, which we will discuss in the

month,

This is the correct place to think about the point of entry.

This is not necessarily the highest probability place, and that's the only

caveat that I would add to Adam's remark, but it's still one of the points

entry that we will be discussing in this course.

It comes after phase C.

It shows to us a short -term ability of the rally to come to the previous local

resistance, and look how flat this...

trading range is, this reaction is. It doesn't come to the level of the

It's all flat.

Obviously, again, we could talk about the volume signature here, but maybe not

for now.

Not only that, on the relative strength ratio line, which basically shows the

leadership of the stock relative to the market, we've seen that the breakout

produced also a breakout in the leadership.

which is a confirming sign as well.

And we will study that in the third month when we'll talk about the relative

comparative performance.

So all of the points of entries are going to be talked about, guys, so don't

worry about that.

All of the confirmations are going to be talked about.

It's just a lot of material, and obviously I can't give it to you right

We'll see how it's going to unfold.

So after the first rally into the major sign of strength, we're seeing a

reaction. And hopefully, guys, you could see this. I'm going to put the color

here, blue color.

This is the reaction that we've seen. So for the first time in this rally, since

the lows in the potential phase C, we're seeing the reaction that

is...

outperforming all of the reactions to the downside.

We see how this reaction increases in distance.

You don't see it here, but I'm quite positive that with that increase in

distance, the downspread has increased as well.

And we're seeing maybe a slight increase of the supply here. It's actually not

that pronounced.

So it's more over the latest reaction. Actually, supply level is kind of the

same as other reactions, which tells us what?

Here is kind of like a preview on phase A bias identification, phase A

bias. So what would we be thinking about the bias in phase A? Well, because the

supply is at the same level or somewhat low and doesn't produce an extreme...

move to the downside, we don't actually go to even one half of the move that

we've done, we probably would be thinking that the bias is still going to

reaccumulation at this point.

And that's the way how I'm going to teach you guys.

Your first assumption about a reconsolidation or a stepping stone

is always going to be the bias that you've defined in the trading range

and the trend that we have had.

So therefore,

a bias to the upside and therefore a reaccumulation.

And then we would be seeking confirmations throughout the range. And

either we're going to confirm that this is a reaccumulation or we're going to

reject this as an idea.

So all of these elements here just on the price alone suggest that we're going

to go into a trading range. By the way, now that I've talked about the bias, Let

me talk really quickly about the duration.

This could be just a preview of what they had for those of you who are going

kind of graduate to a more advanced level.

Think about the increase of the supply.

Is it a lot of supply or not a lot of supply that comes in on the exchange of

character?

Probably not, right?

So increases but not substantially.

So what could we say about the level of the supply?

The level of supply,

is average.

So therefore, we are not expecting that the duration of this trading range is

going to be big.

You know, it's not going to take a lot of time to observe whatever supply is

coming. So duration is probably going to be not that long.

And we see that on the next, you know, attempt to go down, there is a test,

which looks like phase C, sign of strength, backing up action.

And off we go to the next change of character, which is somewhat hard to see

here. But if we would be thinking about the rally into the sign of strength,

comparing it to the previous rally, we would see that it's much better as a

rally in the straightened range, that the reaction is more horizontal. So that

suggests a change of character.

And within the context of the previous

range, which we thought was a reaccumulation range, and then the

uptrend. We are saying that the change of character acts as a resumption

of uptrend.

Why is this significant?

Because this is where we're going to originate our positions.

The resumption of the uptrend gives us a timing.

It's a timing tool to consider that now is the time to go in and open the

position with an assumption that there's going to be a continuation of the swing

or continuation of the longer -term trend.

Okay, well, imagine that we've opened the position. And imagine that we opened

two positions.

One is a swing position and one is a long -term.

long position, kind of like investment position.

Or we're just trying to catch a much larger swing.

Our entries are going to be here, here, here, and here. Four points of

entry on the way up.

And then as we go through the uptrend, we see the

break of that uptrend.

And then we look at the reaction. And it's a little bit complex. It has ABC

formation or 1, 2, 3.

For those of you who are familiar with Elliott's wave, you will recognize this

reaction. So look at this reaction and compare this reaction to every

reaction that came before.

What do you see?

Well, I see that we definitely...

overshooting uh you know the distance with which the price travels to the

downside so this becomes the largest distance again downward spread is

increasing we could see maybe some increase in the supply as well over the

previous reactions the latest reactions but it's not as significant um and again

we probably are thinking here that this is a reaccumulation. If distribution

would come, it probably would look differently.

You know, supply would be more violent and the price action would be more

violent to the downside.

We don't see that here.

But we are concerned with this slightly lower low.

Now, what happens next is so amazing because the next rally

suggests a sign of strength being followed by the backing up action.

And if we would look at all of the rallies in this trading range that

we could say that this is the largest rally. So therefore, the price behaves

differently. And we want to acknowledge that. And we want to say that this looks

like a change of character.

And then the backing up action confirms that.

So here we're thinking if this is a change of character, again, this is the

timing for us.

to find points of entry in this area as our assumption

about the trend is such that the uptrend will

be resumed again.

So if we are swing traders,

our tactics are going to be such that most likely we're going to be exiting

somewhere here. This is our last point where we're going to give up our

position. And this is going to act as kind of like this local capitulation.

And as we're closing the position on that particular bar, we will be a part

that capitulation.

We still will have a really great trade.

And this is the trade right here.

And for a swing trader, that could be a great trade.

Later on in the course, I will show you, or rather in the practical, I will show

you how to identify this action as a potential point of exit.

This is all going to be associated with the climactic run into the stopping

action of the buying climax.

And I'll outline to you the spots where we're going to be exiting the position

or scaling out of the position.

But for the long -term investor, we still would stay in this position.

If the initial bias in phase A, based on the

supply signature, suggests that this is still reaccumulation, then we want to

stay in this position. Actually, we want to add to the position, and we will be

really heavily adding here and then somewhere here on the breakout.

So these are the two spots of short

-term weakness in the context of a much larger

trend, long -term uptrend, that we will be looking for the

long -term investor to add to the position and for the short -term swing

to establish the position for the next swing.

Now, a couple of you, a couple of you, you know, before the class were talking

about, you know, yourselves. And by the way, guys, could you please email me,

like, one paragraph on who you are as a trader,

what do you trade, and then what kind of history with the Wyckoff Method you

have. And also, how did you hear about... you know, our course. Just let

the source. I would really appreciate this.

And, you know, send that with your homework.

You know, don't send this as a separate email, you know.

Or, you know, if you want to send it as a separate email, that's fine as well.

A couple of you identified yourselves as long -term investors. And the question

about the course was, well, is it going to be helpful to me?

Well, hopefully, even from this picture, you kind of could see that it should be

extremely helpful.

because we will be discussing, obviously, original accumulations, but

the trend itself, how do you decide are you still staying in this position as a

long -term investor or not?

Where potentially could you add to the position?

Those are also very crucial places.

And then where do you actually exit?

So look at the next change of character that comes.

It seems like all of the reactions here, which is one and two,

of the same magnitude, and then suddenly we have such a huge reaction to the

downside. This is by far the largest reaction, not only on the last leg up,

actually since the lows in the potential phase C here.

And not only, you know, when we look at this reaction, we would be thinking,

okay, well, is the trend done?

Is the uptrend done?

And at this point of time, because it's a much more substantial reaction than

what we've seen before, we probably would conclude or make a couple of

deductions here.

Our first deduction is going to be that, well, first of all, after the change of

character, we're definitely going to experience a non -trending environment.

That's number one.

Secondly, because of the size of the change of character, we're probably

to say that

trading range is going to increase the duration than anything what we've seen

before. So therefore, the timing comes in as an element of our analysis.

