Original subtitles

Hello, everyone. Today is February 4th, and this is our session number five of

the Wyckoff Trading Course.

Today, we're going to cover the exercises, the

homework that we had for the couple of last sessions.

Specifically, we're going to look into the distribution homework.

self -review the Microsoft homework.

I'll talk about this a little bit more, but there are some spots that I want to

discuss because they were common for everybody.

By the way, I did receive your emails with your homework.

So today I had time and I also felt

healthy enough to go through all of the homework.

I think I had a chance to reply to everyone, at least send, you know, a

note here and there.

I must say that I feel comfortable with how the group views the price structural

analysis right now.

There are some small minor things that we will discuss.

And the next homework, which will be Apple, also will be the homework on

labeling. So this is another.

chance for you guys to practice structural labeling.

Next session is going to be on February 11th. A quick comment from a student.

This class has so much information and it's a touch overwhelming, but I'll do

best to stay on the top of it.

So yeah, this is a great comment. I love this comment and thank you for those of

you who are sending your emails and just

Thank you, neither me or the course.

Thank you for all those kind words.

Some of them I'll use as a testimonial. So if you guys want to send

testimonials, I'll gladly receive those. We just save those, and then at some

point we'll just put them on the website.

We only disclose the first letters of students' names, so it's very anonymous.

All right.

Let's see what we've got for today.

So today's session is going to be, we're going to start with the review of the

distribution homework.

And because I want to go a little bit fast, this is already session number

So I will not call on anybody today.

With an exception of a couple of spots, we'll see where those spots are going to

be. But I just want to cover as much material as possible and go through as

homeworks as possible.

We're still going to talk about some of the distributional patterns,

specifically upthrust today.

And then whatever we can do with the Microsoft homework, we also will do

today. We'll try to...

review it. If we don't cover that, then this will become a self -review. So this

means that I'm going to give you solution slides and then you're going to

to check your labeling against mine and then to see what kind of questions you

might have.

As I mentioned, homework for next week is again labeling.

We're going to take Apple and we're going to look into quite a lot of ranges

Apple's history.

Next session, we're going to start on volume and price analysis.

And our first task is going to be to dive in into the volume and spread

analysis. We'll discuss what we're looking in the spread, on the

price side, on the volume side, and so on and so forth.

There's going to be two homeworks. Homework number six is going to be on

volume spread analysis.

And then we're going to start what I call a systematic exercise where we're

going to start introducing the concepts of volume and effort against the price

or the result.

And that exercise is going to last for about maybe four to five sessions,

depending on how quickly we're going to go.

Meanwhile, on the theoretical side, we're going to discuss a couple of laws

are going to be extremely important to us in the way how we approach this

exercise.

are the laws of supply and demand and the law of effort versus result.

And again, you know, if we don't have time, self -review of the homework on

label, Apple.

Otherwise, you know, two homeworks that we're going to have next week.

Now, don't jump to the conclusion that this is too much. These homeworks

actually are going to be just one slide each. So you're just going to have two

slides.

So don't worry beforehand.

All right, so that's the plan for the next two sessions.

And let's jump to our homework review of homework number three.

That was on the distribution.

And we went through the distribution. I gave you kind of like the theoretical

material where, you know, I've discussed the schematic where I discussed the

Wyckoff events, and I suggested that all of you would not only review those

slides, but also to remember the characteristics of all of the Wyckoff

that happened in the specific phases.

That's extremely important for timing and for bias definitions.

So hopefully you've done so. So the first stock is Callaway Golf.

This is the weekly chart.

So we are looking at the uptrend.

And when we look at the uptrend, we want to distinguish a couple of things. We

want to understand what kind of characteristics, all of the reactions.

are going to have on the way up we also want to understand where the trend

emerges and where the trend ends in this case we are given probably a slightly

limited amount of information but we could maybe put

the trend lines like this

And at the break of this channel, this is where we would consider that the

is done. It's a break of a trend.

And also, we could look at the character with which the price is moving

up. And we could see that there are quite a few climactic runs into areas of

consolidations on the way up almost everywhere you kind of could see that

increasing volume signature and then going into the

overbought condition short -term overbought condition and the last run

necessarily seeing an increase in the volume signature so we see on the third

leg to the upside

the character of the volume actually starts to diminish.

That suggests that demand is being exhausted at this point.

And then we see in the last bar on the volume increase, which suggests

not just demand increase, but increase in the supply.

This is the volume equation that we're going to be very...

familiar with once we start going into the next session and when we will start

discussing volume signature and how the price reacts to that.

Well, then the next two bars have also quite a lot of volume signature.

So we're seeing how supply has increased over the last period where we had a

reaction. So with that, we're seeing some kind of change of behavior.

in the supply signature.