So this is not necessarily in the methodology. This is something that I've

developed with the advanced students in the practicum, you know, just addressing

exactly this question.

What about the duration of the trading range?

So, and it's not necessarily common knowledge. I know that, Bruce does

not use this.

I know that other, you know, work effects do not actually use this, but

very hard, you know, evidence, you know, that we see even on this slide

alone to make some kind of assumption or judgment about the duration. The

smaller the change of character, the smaller the duration of the rage.

the larger the change of character or the larger the presence of the supply,

longer it takes time to absorb the supply. So therefore, duration of the

is going to increase.

Okay, what other assumptions could we make here?

Well, obviously, assumption on the buys is going to be something of interest to

everyone here.

But at this point of time, we would just have to say that it looks like the

selling has come, but it's not.

you know extremely heavy we're still going to be under the assumption initial

assumption that this is a reaccumulation and then we either going to confirm it

through the price action in phases b c and

d or we're just gonna uh reverse our bias and this bias

original bias which is to the upside is gonna fail

And then with this failure, we're going to say that most likely we're in a

distribution. So this has to be confirmed as well as we go through the

trade image.

Okay.

Well, hopefully this is simple and

understandable in terms of the first major

concept that we want to work with.

Change of character, again, is an extremely important concept, and that's

I'm teaching this concept first.

I did not even talk about, you know, I would say accumulation or distribution

in general.

Let's look quickly at another example here.

Excuse me.

We are...

Again, talking about Yahoo, and this is a daily chart.

2002, 2003 lows as a trading range.

And then look at how the first momentum lag is identifying

urgent buying by institutions.

And those are predominantly trend followers.

And then look at the backing up action here.

It's not just flat. It's actually sloping up. So there is a lot of

strength in this reaction by itself. And it happens on the background where

supply is the lowest supply within the whole range. So that was a really good

trade right there or a point of entry.

And by the way, for those of you who are extremely picky about all of this

stuff, which I want you guys to be.

you know because i am the same way you might be saying okay well where is this

uh sign of strength yeah if if you're talking about the change of character

this is a change of character but where is that sign of strength that should

overcome the point of the resistance well you're looking at this in a

different way so look at the lower high lower low so what

does this look like this looks more like a triangle

So the backing up action actually comes exactly to the point of that sloping

down resistance.

And therefore, you know, it's all in line with the sign of strength and the

backing up action. This characteristic we will study later, you know,

characteristics of apex and what kind of sign of strength and the backing up

action there we could expect.

As the price goes up, look at the texture.

of all of the moves up and the reactionary textures.

So reactions are either flat or non -significant.

And then the moves to the upside have some kind of deterioration of the

momentum. So we have first a lot of momentum of the low, then continuation

that momentum. We still see some bind here.

in this area, so that's great, on the way up, and this is how institutions,

trend -following institutions, are getting into the position.

They're assessing, at this point of time, the bias, the

value proposition that they have, the liquidity that is available to them at

this point of time, and because they are already late to establish a position at

the level of support,

What they are going to do here is they're going to be buying on the way

And this buying on the way up is going to look like this.

So obviously this is buying off the low, and also we could say buying on the way

up by itself.

But after the first initial momentum buy by institutions, this is what we're

going to see.

So there's going to be fewer institutions, that's number one.

Secondly, you know, this buying is going to be on the way up, so it's going to

push the price up.

And as we understand these concepts of the initial momentum buying and then

continuation of this buying throughout the trend, then we could see that

momentum on the next rallies is fading.

And we don't see as much barn behind, you know, those waves. So we could

some kind of stopping action, barn climax, and then a change of character.

So how would the change of character look like? Well, obviously, it's going

look different from what we've seen before, from the reactions that we've

before. Look at those.

Do you see how different the latest reaction is? So right away...

We are noticing that. We are making a note here. And at this point, we are

to say we're going to make a couple of deductions. Change of character.

And here also, a small break of trend as a confirmation of that.

It means that it's going to be a trading range.

We don't necessarily see a lot of volume signature that is different.

on the reaction.

So we're going to assume at this point that the bias is still up.

And again, remember what I said.

Don't take only these words from me.

That the first thought is going to be, oh, it's the same bias as the trend

before, just because supply is not there.

We need either to confirm or reverse our bias as

we go through the range.

And the reversal of the bias could happen many times in a lot of stocks

because it's not always there's going to be some kind of

continuation of the previous trend.

So at least here, what we could deduct is that we've experienced a buying

climax, a change of character.

and therefore an automatic response or automatic reaction in this case.

And we could form a trading range by applying the parallel

lines to the buying climax, and this is going to be our resistance, and support,

which is going to be defined by the law of the automatic reaction.

Our next assumption is going to be a buy -buy caution structure.

We're going to ask ourselves a question.

What comes next?

Well, obviously, if there was a climactic stop in action, there's still

be some momentum to the upside that we need to check.

Right? So we're expecting a secondary test in phase A.

And as we've talked about secondary tests to the selling climax, that

there are three types.

We also...

think that there could be the same situation for a distribution where we

say that buying climax is going to define the point of resistance, and then

could have a secondary test that's going to have a higher high, or a secondary

test that is going to have a lower high.

or a secondary test that is going to be kind of on the same level or close to

that of the buying climax.

So the same structural options on both accumulation and the

distribution. And you kind of could see, guys, already where I'm leading you

with this.

If you understand Wyckoff context, if you understand what I call Wyckoff layer

on the analysis, on the structural analysis of the conventional technical

analysis, you could anticipate things, the way how they should unfold, the

character of those things to come, and more importantly to understand, should I

be trading in this environment or not?

And if I'm trading, you should be understanding how you should be trading.

So for instance, if I have been in this position and I'm a swing trader, then my

decision making here is going to be very simple. I'm just basically looking for

the points of exit. I could exit on the way up into the climactic action.

I could exit on the change of character bar. I could exit on the change of

character reaction.

I could exit on the way up into this secondary test rally.

There are quite a few spots to exit that we will be discussing as a part of this

course.

If I am a long -term investor, I'm still in this position.

I still need to go through the whole trading range to define the potential

and either to confirm that bias or to reverse this bias and therefore start

scaling out.

If I am a short -term trader and I'm not in this position and I'm looking at

this potential phase A as it unfolds and I look at this change of character, I'm

saying there is no swing opportunity for me here. This is just phase A. I still

have to go through phase B and then phase C and to define that bias

going into phase C. So I will not be participating.

as a swing trader in anything that's unfolding right now.

Having said this, a much shorter swing trader might be thinking, okay, well, I

see that we've experienced automatic reaction.

I'm looking for the secondary test.

I see that supply is somewhat the same than at other spots, other reactions,

and that the initial change of character actually was not that pronounced.

as we're experiencing a secondary test most likely this test is going to be

strong and therefore a higher high and will create probably some kind of

opportunity so how do i trade that well i want to establish position here

somewhere on the intraday basis and then trade through the resistance and once i

see first intraday signs of distribution i will be out But again, this is

somebody who is going to trade on the intraday level, on the very, very short

-term swing trading level.

So in here, I went through all of the possible, you know,

traders and their requirements as to how they would be thinking about the

Wyckoff structure at this spot.

Well, let's see what happens next.

So we said that, you know, supply was not that impressive, and then the change

of character was not that impressive either, you know, relative to this whole

move. So most likely the secondary test rally is going to produce some kind of

up -to -rush situation with the higher high. So that was great. We were correct

on that.

But we know by the Wyckoff context, by the Wyckoff layer and structure, that...

Phase A is going to conclude with this secondary test, and we're going to go

into a very volatile and predictable phase B.

As we go through this phase, and here is my

honesty and authenticity and my commitment to all of you guys,

and more importantly, even to myself. And for those of you who know me for a

while, and I see that some of you guys here are alumni.