So let's look at the price. What does the price do?

Okay, we're seeing a reaction still within confines of the trend.

So that's normal.

Still, even if we look at this reaction and we would compare it to the previous

reactions, we're seeing that maybe the size of this reaction just ever

slightly more, actually a little bit more, so distance increases.

but not significantly.

And it still happens within the boundaries of the support and the

the trend channel.

So until we see some kind of break over trend, we might even assume that we're

going to have a continuation.

On the other hand, knowing the history of the stock, we know that

there was a consolidation.

And this was the last point at which the price has stopped going up.

and all of the other points were just the retest of the same stop in action.

So from the historical perspective, we know that this was the stop in action,

and therefore this was a climactic action.

The reaction prior to that was a preliminary supply, although not a lot

supply that has come at that area. So sometimes it's not going to be that

significant to us.

Preliminary supply will be...

an indication of where we might see some kind of

stopping action in different phases on a very short -term basis.

So this area could provide some kind of area of support in the near future.

As we recognize the bind climax, the next reaction is going to be an

automatic reaction.

We have discussed the buying signature, some supply increase, but it's not as

significant as some supply that we see on the chart in the prior spots,

in the prior reactions.

So therefore, our conclusion here on the bias is still that we are most likely

going to continue to the upside at this point of time.

As the price goes up,

And the reverses on this bar right here, we recognize that we are in the

confirmed trading range.

Buying climax and automatic reaction define the boundaries of the

range with the support and the resistance definition.

And then the next leg up, which is the test of the local test of the

climactic stopping action, and then subsequent reversal defines that we can

higher. and therefore we are from now on in the non -trending environment or

consolidating environment, and therefore we have entered phase A.

Next couple of tests, and they are secondary tests

as minus sign of weaknesses.

So let's talk about this. Why are those secondary tests? What are we testing?

Well, we are definitely testing the low of the automatic reaction in

phase A. This is the main test.

But the low of this test are lower than the low of the

automatic reaction. So therefore, lower lows.

So just some kind of weakness, structural weakness.

Whenever you see structural weakness, right away look down, look at the volume

signature and see what supply is doing. We kind of could see that, yeah, there

is some supply signature.

There is definitely some increase, overall increase of the supply activity

phase A. So we're looking at supply in B. We're looking at supply in A.

it produces just minus sign of weaknesses.

So we should be on the lookout.

And here we would be thinking about the bias as

still short -term bullish

with weak elements.

So that suggests that at any point, you know, if... supply comes in or if the

bullish picture structural picture is going to deteriorate we probably would

thinking that there is some kind of bearish at least short -term bias

bias that could be defined so as we go up we're seeing some kind of excitement

on this rally up

These are two possibilities at this point of time.

We could be looking at the possibility of a sign of strength or an upthrust.

Sign of strength will be in phase D of an accumulation.

An upthrust could be either in phase B or in phase C

of a distribution.

One of the things that we will pay attention to on this rally is the

with which the price goes up.

We know that the sign of strength definition is going to be

a rally that's going to travel from phase C throughout the whole

trading range and above the resistance

that was created in phases A and B.

It's going to stay above there for some time, spend some time above,

so not having the capacity to just think on the bad demand

or emergent supply, and then have some kind of reaction

to new support, which before

that acted as a resistance.

Characteristics.

of sign of strength are gonna be expanding spread, specifically up

spread, and increasing demand.

All right, well we see how there is some kind of increase in the volume

signature right here, and as this volume signature increases, the price moves

up. So there is definitely some demand.

We just need to define what kind of demand it is, a good demand or a bad

weak hands demand, strong hands demand.

We will see this only on the confirmation.

By the spread, we could think that this could be a legitimate sign of strength.

By the definition of the sign of strength, we need to commit

and stay above.

There is only one close.

above the resistance level that is a progressive close that makes

the new high on the close.

Please note that this bar right here, which is also a big up bar,

but it doesn't close above the high of that last bar.

So it doesn't produce that commitment that we need. So there is only one close

here in this yellow.

small circle, that shows us a temporary commitment to the upside.

And then the price falls back under the resistance instantly on the next day.

So this looks more like a definition of the upthrust rather than

a sign of stress.

So therefore, right here, we would be questioning.

We would be making that judgment as to maybe this is not...

necessarily a reaccumulation and maybe this is a distribution.

Under the distributional scenario, if we are in phase C of the distribution,

that upthrust is going to start falling and failing back into the trading range.

It's going to create different points of, less points of supply.

It's going to create a major sign of weakness and less points of supply

And that's exactly what is happening.