First of all, great to see you here.

Great to have you in the class.

Don't forget to give me some feedback as you've listened to me and to this

course maybe a year ago, maybe two, maybe three years ago, maybe even more

that.

Let me know how the course has improved and how else we could improve the

course. I'll be very curious to hear.

My commitment to you guys is of the highest honesty.

I'm going to tell you exactly how I'm conducting my trades. I will not hide my

losses. I will not hide my mistakes. This is not my intent to do so.

So when I say something, usually take it for what it is. Usually this is how I

think and this is the most honest answer that you could get from me. So looking

into phase B environment.

And looking at the higher lows, I still as a long -term

investor would be thinking that the bias here is to the upside.

There is really nothing distributional about this pattern in Phase B.

Nothing. You don't have a lot of supply coming in. It's somewhat mediocre,

average.

And it doesn't produce, you know, anything larger than the change of

which is by itself is not such a big retracement from the lows to

the highs of the buying climax, from the lows of fade C into the buying climax

high. So I'm still going to be thinking that this is a potential reaccumulation

at this point. The only question here is just... the timing are we in phase b or

in phase c if this is if we're thinking in phase c then we should wait if we uh

i'm sorry if we're in phase b we then we should wait if we're thinking that we

are in phase c then you're going to originate a trade somewhere here

and your point of exit is going to be this bar right here

so basically you're going to have a break -even trade again this is

that i don't mind for my own trading and for the trading of my students what

this trade does it creates two levels of understanding um

the failure of this trait creates two levels of understanding the first one is

going to be that the analysis is actually incorrect and it doesn't matter

whether the analysis is incorrect because it didn't really show us what

going to be in the trading range itself sometimes the bias is so evident even in

phase a you can't really think anything else but then in some instances like

this one you're going to see a lot of elements of outperformance like yahoo

exhibiting in 2005 in phase b and phase c and you might not distinguish this as

a potential distribution

In the first class, in the first lecture, I have shown you an actual

Novodea that I did just recently where Novodea as a leadership stock was

exhibiting elements of reaccumulation in what turned out to be a distribution.

The same here with this stock, the same with Yahoo.

Why is this happening?

Well, because there is a lot of leadership characteristics on the way

And they are not going away really fast in the trading range that turns out to

be a distribution.

So therefore, a trade like this, the one that I'm showing you here, is actually

an okay trade. If you're not okay with this trade, then you're greedy.

And something you've got to check with your ego.

Because we're never 100 % right in this craft.

Trading is not about being right all the times.

Trading is about making money.

There are no other goals. There are no other intentions but to make money. If

you're spending time on this, you should be making money. If you're not making

money, then you should make some kind of adjustment.

Get more knowledge, get more skill, and develop that skill.

All right.

As we go along this range, so what else do we see?

We see an upthrust and then a failure. So it's right here on this

failure of the upthrust. This is where we're going to start thinking, like,

is going on?

Look how supply is starting to show the picture of the distribution where supply

is starting to increase.

There is a lot of selling off the top.

So usually that type of selling is always going to be institutional.

So we might be thinking here that with the increase of the supply and the way

how the price quickly reacts back into the trading range, we might be in some

kind of either short -term distribution or in the much bigger distribution.

So a short -term distribution would take us to the support level and maybe even

below that level.

that could be a trade by itself.

You can establish a position somewhere here on the failed signal and then

continue with this position until you see some kind of low or low. So exit

or somewhere here would be okay.

And then you could wait.

You don't necessarily have to continue with the short trade here.

You could wait and you could see how the last point of supply

It's going to unfold.

Or is it going to be possibly a spring?

Because in some of the cases, we could have volatility going into phase C of

reaccumulation and then move to the upside.

So that's why we would want to wait and to see if there's going to be some kind

of further failure and further behavior that is going to be associated with the

distribution.

We talked about the changes of character, and that's the main topic

Look at this reaction to the downside.

Compare that to the reaction that we've seen throughout this whole trading

range. Is it expanding?

Yes. Is the down spread expanding as well relative to what

we've seen in the current environment?

And we see that those are the big spreads.

The only spreads like this we've seen.

on the change of character itself.

So that tells us that we definitely see some bearish characteristics here.

Would the volume signature increase?

Yes. Would the supply signature increase with that? Yes, absolutely.

So we see in here a synchronicity, and this is just again, you know, a WTC

synchronicity between the downward effort, which is expanded.

and the downward result which is expanding as well therefore the bias at

short term at this point is going to be bearish so please note again

let's be honest about where we define the bias

let's be honest about even questioning where we're defining the bias if

you're gonna say that Why not define the bias before, let's say, the beginning

of 2006?

I'm going to honestly answer you that I did, and my bias back then

was still to the upside in this area until it actually showed a failure.

And this is where my bias has changed.

And there is nothing wrong about changing your bias as long as you

why. and as long as you could use it and make money.

So just something like, you know, as we go through the material, guys, I'm

giving you my belief systems about trading and about money as well, and you

should make those notes somewhere.

And just in general, a piece of advice, for those of you who are seriously

studying this course,

For those of you who are going to be spending hours on homework, I'm going to

push you a little bit more.

And I'm going to say that your main homework should be not just labeling the

charts that I'm going to give you, but it also should be making notes,

listening to the recording again and making notes and sending those notes to

What that does is, as you can see, I go through the material somewhat fast, and

I'm giving you a lot of material.

Yes, this material is being repeated over and over, but still, I'm giving you

lot of material.

Our minds are just not capable of absorbing all of the material at the

time. That's what I've seen from students from cycle to cycle to cycle.

just you. It's very common.

I cannot observe all of this material, even of this session, you know, like if

it would be a new material to me.

So therefore, watch the recording again, make notes, send those notes to me.

So let's come back.

So we clearly see some bearish activity on the possible change of character.

We're assuming that this is a sign of weakness and that the next rally, which

not going to be extremely strong, is going to be a last point of supply

We're looking for the points of, confirmation of this information and

bar actually gives us exactly that.

By itself, this rally as a last point of supply rally is better

than any of the rallies that we have seen on the change of character.

So therefore, we might be even thinking that there could be another trading

range here before we continue to the downside with the bias, with the overall

bias that started with the up thrust here.

So therefore, we could be either entering a position right here. This

our point of entry.

But the very vibrant rally suggests that demand is there, and this demand

is probably of weak hands.

But increase of the demand as increase of the supply will always have to have

some kind of test or retest.

So we are thinking that maybe there's going to be some kind of test.

Again, at this level. And there's going to be another point of entry for us

here.

Okay, well, let's see what has happened.

Oh, and I don't have this.

How come?

Okay, apologies.

So if I remember this correctly, you know, you guys could check out on Yahoo.

think it's been discontinued, but still.

I believe we had some kind of trading range here, and then we went to the

downside, so that was the history.

Okay. All right. So important concept on the change of character.

If you did not fully understand it, please...

rewind the recording, listen to the recording again, stop the thoughts that

don't understand, rewind it, listen to it again. If you don't understand still

and have a question, email me and we'll just go from there.

Okay. All right.

Let's talk about accumulation. So that's the next question for us, right?

Because as we think about a change of character, which is

basically from, let's say, an accumulation, a downtrend changing into

-trending environment, into the trading range.

As we enter the trading range, In phase A,

the biggest question from students, and it's just funny how it is, I would

actually never be thinking about this question because there are so many

that are going to still unfold as consolidation unfolds by itself.

But that question is always about the bias.

So students always want to know what is the bias.

Again, as I mentioned before, the advanced studies, which we're going to

the practicum course. I'm going to address this question to a certain

not necessarily to the fullest degree, but to a certain degree.

But for now, what I want you to do is just to think of a change of character

a change of the environment. And then once we're in the trading range, that's

when we want to observe how it unfolds and we want to solve this problem of the

bias.

The timing, when the price is getting out, so therefore identifying phase

C and D correctly.

And then the character.

And usually the character is going to be all about the leadership and the way

how the price is going to travel, you know, what kind of structure it's going

give us.

So how would we do this?

How would we define accumulation?

Well, there are a couple of things that are going to help us out. The first

helpful thing that Wyckoff method, and this is the value of the Wyckoff

methodology, by the way. I was talking to Bruce the other day, and I was

him that if you think about the Wyckoff method, you know, all of the elements,

the most important concepts are all on the level of

price structural analysis.

Everything else is just more in -depth on the technical analysis concepts, and

recognize it could be more in -depth. Let's say when we talk about the volume,

you know, I meet very rarely people who don't know about Wyckoff, and

they talk about the volume on a very high level.

But majority of volume guys are going to be all about,

you know, some kind of Wyckoff background.

But predominantly, it's all about the structure and how it unfolds.

So we'll talk about the phase analysis.

And phase analysis is extremely important because phase analysis

gives us the timing.

it gives us to a certain degree the bias as well.

But more importantly, it guides us through the process of how trading range

unfolds.

And we know that a specific phase is going to have specific Wyckoff elements,

specific Wyckoff events, and those Wyckoff events are going to unfold in a

specific way, and that could give us a hint for the bias as well.

So what do I mean by that? What do I mean by this phase analysis and how

everything happens kind of in the same way?

Well, let's talk about phases and let's start with phase A. And we spent some

time already on phase A. We said that in phase A, we have the conclusion

of the previous trending environment, in this case, a downtrend.

And it's going to conclude with four points.

The first one is going to be...

Always failed attempt to stop the price from moving further down, and it's going

to be our preliminary support.

So here is on this slide something that I want you not only to read, but I want

you to remember.

I want you to memorize this, the majority of it at least.

I want you to memorize this sequence.

of events that are going to come in the trading range. This is one of the

mistakes that students make a lot.

So I want you to understand that first is going to be preliminary support.

That's going to be followed by the selling climax.

That's going to be followed by the automatic rally.

Then secondary tests and so on and so forth from one phase to another.

I want you to remember this sequence of events, how trading range unfolds.

Come into phase A.

coming back to phase A.

Preliminary support is the first attempt to stop the price from moving further

down. And usually, this is still going to be an institutional activity and some

institutional buying.

Institutions at this point of time already seeing some kind of value and

them just a little bit more.

premature entering the position, which is totally fine with them because their

time horizon is so long and big that even if they bought here

and they sold somewhere here, this is still a profitable trade for them.

Also, please think that they could be scaling in into this and they could buy

more at the selling climax and kind of average down.

and then turn out to be averaging about one half of the trading range or even

below that.

So quite a few different ways of

how institutions could start to accumulate, and preliminary support is

be one of those initial first points where institutions could establish a

position.

this preliminary support definitely going to fail. Preliminary support,

preliminary supply points will always fail. You will always see either a lower

low for the selling climax or a higher high for the buying climax.

If you are labeling it as a preliminary support, which is the lowest point

on the chart like this, this is wrong. So this is incorrect right away.

So a selling climax is going to come, as I mentioned, as that panic from weak

hands. And again, weak hands at this point, and this is more of the general

capitulation.

So at this point, weak hands are not just public.

And this is what's been taught to us, that weak hands are going to be public.

No, that's not correct.

Get this out of your head, especially those of you who've been studying the

methodology for years and years.

Weak hands are not necessarily just public.

Weak hands are always going to be public plus institutions.

Otherwise, we would not have such a huge volume signature on the selling climax.

Public cannot produce over -extended volume spikes like that.

So on this general capitulation, the volume signature is going to increase

dramatically.

Supply is going to increase dramatically.

Demand is going to increase as well. And that increase of the demand, that's

what's going to start absorbing the supply.

This is initial absorption.

And who is absorbing?

CO, composite operator, composite man.

And then as this absorption happens, initial stopping action happens. And

stopping could be having such different variations.

Momentum could slow down, but price could still go down at the same time.

You could have situations where, let's say there is a deterioration of the

supply, price still goes down.

You could have a stopping action by itself where you have a spread that is

decreasing by the spread daily spread

and it decreases significantly at the same time the

volume signature is spiking up so what does it mean that means that there is a

force that pushes the price down there is a force that pushes the price up so

supply and demand increases at the same time volume signature increases

dramatically but yet there is no progress the result is kind of the same

that is a stopping action and then um you know another one on the increase of

the demand you could start seeing the price actually not just stopping but

moving up so that's the whole process behind the selling climax again

the most interesting part about this is the exchange of shares between weekends

and strong hands at this point of time.

Both groups have different intentions.

One group wants to get rid of the position because the emotional pain is

much. Another group is trying to establish a meaningful position because

is a point of liquidity and value to them.

All right.

After the selling climax, As the supply is being observed, that produces

automatic response, which has not just the buying by institutions on the way

but short covering by professionals that pushes the price up.

And that establishes a change of character and establishes the high for

automatic rally, the low selling climax, and therefore establishes the

boundaries for the trading range itself.

establishes the resistance and the support line.

This is a very valuable piece of information.

Actually, I've given you today so many great tools on how to think

about the change of environment and how to establish the trading range and how

your decision -making at those spots are going to be tested by all of these

events. So I want you to understand all of this. I want you to memorize all of

this. Because as we go along, and we're going to go into much deeper stuff,

especially with supply and demand, I want you to think about the definitions.

want you to know them.

So very valuable information with the resistance and the support lines.

Why? Well, because for the majority of the duration of the trading range, this

is where the price is going to reside.

It's going to have some points where it's going to go into the oversold

condition or overbought condition, and it's going to create low lows, higher

highs, but that's not that important.

The majority of the deviation of the price is going to be still around the

that was created by that phase A.

You might have some slope to the upside to the downside, but predominantly it's

going to be horizontal.

So therefore, think about the trading strategies that you're going to have

If you're an option trader, your strategy is going to be collecting of

and very short duration kind of weekly options type of

directional trades.

If you're a long -term investor, your goal is here to identify the bias of the

whole formation and timing.

identifying phase C and phase D as your potential points of entry on the

emergence of the trend.

If you're a swing trader, then most likely this is not even going to be the

candidate for you even to be in. But if you're a very, very short -term trader

or just oriented for this specific stock, then you could have some

trades, and those should be originated at the points of resistance and support,

so around the edges of the range.

All right.

So as we conclude our phase A with secondary tests, which is, again, a

test of the climactic action, it basically asks a question, do we still

lot of supply left from the downtrend and the last lag in the downtrend, the

capitulation into the selling climax?

And if we don't, if we don't see that continuation and we see the reversal,

it confirms.

a change of character by itself. It confirms the idea that we are in the

range. And we also will start thinking about phase B and how that phase should

unfold.

We will be talking about the intentions of the phases in the trading range. And

that is also something that I want you to remember by heart.

The intention behind phase A is all about stopping the previous trend.

In the accumulation, you will be stopping the downtrend.

In the distribution, you will be stopping an uptrend.

And therefore, the intention is just to stop the previous trend.

In phase B, we're doing two things. We're building a cause, and

building of a cause happens because there are so many...

fluctuations in phase B that we could observe.

And those fluctuations are just a kind of reflection

of buying and selling by different groups.

And through this buying and selling, what is happening in phase B in the

accumulation, it's the further process of

absorption of the supply.

that is going on that is happening here.

And it's not going to be extremely visible.

And again, this is something that I'm going to be extremely, extremely honest

with all of you guys.

This is not a linear craft.

This is not a linear analysis. This is something that...

It only could become linear if you understand all of the variables. And

unfortunately, we can't even comprehend the number of variables that influence

the movement of the price of a single stock.