As it happens, the characteristics of the major sign of weakness are going to

of such where the spread to the downside is going to start increasing.

And that's going to be on the increased supply signature.

Why is this happening on the major sign of weakness?

Well, that's because the trend to the downside is starting to emerge.

And this is just another small capitulation within the trading range by

institutions.

They are recognizing that there is no absolute return over the last year or

On the attempt to go out of the trading range, the price has failed, so they

need to get out.

There is no relative performance as well. If you would look at the history

the market in 1997, the market was going up.

So there is definite deterioration in their portfolio as to how they treat

position. they will be capitulated.

And this is just an initial capitulation here at the end of 1997,

beginning of 1998, by institutions.

And those are smarter institutions.

Those are the ones that are recognizing that the trend has changed.

And obviously, those are also trend -following institutions.

as they are the ones that are going to recognize the spot as that emerging

downtrend.

So on the rally, this is where you should get a lot of confirmation.

We see that the price commits, not commits, but at least retests the new

after the minor lows, sign of weaknesses in phase B.

We're assuming at that point that we are probably in phase D and we should be

experiencing some kind of last point of supply type of rally.

The first rally sometimes could be very aggressive.

And we see it right here. It comes back into one half of the range.

Well, it actually is a very logical thing because,

you know, as there is this short -term capitulation, on the way down into the

lows of the major sign of weakness, that creates two things. It

creates a very short -term value proposition to weak hands.

And again, by weak hands, I mean institutional hands and public, both,

not just public.

So we never want to position ourselves, you know, talking about composite men

against the public. This is an incorrect statement.

We always want to talk about composite men as a

strong holder, so therefore strong hands.

And then other institutions that participate

but on the wrong side.

of the trade and majority of the public will be majority of the time

specifically you know at the majority of the spot is going to be on the wrong

side of the trade as well so that's why public always has this kind of like

negative view by the market experts okay so

this is a short term value proposition and then it also creates a short term

liquidity

because some of the institutions are capitulating on this position with the

profit. So that creates an opportunity.

There is a short -term absorption of the supply, and

that leads to this aggressive rally, because a lot of the trend followers are

trying to pick up the spot as the reversal and the resumption of the

And why wouldn't they?

Look at the leadership.

prior to the consolidation and then as we go through there is not a

lot of deterioration uh to the downside i mean we're not giving up we're giving

up probably what maybe like uh one -fifth of the last leg to the upside so

a lot of them are going to see value right here and i think that the clue

this you know

of the uptrend was somewhere here on this gap with a lot of the

volume signature, probably earnings catalyst right here.

And as we had probably earnings, very favorable earnings, then the reaction on

earnings event is unfavorable for the first time. And that's after the

absorption that has happened.

So who's selling? Some other institutions are selling.

And they are selling a lot.

This is the highest volume signature since the beginning of this chart.

So something is wrong. Something is not going well.

So it's listed at the minimum. The price is going to consolidate.

And then we should assess as to how it's going to consolidate.

Two rallies, very weak rallies.

And as these two rallies develop, look at the demand signature. It diminishes.

demand becomes poor and this is where we just basically say that the

distributional scenario is unfolding it's confirmed and we could open the

position and actually you know short the stock all right so that's the whole

story here is my labeling for you and then couple of questions here

In phase A, does automatic reaction have to be equal or lower than preliminary

supply? Does the first secondary test have to be equal or lower than the

climax? So we've talked about this a little bit, preliminary supply, and then

look how we are connecting with this area later on in the trading range,

multiple times.

And by connecting, I mean that either we are testing with our short -term

committing, testing, short -term committing below the area of the

It's not necessary that it's going to happen this way. We might have multiple

scenarios. We might have a preliminary supply that will be violated.

Usually that would suggest that there is more supply that is coming in at this

point of time, and it has this capacity to go.

through the support area of the preliminary supply.

We could have the situation like we have on our current chart, where

that area is being respected.

And in some instances, the price just would stop exactly around the lows of

preliminary supply. So all of the three possibilities are there, and we should

make a judgment.

by how the price reacts towards that preliminary supply area as

for the secondary test the same thing we could have different tests we could

have very very low tests that suggest a lot of weakness we could have a higher

test where we're going to say that this is a secondary test as an up thrust and

then we could have a test more of what we see on this chart being in the same

area approximately as the buying climax.

And obviously, each test has its own implications.

An up -thrust test would suggest that maybe this is a leadership and we might

have, if this is a distribution, we might have a rising, up -sloping trading

range. The weak performance of the secondary test might suggest

Either a very poor demand and the price will have to consolidate before it's

going to go up or just a continuation in the hypodermic type of manner.

And we'll look into this on other slides as well.