But what we could comprehend is the way of how patterns should unfold.

And we're obviously saying the pattern will unfold with different variations.

And those different variations is going to create different structures, and we

have to make sure that we understand the process with which the trading range is

going to unfold.

So in phase B, there's going to be still in accumulation that process of

absorption that is not going to be extremely visible to us. In some

it's going to be extremely visible.

We might have some elements of strength, let's say, as a sign of strength, and

we're going to say this is a minor sign of strength, and it acts as an...

upthrust action in the possible accumulation.

And then we're going to see a very laborious move to the downside in phase

maybe into the higher low as a last point of support rather than a sprint

the lower low or a shakeout. So those are going to be extremely visible to us.

But in some instances, they will not be.

And what we will have to do is we will have to make the best judgment in phase

and then look into phase C and D as a confirmation for that bias.

And this is as honest as I could be with you.

And one more thing that I'm going to say here.

You will make the mistakes making that judgment call.

And that's okay.

You make the mistake.

You post -analyze this. You understand was this analytical mistake or

mistake or was it a trader mistake, my mistake.

And then you address that. You make an adjustment.

If there's something new on the analysis part, you take that chart, put this in

your library.

You bring this chart to me. We discuss this in, you know, either in session

number 15 or in the practical more somewhere else.

And we will understand it better.

But, you know, those things will happen.

So phase B also, as I said, you know, building cause through this buying and

selling wave.

And then it's all about the supply and demand.

You know, is there absorption happening?

Or maybe supply is very dormant, but the quality of the demand is not there.

So what does that suggest?

Probably suggest a continuation rather than a reversal.

So again, something that we will be discussing and practicing.

and developing the skill to recognize.

Then we go on to phase C.

And phase C is the most important phase in the whole trading range for me. Why?

Well, because it's the last test at the level of the support

for accumulation and reaccumulation.

And what is it testing?

Well, obviously, it's testing the availability of the supply.

assessing the availability of the demand and the quality of the demand at the

support level.

And if we would be just thinking about the testing of the previous price

then the test is definitely oriented toward testing the support in Phase B

and toward testing of the support in Phase A.

We want to see if the price...

not only can commit to the downside, and I'm not talking about the temporary

commitment where we have one or two closes below the support level and then

instant resumption of the upswing.

No, I'm talking about a more meaningful commitment to the downside.

Ironically, the current market shows a lot of those spots where there is a

significant commitment to the downside, and yet even that could act as a

shakeout.

And we're kind of seeing how the market is reacting.

In the mornings, the behavior is always sell, and then into the close, even

today, into the close, we're seeing some kind of move up. So whatever supply

comes in on the discounted news from overnight or from over the weekend,

it's still some buying that is present there.

We are at the very kind of like interesting spot where we could have a

But we also, if, you know, the price action is going to be, you know, more

bullish, we could continue with that move to the upside.

Or we could have a very shallow reaction.

So we'll just have to see.

But phase C is that last test at the level of the support. This is the test

of the supply and the test of the demand at the same time.

And this is a test number three. I will come back to this idea.

And this is a pure Romanism. That's how students call this.

Because in the original course or TGU course or, you know, whoever you, you

know, took this course before, there probably, there is no mention of this.

But I wanted to create some kind of shortcuts for you guys.

in order for us to just understand the concepts. And I will develop the idea of

why test number three later on. But for now, I want you to remember that the

first test is going to be a local test of the climactic action to the selling

climax. That's test number one. That's in phase A.

The test number two is going to be the test of the support area in phase B.

And then test number three at the support level is going to be the test.

of the last point of support, the test of the spring, the test of the shakeout,

and it's still going to provide us the clue that even if supply is available

here at the spot, demand is capable of reversing the price back into the

range and then pushing the price back to the resistance point.

Our fourth test is going to be a backing up action.

And this test is going to be at the level of support, but at the different

of support.

This level of support is going to be all about a conversion, a switch from

resistance to the support.

And that test number four is going to confirm a change of character.

Okay, well, if phase C is the last test, and it's extremely important to observe

this test of the supply and demand at the support level and to seek the

confirmation that the price comes back into the trading range and has

characteristics of being able to move the price up on the bullish volume

character, the bullish price character, and so on and so forth, then phase D

already becomes a part.

of the markup phase or an uptrend.

And usually when we look at the historic chart and you need to quickly identify

phase C, what do you do?

You look for the lowest point

in an uptrend

and usually that's going to be your phase C.

That's going to be a shortcut as well.

And especially for the homework that I'm going to give you guys.

So phase D is a part of the uptrend already.

And in the uptrend, the behavior is going to be different.

And we're going to experience that change of character again. As I

before,

the rally is going to be the best rally out of all of the rallies in the range.

And then the reaction is going to be the best reaction in the range.

And in a lot of cases, it's going to be more horizontal than the reactions in

the trading range itself.

And then after that, as we confirm the uptrend with the breakout out of this

area of the sign of strength and the backing up action, that's when we enter

phase E.

And this is where it seems, or at least that's what we were taught, you know,

things are going to be easier.

Not necessarily the case.

The character with which the price moves could become very dull and interesting,

and you could regret this trade. That's number one.

Secondly, even in the uptrends, we're going to encounter a lot of

consolidations, and we still have to go through the same process of identifying

the buys and like of events, phases, and so on and so forth.

Some last thoughts on this slide.

first of all, I want you to read all of this. This is your homework.

So read all of this.

Then try to find all of these points on the schematic.

And then also, as you read through this, I want you to identify certain

characteristics that are going to be useful in identification of all of

these Wyckoff events. What do I mean by that?

Well, for instance, an event like selling climax is going to be associated

increasing momentum to the downside,

increasing downward spread, increasing

volume signature, increasing supply signature.

Automatic rally might have the increase of the demand and increase of the up

spread behind it.

Secondary test is going to see the diminution downward spread and

volume signature and specifically diminution supply signature.

Sprint, as well as the shakeout, will have a structural lower low.

And then we'll study the sprints.

Sprints are going to have different levels of...

supply and price penetration below the support, and specific failures,

like spring number one.

And then a shakeout is going to have characteristics where the volume

is going to increase a lot. And there's going to be a lot of commitment by the

price below the support.

And it's going to look a lot like...

a sign of weakness. So the biggest question here is going to be to decipher

whether we are in the bullish or bearish bias.

Sign of strength is going to have characteristics where the upspread is

increasing, where the volume signature in general is increasing, and therefore

demand is increasing as well.

In a lot of cases, when I'm going to ask you, What is the definition of the sign

of strength?

You're going to give me the incorrect definition, and instead you're going to

talk about the character of the sign of strength bar.

A sign of strength rally is a different beast than a sign of strength

bar on that rally, and usually... students are giving me the character

of the sign of strength bar, not even the definition of the sign of strength

bar. So I want to point this to your attention.

And then the backing up action is going to have characteristics where the

downspread is decreasing, where the supply signature is decreasing, volume

signature is decreasing, and so on and so forth.

So if you could see...

Each Wyckoff event has some specific characteristics,

whether those are price characteristics, volume characteristics, or contextual

characteristics as to where those events are going to happen at the level of

support, at the level of resistance, in phases A, B, C, or D.

And what it does to us, once you understand all of this, once you get all

this, is that it acts as a roadmap for us, not just for the

timing when the price is leaving the trading range, but for the buyers as

You might be thinking, oh, okay, well, shakeout looks like a sign of weakness,

so it's a bearish buy, but then the price quickly comes back into the

range, shows some bullish characteristics.

Would you change your bias then?

You could.

And that's why Wyckoff methodology is so great, just because it gives you that

contextual layer that you could apply to your analysis.

And that layer is not only for the price structure itself.

That layer could be used for supply and demand characteristics, and that's why

supply and demand is so huge in Wyckoff analysis.

It could be used for the relative comparative purposes and comparisons.

And more importantly, it will be used by us.

with tactics.

You know, tactically, we want to understand that the best phases for us

and D, so identification of those phases are going to be crucial.

That's number one.

Secondly, we could bring, you know, into with tactics a lot of the

structural events type of interpretations where we could

open the position on the sprint itself, on the test of the sprint, on the

breakout.

of the local sprint on the sign of strength bar, on the reversal of the

up action, and on the breakout.

I just went really quickly through all of the points of entry that we will be

discussing, and we will be discussing those in more detail as to where

you know, is it at the open of the bar, at the end of the bar, at the close of

the bar, how would we use intraday, and so on and so forth. So that's all we

had.

So I want you to understand all of this. So you need to read all of this. You

need to memorize this. You need to understand the characteristics behind

event.

Okay.

And, you know, I've talked about the different type of

variations on how, let's say, an accumulation absorption could happen.

Let's imagine that there is a lot of value in the climactic action

for the stock that has just very, very big moves to the

downside, and selling Climax becomes the lowest low in this cold range.

How is it possible?

Why would this structure be created instead of a more horizontal, more

conventional structure that we see here on schematic number one?

Well, we can think about this, right? So there is a lot of value, and not only a

lot of value. This is an extreme value for institutions.

They're just saying, wow, the value of the stock is somewhere here, and now

just so undervalued.

So I'm definitely going to buy this because it's almost like a free trade to

at this point of time. Even if it gets all this and at some point it will come

to the value zone, then I'm going to make money.

So what they're doing here at this spot is they're buying a lot.

And because they're buying a lot and they're willing to buy even more because

still at this point of at the higher low, there is still extreme value for

And then at another higher low, there is still some value for them. So they're

coming in and buying on each reaction and supporting the price.

And that does not allow the price to go back to the support level and even

create a lower low.

So there is some urgency in the way how institutions accumulate in this

particular pattern.

And that's what creates this pattern, the upsloping structure. And that shows

potential leadership in the future.

It's different than the conventional accumulation range where we would see

stopping of the downtrend with the buying from institutions, and then it's

of flat.

And the spring could be a low, a low. The shakeout could be a low, a low. But

could also have a higher low here as a last point of support.

So why is it different? Again, different urgency to accumulate.

In the conventional schematic, the urgency more as the price leaves the

range. This is where the value becomes scarce.

Institutions that are late, they are the ones that are going to push the price

up.

In the extra strength trading range, it's slightly different. Extreme value

the point of the climactic action, and then every time it gives the reaction,

there's still some value.

They are pushing the price up, and that's what creates the structure.

In the continuous weakness, where we have the lowest point as a sprint or a

shakeout, and it's different than the conventional one, even though it's a

low as well, we kind of see that there is some kind of downslope in structure

here.

So lower lows throughout, and those are significant lower lows. What does it

tell us?

Even though initial accumulation has happened here on the selling climax,

is still supply present that pushes the price down.

And then at the lower points now, we see the value.

And this is where institutions are accumulating.

And that's how this structure is being created.

The traditional thoughts are rounding up formation.

Here, the same thought.

Even though selling climax is at the high level, still there is some elements

the supply that push the price lower, lower. We're testing it. And then until

the last test is showing some kind of deterioration, we will be testing it and

still we'll be looking at this as a downtrend.

It's when the change of character happens and then we start seeing the

behavior, higher highs, higher lows, and the volume signature is going to

exhibit this type of the behavior.

that's when we're starting to think about this pattern as well.

So again, I don't want you guys to be linear in your thinking about how we

approach this analysis.

You've got to be flexible.

Your minds have to be dynamic.

The only way how to behave linearly about this are two ways.

Take just one small event and there you can say, yes, this should unfold this

way. And if it doesn't, then it's a failure and I'm going to trade it in a

different way.

And secondly, if you are capable of thinking thousands of variables at the

time, then you can think linearly.

If you could analyze so many data points, then you can think linearly.

So what I would like you to do for your homework, going to the previous slide,

going back to the previous slide, print it out, have it for your library of

slides, have it in front of you as you do your homework.

and use it for your homework as you start labeling.

And then also look into this schematic right here, or schematics rather, and

then print those out as well and try to identify as you go through the homework

as to what kind of range you have there. Is there extra strength or extra

weakness? Is there some kind of specific formation that you

see? in your homework, and that would be the best.

All right.

Reaccumulation. Yeah, let's go through the reaccumulation. This will be really

helpful for the homework, and then we'll discuss the homework, and then we'll

probably stop at this point.

So usually I jump right into the distribution, but this cycle I decided

going to go about this in a slightly different way, and you kind of see how

creating this sequence. So going from a change of character that basically tells

us how the environment changes.

So from the down environment to accumulation.

You know, this is the change that we've described, a change of character.

And this is a change, change of character.

And those are the spots where we're going to make majority of our trading

decisions.

In between, we said that we need our phase analysis

to define the bias,

timing, and next character.

But once we're in the trend, we could also go into non -trending environment.

And obviously, at this point of time, you would be thinking, is this a

distribution or a reaccumulation?

We're going to concentrate today on the reaccumulation, just concentrating on

bullish patterns for now.

So reaccumulation is different from accumulation in the way what preceded

So on the way up, we have an uptrend for the reaccumulation.

In accumulation, we actually had a downtrend, and that's the only

whenever I'm going to ask you what's the main difference between accumulation

and reaccumulation, that's how you address this question.

Accumulation had a downtrend before that.

Reaccumulation had an uptrend before a consolidated environment.

So we want to look into reaccumulation and specifically label it. How are we

going to label it?

And then, you know, as we go further into the studies of the bias,

then we'll talk more about reaccumulation and the difference, you

reaccumulation and the distribution.

So let me take a picture of this.

Okay.

All right.

So what are the reaccumulations, the areas of reaccumulations?

We definitely should understand that

there are different cycles as to how the price moves.

There are cycles that are very short -lived cycles, and they exist on the

intraday timeframe.

The longer cycles would be existing on the daily time frame, and then weekly,

and then monthly, and then you could even go further with the quarter way and

yearly.

And within those cycles, within large cycles, like a monthly cycle,

a monthly move to the upside, you are going to have your original areas of

accumulation.

You're going to have some kind of moves to the upside.

And then areas of a reaccumulation that would

have some elements of the distribution, which are going to be short -term lift

elements, that will also have elements of absorption.

But once the reaccumulation has been concluded and ran its course, then we're

going to resume an uptrend, which now becomes a very, very...

much long -term uptrend. And we're going to go into the uptrend and the

resolution of that uptrend.

It's this spot, the trading range, the consolidation within the structure of a

much larger price cycle where the price stops,

exhibits some temporary weakness, which is being

produced by temporary selling and we could discuss more the reasons of why

selling would occur at those spots and then um absorption of that supply

absorption of those distribution elements and the resumption of the

those what we are going to call stepping stone reaccumulation trading ranges

could occur on different time frames and at different points

of the uptrend. So here we're seeing the same magnitude reaccumulation ranges

on the way up.

And then we see a different magnitude of the reaccumulation range.

And we will have to make that distinction because we will need to

we trade in this.

If I'm a short -term swing trader, then definitely small trading ranges are the

ones that I'm looking for, and these are the swings that I'm looking for.

If I'm a long -term investor, I really would like to exploit this opportunity,

which is a long -term value proposition to me, as I am a long -term investor.

And this is the position that I will establish and then hold on to it for

some time.

I also would be looking for the points to add on the way up.

So we would just have to be very mindful as to

the stepping stone recognition triggers occur, how they

unfold, and then what kind of trades are available out of those spots to us.

Okay, well, let's look at...

the example of labeling.