Next question. In real time, would this area be labeled as a reaccumulation with

the upthrust being a sign of strength in Phase D on increasing spread and volume

signature? So we've talked about this as well.

there are some elements of a reaccumulation right here.

Actually, not necessarily very favorable elements.

I mean, if we would go into more details of this area, we would see that on

average supply has increased and that produced some minor weaknesses.

So that suggests that, you know, there might be a possibility of a bearish

scenario at some point.

So therefore...

So it's not necessarily at that point that we would be thinking that the

reaccumulation, but the first assumption will be that it is a reaccumulation.

All right. Next question.

Can we only confirm distribution on the break of the support with volume?

So I think that I've shown you guys kind of like a gradual change of bias

or perception by us as to how we analyze this whole trading range.

we could see that here it's going to be extremely difficult for us not to give

the beginning trading range a definition of a reaccumulation.

Then only in phase B, we're going to have some kind of doubt that

this is just a reaccumulation. Because even though it looks like a long -term

picture is still a reaccumulation, we see on a short -term basis some kind

a deterioration in the increased supply signature and result to the downside

that is slightly increasing so that suggests short -term bearish picture

and then as we go into phase c into the up thrust and we see the failure

this is where we're saying the up thrust failure suggests at least a short -term

bearish scenario

And then once we go into a major sign of weakness and then the LPSY fails, this

confirms a bearish bias.

So this is extremely important, what I've done right now for you.

It's another way of showing to you of how perception is

going to change through the analysis, through all of the phases.

And we might be coming in.

into the trading range thinking that this is a big leadership stock and we

be looking to buy this stock.

And the timing of phases would not allow us to necessarily buy right away in

phase B. We would be waiting maybe for the back and up action if we thought

we missed a sign of strength here.

And yet after that, the perception is going to change and we're going to

our bias.

So and that's why, you know, it's a nonlinear analysis that we

are conducting here because everything changes. So it's kind of like ongoing.

But at the same time, I understand that some of you, especially now those

engineer types, you guys are going to be thinking about like, you know, a lot of

data points here and how could you convert that into the bias decision.

And I think that it's possible. It's just that you need to define.

you know, the interaction between those data points and the deductions that you

made.

All right.

Question, and then we're going to go away from this slide.

Large volume spike in May.

Can it be concluded as effort versus result based on volume and price

So this one right here, yes.

So this is more of what we would call a late institutional

capitulation, right? So we had like an early institutional capitulation on this

volume signature. This is a late institutional capitulation. Sometimes it

on earnings as well. And it kind of moves the stock and the whole chart into

different

from a non -trending environment to the trending, which is the downtrending

environment.

And at this point, the institutions that are giving up their position, they are

not necessarily unprofitable. They could have been holding on to this position

for quite some time.

So their profits are building.

They could be scaling out at that point. But a lot of the trend followers,

are going to capitulate here.

And that's because the trend has been decisively broken.

And not only that, the consolidation that they may have thought was a

reaccumulation is actually resolving itself as a distribution.

So this is where they're going to give up. They're also going to give up here.

So these institutions are probably already going to have some kind of

unfavorable profit picture or it's going to be, you know, even

unprofitable proposition if they were buying on the way up.

All right, so a couple of questions.

From Nilesh, why was logarithmic chart used for this analysis?

Was not relevant.

at all for any type of the chart to use.

The purpose of this exercise is to label, so that's what we're doing.

Next question.

About phase C, what is the difference to label it as an upthrust after

distribution instead of the upthrust?

Okay, so we're talking about this spot right here.

So the whole idea...

about the upthrust after distribution.

And I think that I've discussed this in the last session, Eric.

So why is it after distribution? Because the assumption was that distribution

has already happened by this point.

And again, this is a very erroneous statement that was thought to us before.

It doesn't mean that by the upthrust in phase C, all of the times

that distribution would conclude.

And this is a really great example of this because we don't see a lot of

elements of the distribution until we actually come to the later phase D.

So therefore, it doesn't necessarily make a lot of sense to me that we call

the upthrust after distribution in this case. So therefore, I kind of consider

this a legacy.

legacy name or legacy semantic.

And even though we're using it, we need to understand the proper usage of it,

the functionality of it.

All right, let's go to the next one.

Oh, okay, let's talk about the upthrust.

Okay, so upthrust and upthrust action.

Those are two different things that we...

want to distinguish.

And the first thing that we're going to talk about is just upthrust itself.

And the definition of the upthrust is a temporary commitment above a level of

resistance and almost immediate comeback into the trading range.

So we see how upthrust happens this way.