So this I've taken from Hank's book,

which I hope that you all

are already in possession of. Again, with Hank's book here.

Chapters 3 to 7 are the chapters that I want you to read.

If you read it throughout the course, this is fine as long as you read it.

So definitely a really good case study on the introduction of the Wyckoff

itself. And here we're seeing what I call a conventional

way of labeling a reaccumulation. We start with the preliminary supply,

then buying climax as a stopping action, biggest reaction to the downside

as a change of character.

which is also labeled as automatic reaction.

And then a secondary test rally would conclude phase A.

Phase A, remember, the intention is all about stopping. What are we stopping?

We're stopping the uptrend from further movement up.

The change of character phase A defined the non -trending environment, the

trading range.

and then throughout the trading range again we're going to go and define

different points like of events we're going to try to define phase c anything

between in between is going to be phase b sign of strength backing up action so

from this perspective everything looks

the same as an accumulation with an exception of the bind climax, automatic

reaction, and secondary test.

It's almost as if it's reversed, right?

So here is the accumulation, selling climax, automatic rally, secondary test.

So we have a reversed mirror image of that accumulation in the

reaccumulation in phase eight. But everything else is the same.

We're still going to have secondary tests in phase B. If those are lower

then this is going to be identified as minor sign of weaknesses.

We're still going to have in phase B upthrust attempts or upthrust actions.

We're still going to have phase C with the last point of

support as a higher low or sprint or shakeout as the lower low.

We're still going to have a sign of strength in phase B and a backing up

in phase D. I'm sorry, not phase B, phase D, sign of strength in the backing

action.

So all of this is going to be the same.

Here is an example. It's not that great because this article has been written

quite a long time ago, more than 20 years ago.

I believe it was written, oh, look at this, 1992.

And it was written by Jim Forte.

And in my opinion, this is the best article on price structural

analysis that has been written not just recently.

And I know that Hank wrote on that. Bruce wrote in the blog.

But to me personally, it's Jim's article that is extremely important.

This was the homework for you for today, to read this article. If you haven't

read this article, go to our website, go to the resources page, and you will

find that article. It's a requirement for this course.

This is the most comprehensive article on price structure analysis that I've

encountered. And if you don't believe me, here's the story.

you know, about this article.

I went in 1914 or 13 to

Singapore to the IFTER conference, which is the International Federation of

Technical Analysts. And I met there John

Bollinger. And you know all John, you know, with his Bollinger Bands.

And we were chatting, we were just chatting at the break, and he's like,

know, the best article on Wyckoff, on the structure, was by Jim.

And Jim was in the class with me, and actually multiple classes when I was at

Golden Gate University. So if you don't take my word as a confirmation of the

value of this article, then take the word of John Bollinger.

And he said to me that I actually keep it handy.

I keep it close to me because it acts as a reference point to me when I look at

the structure.

So Jim has done a tremendous job with this article.

And here is an example, which I actually think is not that great.

So he talks about the shakeouts here. Well, maybe a shakeout attempt, but

definitely looks more like a sprint.

Actually, I would do more of the...

horizontal down flocking range like this but the principles are going to be the

same phase a is going to be a stop in action of the previous uptrend then

b is going to be multiple tasks at the support at the resistance level and then

phase c is going to be your third test and then the resumption after the sign

strength and the backing up action i would actually identify sign of strength

little bit higher because this looks climactic to me oh he has two arrows

so this is great okay so um yeah really good studies by

jim um so i started thinking about different variations on the

range and in anticipation that students are going to have questions, you know,

I'm kind of showing you something that I've developed

in a slightly different way.

A lot of the times, the first move to the downside of the change of character

is going to have characteristics of a shakeout.

And then the next rally is going to look like your regular automatic rally in

the accumulation.

And then your next reaction is going to look like a secondary test.

So I started thinking that a lot of the reaccumulations are going to kind of go

through a very quick phase of distribution on that first

shakeout move.

And you could think of...

2010 May 6th flash crash as

an example and I should bring this to your attention.

So a flash crash like this and then a quick recovery as an automatic

reaction and then a test, a secondary test.

So here we are kind of dealing with the issue that

We have two changes of character at the same time. We have the change of

character on the way down and then on the way up.

So that suggests that the automatic rally is still here.

Then how would we label this? Well, obviously, this looks more like a

Or sometimes I'm going to put a sell in climax as a climactic action. So your

downtrend is very fast.

within the context of a reaccumulation.

In some instances, you're going to have a push to the upside, climactic action,

very small distributional pattern, which would point on the PNF that there's

going to be some kind of downtrend, so you have to go through this, and then a

local selling climax, and the regular accumulation labeling

is going to be applied to this.

But within the context of a much larger trend, this is just a reaccumulation by

itself.

So different timeframes, right?

Different timeframes on a secular,

big, or cyclical uptrend.

And then much, much shorter -term weakness and a downtrend.

within the context of a much larger trend up.

So again, just slightly different labeling that you could apply.

If you're seeing all of the shakeout elements and elements of the automatic

rally in the secondary test, then I'm actually okay if you label it like that.

I'm definitely okay and I'm going to ask you to label it exactly like this if

you're going to have a small distribution pattern.

a down move, and then a local selling climax, automatic rally, and secondary

test.

And again, this is something that you will encounter with your homework and

we'll discuss with your homework review.

Again, different, it seems to be the same concept, right? A concept of

accumulation, a concept of a reaccumulation.

Another reaccumulation, another reaccumulation, another reaccumulation.

And yet, look at the different variations on the same bullish bias.

The first pattern shows to us that in 2008, there was a

short -term downtrend. And I'm thinking about the 2000 real low for Apple. And

this is Apple.

So this 2009 low on the secular basis acts as a reaccumulation

low rather than a downtrend. But on a short -term basis, we are in the

downtrend right here. So here is that schematic that I've just shown you.

shows examples from life. This is how it unfolded. And then as we go to the next

meaningful consolidation, this consolidation is a reaccumulation

and it has a high, a low in phase C. So it

looks like this.

This one right here, this is the flash crash on May 6th in 2010.

Here is that example where you could, Label a buying climax, selling climax,

a shakeout, and it looks like a shakeout.

Automatic rally secondary test, phase A.

Test in B, test in B.

Phase C.

And relative to the previous low, the flash crash low, this is a high low

so the same schematic.

The next reaccumulation has a downsloping structure to it, so we see

C is a low low.

like right here, like in this schematic.

And it leads us to this frame, and it shows us a sign of strength, and here is

sign of strength, and the back -and -up action that's going to back up, you

know, to the same level of the support that acted before the resistance.

So the linear thinking about the method

should always be about the process itself.

We are in the trending environment.

Change of character happens.

We are in the non -trending environment.

In the non -trending environment, we're going to go through our phase analysis

to define bias, timing, and character.

Once that is defined, we want our tactics, a layer of tactics in phases

C, D, and early E to enter the position and to scale into the position.

Then we're going to have an uptrend.

with potential areas of consolidation where we could add to the position or

establish the position. Those are going to be a reaccumulation area.

They are all going to start the same way as other consolidations, with the last

climactic run, with the change of character, with the failure to continue

previous move, and therefore with the consolidation around the mean.

They could take different shapes and forms, but the process is going to be

linear again.

You're going to go through your phase analysis, you're going to identify all

weaknesses there, and then you're going to apply your tactics.

And it's going to continue until you actually come into the

distribution, and there the characteristics are going to be

And that's going to repeat over and over and over again. And this whole craft is

just about that.

It's about identification of the bias.

It's about identification of the opening of the position at the most opportune

time where your trade becomes efficient trade, where you don't wait for the

trade to happen. It happens right away.

And that gives you the most efficient run for your money.

All right.

So that's a reaccumulation.

Now let's talk about the homework.

So this homework is going to be for next week.

We are going to look at the Home Depot chart.

And the assignment is very simple.

I want you to label all of the trading ranges that I identify on the

slide.

And I want you to label those with Wyckoff phases, that's number one.

Wyckoff events, that's number two.

And changes of character, that's number three.

For the ease.

of conducting this exercise, I want you to print out

this slide right here.

This slide is going to show you the template with which you should label.

It's going to identify for you the sequence of Wyckoff events, sequence of

phases, intentions behind the phases, characteristics of all of the Wyckoff

events. in the consolidation.

And after that, I just want you to go to all of the slides.

And by the way, I will make the slides available to you. I will explain in a

second how you could get the slides. So you'll have two types

of slides. You're going to have PDF slides.

for lecture, and you're gonna have PowerPoint slides for your

home assignment.

This is just the new innovation for the course that I'm gonna try to cycle and

see whether it's gonna be more successful.

Please note that I don't have the volume signature here, so not all of the

charts are gonna have the volume signature.

This is not necessary at this point of time.

And I'm very serious about that. I don't want your minds to be distracted by

additional information. It's just not conducive to the understanding of the

price structural analysis at this time. Just follow my lead and don't even think

about it.

So look at all of the trading ranges that I identify with the support and the

resistance.

and just go through all of them and label them.

And then in the next class, we'll talk about all of this labeling, and we're

going to review all of these slides, and I'm going to give you

my solution slides, and I'm going to look through your homeworks, and

we're going to talk about specific points where you guys...

more commonly making the mistakes.

That would be a great time for us as we go through the review of the homework to

answer some of the questions that relate to price structural analysis. So I see

today some of the questions come, which is great, but a lot of the questions are

actually on the material that is still ahead.

And obviously I don't want to jump ahead without establishing very proper

basics.

And this exercise is all about the basics.

Now let me talk about what's going to happen today and tomorrow, and then

I'll go to your questions and comments. If you have any questions, you can type

those in.

So I mentioned already a couple of times a couple of things.

First of all, I will email you either tonight.

or tomorrow morning. And I'm going to email you with the access information

on the

webpage for this class

and for this particular cycle.

So please expect the email to come to you. This information

is confidential.

I would like to ask you to keep it just to yourself.

And then on this page, you're going to have

usually two

things, a video and

slides.

So the video is a player.

That is built in.

So what you need to do when you watch it is make sure that you expand it.

That you expand the view.

And you can watch it on the whole screen.

Slides is just a link. And slides you can download.

And what I'm going to do for you is, again, I'm going to have a PDF slide on

lecture itself.

And then I'm going to have a PowerPoint slide for your homework.

It's just going to be easier with the homework if you have PowerPoint slides

because you could work with those right away. You could just narrate them right

there and just send those back to me. So you don't have to think about scanning

those or maybe converting them into a different file format. It's all going to

be done for you.

So just use that.

Okay, so access, homework, what else? Yes, send me with

your homework one paragraph.

Identify how you heard about us.

How you heard about WTC.

And then what kind of...

Wyckoff method history you have.

You know, whether this is studies or trading.

You can tell me what kind of results you have as you're trading.

And all of this, by the way, right now, I want to establish that all of the

communication with me would go to this address.

SimpleKOT at Hotmail .com. The reason why I want to use this address is

because... It's just faster for me to see right away that you are emailing me.

Plus, the WyckoffAssociates .gmail .com email is just for business purposes and

the whole team sees those emails and, you know, it's just distracting for

So I just want to make sure that all of the emails go to my private email. And,

you know, I could answer much faster.

I'm not guaranteeing that I'm going to answer.

right away but i'm definitely going to see it much faster okay questions

comments on the homework or on the material that we've covered today so let

just see some of the comments questions here

okay

question uh multiple questions from eric here

In accumulation, schematic number one. Okay, let's go there.

If the move up after secondary test in

phase B goes far above the previous high in phase A, so with human up thrust,

which is overextended,

can we think that we are still in the accumulation?

Okay, so this is a question kind of like in the moment, right?

So, for instance, you know, if the price goes up, are we still in the

accumulation? Well, by the definition, you know, of the higher highs, higher

lows, here we already would be in the uptrend if this to happen.

In some instances, the upthrust could be overextended, but still will come back

into the trading range.

That's just the definition of phase B, right? So phase B here

is going to suggest that the test at the level of the resistance

could have either a failed upthrust attempt

or is going to have an upthrust attempt.

I'm sorry, upthrust action.

So therefore, upthrust by itself concludes with the return

below the support line, below the resistance, right? So therefore, by

of the accumulation, the price will come back.

In the case that you're describing, Eric, you know, with the prices going

up, up from here, then we are in the upfront, and I would be questioning

This type of structure is just phase C of a much larger formation.

So you have to think about that.

Okay, next question.

Okay, so the main thing in the reaccumulation is phase A that is

similar to phase A in the distribution.

But phase B is the only difference that I could see with the sign of weakness

that goes below the automatic reaction in the distribution.

Eric, again, I like all of the questioning. I think that we're just

little bit ahead.

So I would just say, like, stay patient.

And it will come to us as we're discussing in the next two sessions, you

all of those elements we go through the homework.

But a very simple, quick answer to this is that, you know, there are quite a

few things that we will be discussing as to how to define the bias.

And yes, you're right. In the redistribution, the first one -third of

I'm sorry, in the reaccumulation, the first one -third of the range could

develop the same way as the distribution.

It just starts with the same stop in action, change of character, and the

secondary test.

So it's going to look the same.

It could look different price and volume characteristics. That could be the

distinction. But again, the goal for this course, for this particular four

months, is for you not to necessarily give the bias in phase A.

I'm kind of teasing you a little bit with that material.

Because I know that we discussed this in the practical.

But for now, this is not the time to discuss that.

For now, I just want you to remember that reaccumulation distribution is

to start the same way.

So it's going to have the same labeling.

And then as we go through the trading range, this is where we want to define

bias.

Would distribution show up or would reaccumulation show up? And that's how

going to determine what to do next.

Can you address some differences in phases B to discriminate phase B of the

reaccumulation and distribution?

Kind of the same thing, right? So this is more advanced as a material.

We're still on basics. So we're going to discuss those probably even more in

practicum. Like phase B is definitely practical because this is one of the

hardest phases that we will be discussing.

So with that, just, you know, everything in the head.

You know, don't worry about this.

We will definitely, you know, get to all of this material.

The main key right now is absorb all of the basics and absorb them at the good

level. So that's the home assignment.

Okay, guys, well, that's it for today.

Okay, quick last question.

Is Wyckoff methodology suitable mostly for liquid stocks?

No, we could definitely use some of the examples of the liquid stocks as well.

Now, the methodology will be applied in a slightly different way there, and we

can talk about this.

Nilesh, this could be a really good question for session number 15, which is

going to be a Q &A session.

So once we understand all of the concepts, a question like this will be

perfect.

All right, guys.

Thank you for all of the questions, even though we really did not have a very

interactive session, but still really good second session.

We've covered a lot of material, which pleases me a lot because we've got a lot

to cover in the next couple of sessions, even just on price structural analysis.

Please do your homework. If you have more time, watch this recording again.

Create your notes. Send those to me.

But send me your homework to simplekot .com and send those before the

class, not in the last hour. I beg you.

You know, if you're going to send me in the last hour, most likely I'm going to

be busy just preparing for the class. I will not even see it.

Send me all of your homework before 12 noon on Monday and preferably on Sunday

or, you know, at any time on Sunday. Or if you could do this even before Sunday,

even better.

All right, guys, that's it for today.

Expect my email with the access information, and I will be expecting

with the homework.

I will see you next week at the same 3 p .m. Pacific.

Happy trading until then, and thank you so much. Bye -bye.