So there is some kind of excitement the price commits.

temporarily or at least tries to commit temporarily above the resistance level

and then it fails almost instantly so in the first case right here

we see a close above and again the way how i look at up thrust and sign of

strength is i'm looking at the progressive closes

to the upside.

So what do I mean by that?

I want to see how many closes are actually above the resistance and

how many of those closes are going to follow up and continue to the upside.

So for instance, let's look at this trading range. And we see that there is

close number one that is above the resistance area.

And then close number two, that is higher than the previous close.

So we have two consecutive progressive closes to the upside.

And then close number three, that also has the same characteristic. The price

closes above the previous close or above the area of the resistance that defines

this area.

We don't see that necessarily with up thrust.

So we see one close and then one bar that tries to close above but fails and

creates the supply tail.

So we only have one close at this level.

The same here.

This was even just an attempt to upthrust rather than the upthrust

Why is this an attempt? Well, because the price opened with the gap up.

It was a gap above the resistance, and then for the whole session, the price

trending down, and it closed below the support area.

So therefore, it was an attempt to upthrust. It was an attempt to

commit above, but it was not necessarily the upthrust itself.

And then in this example right here on the chart below, we see a close above,

and then again.

There are no commitments above the lost resistance that was created.

So just one close above the resistance, and that's that temporary

commitment of the upthrust.

The upthrusts usually were discussed in two places.

Actually, three places, but in the distribution were discussed by Wyckoff

places.

In phase B, and obviously phase analysis came later, so Weikers was

talking about the upthrust itself, and then upthrust of the distribution.

And we've discussed the upthrust of the distribution. The only thing that I want

to add to that for the upthrust of the distribution, just because it is in

C.

we're going to have the equivalent of the second point of fear that we've

discussed for an accumulation.

So a second point of fear usually is going to occur into the lows of phase C

just because supply has increased as the price approaches the support level and

that triggers the worries of the weak hands and they start providing liquidity

to the market by selling their positions.

that could take the price lower.

So with the increase of the supply signature, volume is going to increase

well.

And the result to the downside on the short -term basis is going to increase

too. And that's what we call a second point of fear.

It's going to be associated with the first point of fear, which is the

run into the stop in action in phase A.

Now think about this in the reverse.

Think about this as a distribution right now. If we have had points of fear,

then on the upside, we most likely are going to have points of excitement.

First point of excitement is going to be a climactic run into the stopping

action of the buying climax.

It's going to be associated with some volume increase.

and some spread increase, momentum, velocity increase to the upside.

This second point of excitement is going to come into the highs of phase C.

And usually that second point of excitement is going to be more evident

on the upthrust rather than on the last point of supply rally.

And we kind of see it from here, right? The rally before in phase B.

looks somewhat more interesting.

But there are some elements of excitement on this last rally. As you

the volume signature increases, the spread to the upside increases as well.

The true range of the gap action also happens on the increased spread and

increased volume signature.

Those are the elements of weak hands excitement.

They are getting into this position because they are recognizing in their

that the trend is emerging.

Unfortunately, it's going to fail and it's going to act as an upthrust and the

price is going to come back into the trading range.

But this is the area and the rally that we want to recognize as a second point

of excitement.

What does it give us? Well, it gives us the timing. The timing of what?

The timing of phase.

And obviously phase C is one of the most crucial phases because in phase C,

at the height of phase C, this is where the downtrend is going to start.

And this is where we're going to start having the environment where the

volatility is going to increase.

And we're going to start seeing on that volatility diminishing result

on the upside and increasing result on the downside.

and we want to catch that emergence of the trend.

All right, let's look at the next example. And this is an interesting one

because usually there are some of the difficulties associated with

this chart. So really quickly, a volunteer, say yes, and I have a couple

questions for you here.

A volunteer.

Okay. Let's go to Rama.

Hey, Rama.

So this is going to be very quick.

My question is, where do you see a consolidation here?

Where is our trading range? How do we find it?

I found...

When I was doing this homework, the trading range starts sometime

after February 7th.

So what is this point then? If this is the beginning of the trading range, then

how would we label this?

I would label that as a buying climax because of the price signature.

Okay, great.

Okay, Rama, thank you. So I just wanted just that question.

Okay, so yeah, this is a good definition of where

the trading range would start.

Now, the question here is how do we confirm that this is the beginning of

trading range?

Well, again, this is the historical chart, so there are quite a few points

references for you. But imagine that we are just maybe somewhere here.

We are still in the definition of the uptrend.

Look at the higher highs, higher lows throughout.

So there is no way that you will be thinking that this is a distribution and

that we are in the trading range or anything of this sort.

Now, the key here was identifying this buying climax was

the characteristics of the climactic run and characteristics of the change of

character. The characteristics of the climactic run included

Acceleration to the upside, gaps, increased spread to the

upside, and then stop in action, after which the

price produces the largest reaction to the downside that we have seen or that

see on this chart.

That suggests at some point that we're going to have some kind of trading

We see from the next action into a possible secondary test

after the automatic reaction that the price does not want to go lower.

So what does it mean? It means that there is still some strength around this

spot.

So what does it mean? That means that most likely we're going to continue with

the upward movement.

And if this is a trading range that we might possibly,

have a downsloping trading range.

Now at this point of time, if you're going to tell me right here that we are

going through the distribution, most likely I'm going to say no.

And I'm going to say that short -term picture at least is going to be to the

upside. And there is no definition to the downside yet. At least

everything what kind of came.

is very short -term oriented.

Even if we talk about this reaction rate here that had some kind of increase of

the supply signature, but it still created a higher low, the price quickly

rebounded to the same ground and did not want to go down afterwards.

Those are bullish characteristics, not bearish. So therefore, our

bias still will be bullish.

And it will be bullish until we actually see this reaction right here. This

becomes the largest reaction that we see on the chart.

And it also breaks a couple of intermediate support levels.

So it's either a potential phase C.

Or it's a major sign of weakness in phase D.

So now that we've seen the structure a little bit and we're saying, okay, bind

climax, automatic reaction, secondary test, and we have some kind of upsloping

structure, then we could connect this.

like this.

And then think about what happens at

the edges of this trading range.

What we are seeing is the price commitment into the overbought condition

where the price again commits only once or maybe twice

and then comes back into the trading range.

This is more of a definition of an upthrust than a sign of strength.

And then for the first time, a break of two support areas, and this is

the largest reaction in this trading range.

So it looks a lot like a sign of weakness that tries to commit below the

support. We would be seeking the confirmation on the last point of supply

And it does come. All of the rallies are extremely weak.

And actually, the signature is almost identical to the colorway golf chart

we have seen on the previous slide.

Aggressive rally to the upside.

Gap to the downside.

Probably a pre -earnings gap and then earnings gap somewhere here.

And then the rallies.

that are very, very weak rallies.

This was an actual trade. I traded the stock at that time. I shorted the stock

right here in this area.

And then instantly you're rewarded to the downside and we see how institutions

are entering this capitulation zone and they just don't care. They want to sell,

sell, sell. And that's why the price travels down so fast, so quick on such

volume signatures.

So it was a challenging chart because Again, we are looking at how the

leadership stock, like Netflix, is being distributed on

the way up.

And we're seeing that initial elements of distribution happened here, here,

here, here, and then just a capitulation, overall capitulation here.

It was such a darling. Nobody wanted to get rid of it.

So therefore, when people don't want to get rid of it and the conditions change

and they want to get rid of it really fast, this is how quickly the price is

going to go to the downside.

And that's why the trades to the downside require less time than the

the upside.

But obviously, trades to the downside always have a limitation as you cannot

below zero.

All right.

Let's look here at some of the questions. Subsloping trend can be

a reaccumulation in real time. Is the low volume on the move higher a clue of

demand of poor quality?

I'm trying to detect where a subtle distribution is coming in.

Yeah, you could definitely think of it this way.

It's not necessary at this point of time of the uptrend, especially think about

this uptrend in Netflix that has started at the lows of 2009.

So this trend has been lasting for more than two years now.

So it's not necessary to have an extreme volume signature on the demand side.

And for the price to go up, we kind of see it here.

Volume is low or demand is low, and yet the price is making a progress to

the upside.

And at the same time, if you remember the history of the market,

we had a trading range in the market.

And the trading range was more horizontal, whereas here in Netflix, we

of the...

up -sloping trading range.

So we're definitely outperforming the market at this point.

So there is no reason for institutions to give up this position.

They're still receiving an absolute return.

They're receiving a relative return.

And they're really happy with this position until this quarter comes.

And this is where they capitulate.

So this analysis

kind of like a rollover analysis on the buyers, especially with the stocks that

are going to be extremely winning stocks, the leadership stocks.

So you have to be extremely akin to this area right here where the change of

character takes place.

All right, let's talk about the next

on the next possible way of how we could address upthrust.

One of the ways that Weikert talked about upthrust is a

measure of momentum.

He used the upward thrust in the uptrend as a

distance between the significant highs that are being reached and

where the price stopped for a significant period of time.

And he looked at the progression of those highs, and he would determine

momentum was increasing or decreasing.

And in this case, we see how the upthrust or upward thrust is

momentum is going down. So that was another way of looking at the upthrust.

uh measurement of the momentum by the way look into this distribution how this

happens right so what do we see here where the institutions are selling the

stocks first so probably somewhere here right so this looks like that climactic

run um somebody might argue with me that this could be a climactic run and you

know you could be absolutely correct about that, and we could label it in two

different ways.

The climactic characteristics are present in both cases.

So I would probably go for it like this, with the horizontal range, define phase

A here, and then phase C somewhere here.

So B is almost the same size as A, so not necessarily the preferable scenario,

but still possible.

Major sign of weakness and then LPSY area.

And LPSY has its own range.

So look into this smaller range right here and look at this upthrust action.

And look at this upthrust.

What does it look like? It looks like somebody is coming in and demand is

increasing, but result to the upside is decreasing, right?

So this means that there is a lot of effort to the upside, and yet result to

downside is diminishing. So that's a bearish sign.

And this upthrust becomes a second point of excitement for

weak hands. They're trying to play the reversal here.

Okay, well, we've talked about the upthrust. We've talked about the upward.

thrust in the uptrend.

Let's now talk about the upthrust action.

What is the upthrust action?

So one of the things that we recognize is that the

upthrust could happen in the accumulation or reaccumulation as well.

How is it possible? Because we were usually taught that the upthrust is

be defined only in the areas of the distribution.

Well, the swings above the resistance level in the

reaccumulation or accumulation could act in the same way as an upthrust itself.

Those swings could temporarily commit above the area of the resistance, and

the price can come back really quickly back into the trading range.

That's what we've seen here in both of these scenarios.

our first upthrust action is actually a secondary test to the bind climax that

we experienced in prior to that.

Look into the, a change of character that defines that the

uptrend is done. This is the largest reaction here.

And then going into the secondary test, just because we upthrust, we could say

that this is a secondary test as an upthrust action. So it acts, like an

upthrust, but because this is a reaccumulation, we can't say that this

upthrust. It's an upthrust -like action in the accumulation -reaccumulation.

The same happens in phase B here for the small trend rate, for the small

consolidation. We're committing to the upside actually quite significantly.

That shows an element of strength, so we could call this

actually a minor sign of strength here, but it acts as an upthrust, commits

temporarily, comes back into the trade range. So that type of action in

accumulation or reaccumulation, we would call an upthrust action.

All right, questions. But in real -time analysis, we can't know it's an upthrust

or upthrust action, or can we?

Okay, again, we're coming back to this kind of like our...

rolling over analysis right so my point again and i see how

some of you are kind of like you know thinking about the real time and you

are getting stuck there with with that type of thinking don't think of

this analysis as something that you need to

define in the moment right away

that analysis could develop and become a more complete picture as you're getting

more data points.

So therefore, when we are thinking about this upthrust right here, we might be

saying, okay, yeah, we definitely know this is a secondary test.

Fine climax, automatic reaction, secondary test. We know that. And then

somewhere we're going to know that there is an upthrust action here. So that

suggests some...

And that suggests some reaccumulation.

But we yet have to confirm it.

That's our first assumption.

So you see what I'm doing here? I'm not necessarily saying that this is an

upthrust or it's an upthrust action.

I'm just seeing this action as an upthrust.

And that gives me some kind of suggestion on the buys that I still need

confirm.

So therefore, going through this whole range, again, somewhere here, we might

thinking that there is some elements of strength and so on and so forth. Here,

we might be thinking, okay, is this an upthrust or a major sign of strength?

So we would be actually thinking that this is an upthrust as the price goes

here, but it's going to be a major sign of strength to this area right here.

So analysis unfolds. Analysis is not linear, and definitely I want you to

recognize this. If there is one point from today's class, that would be it.

That's a very, very important point.

So let's kind of get it.

Okay, next chart. And this one I'm going to discuss right away with the

labeling.

So this is Apple.

Actually, why did I do this?

Okay.

All right. Well, we'll see how you're going to handle this with the next

homework. So a leadership uprun into the stop in climactic action.

A change of character is well defined with the increased volume signature

we say that supply has come in. This is early institutional distribution into

the weak hands.

Weak hands are seeing some kind of value.

short -term value at this point, and they are buyers.

And rightfully so, because on a short -term basis, you are going to have some

kind of rebound out of what now seems to be an extreme oversold condition right

away.

A minor sign of weakness, that's the first suggestion that there might be

kind of short -term bearish bias if

both price and volume fails.

But instead, we're having elements of a reaccumulation, suggesting a short -term

run. So we're still thinking that, you know, the continuation to the upside.

And then just again, minus signs where we see some kind of selling, some kind

selling, but still it's not the pronounced reactions that we see with

of selling.

Therefore, our first concern about the bias here is only after the upthrust

has been reached and then it fails.

Somewhere here, this is where our perception is going to start changing.

Again, look at what I'm doing.

I'm not suggesting a distribution here.

Look at this volume signature, diminution volume signature, diminution

signature on a higher highs, higher lows.

So what are you going to do here? If you're a long -term investor, you're

in this position, you're holding on to this position until this failure.

If you're a swing trader, you're initiating a position to the upside and

exit is going to be on this bar right here, on this change of character bar.

And in both cases, it's still worthwhile to either be in this position or to

hold on to this position.

And then some of us are going to be thinking that this is too much supply.

maybe in the future, if there is some kind of failure, the bias is going to

change to a downtrend rather than an uptrend or a consolidation.

That's exactly what happens. On the major sign of weakness, we see and the

reaction that is the largest reaction in this trading range.

And that defines institutional selling on the way down

and suggests that we are in the distribution.

So after that, it's only tactics.

We want to open the position after the last point of supply, the first rally

again out of the short -term oversold value.

proposition for some of the institutions and that's why the rally is so so quick

then look at this whole trading range and look into this rally right here

what can you say about that this rally what are the characteristics of this

rally some small increase of the demand more local than global

And the result to the upside is diminishing.

Those are going to be, and it looks like, a second point of excitement.

And then a failure right away. And then a failure again on the gap.

And then a failure again on the rally.

Those are all bearish characteristics.

And therefore, we would label this as a redistribution to the main.

distribution range.

All right, questions.

The swing buy is because of diminishing volume with uptrend. I would be afraid

of the gap down.

Yeah, exactly.

So diminishing volume signature, higher highs, higher lows.

You could label this, this trading range. Here's the range that you're

at. So your phase A is probably somewhere here.

phase B low, and then you could probably squeeze in phase C right

here, or you could have a phase C here.

Now, Philip is talking about this gap.

All right, well, if we would look at this gap, look at how effort has

tremendously, yet what was the intention behind this reaction?

It's to commit below the support level. Have we done so?

No, we haven't.

Therefore, diminishing results to the downside on extreme volume signatures

suggest a presence of demand.

The presence of demand or increase in demand suggests absorption.

We only need a confirmation of price that after such

absorption, the price could go up. We see that exact thing on the next three

bars or so.

As it happens, we definitely want to get into this position.

If we miss this point of entry, and by that I mean one and two,

then we could definitely come in after the backing

up action, especially on the breakout.

So here is our point of entry number three.

Those are the only points of entry that we see here.

And then our exit is going to be here.

here, and then on the failures, on all of the failures to the downside. So it's

just basically down, down, down.

This is not necessarily going to be a winning trade, but it's going to be like

break -even, small win, small loss type of trade.

This is the trade that usually is going to be either in the correct direction in

phase B, or it's going to be on the failure of the continuation of the

trend. In this case, a failure to continue with the uptrend after the

and on what seemed to be the emergence of the continuation of the uptrend

and then the failure of that.

All right.

Let's see what else.

Why automatic rally or automatic reaction is there instead of the

actually is occupying the minor sign of weakness?

Okay, so we're talking about this spot, automatic reaction instead of this. So

the suggestion from Eric is to go all the way.

Well, we usually would be thinking about swings in the trading

range, right?

Look at this.

So each swing is going to be defined by a reversal at the beginning of the

swing. And each swing has an end.

of the swing is going to be defined by the opposite reversal those are going to

be points of confirmation those are going to be the last points where we

know that the swing has reversed so therefore we would define our labeling

on the swing analysis right so here we could see that um

a swing goes down there is no reversal on this bar

No reversal on this bar.

Then it goes down again, and then there is a big bar to the upside. This is the

true range of that bar. It closes right here. It closes above the closes of

1, 2, 3, 4, 5 bars to the downside.

So we see that this was a swing to the upside.

Swing to the downside, swing to the upside.

Automatic reaction, secondary test.

Swing to the downside.

Minor sign of weakness in phase B.

All right, next question.

Okay, more like a comment.

Okay, from Roman.

Two most important and vital thinking skills essential for mastering

This course, flexible thinking and nonlinear thinking.

Yeah, I would agree with this.

But, you know, I would say it's just not necessarily just for Wyckoff.

I think that we kind of used to, in life,

to create systems for ourselves, right? So there is a system of how we drink tea

in the morning. There is a system of how we take care of our children.

And it's all systematic in our...

We just don't even sometimes think that this is a system, but you have rules,

you have steps, and everything happens in some kind of sequence, and then you

just have deviation from that.

Well, with the markets, unfortunately, we have to be systematic,

but we are functioning in the environment where there are so many

many data points, and it's uncertain.

in the way of how these data points are going to be presented to us on each

particular day.

So therefore, we can't really have simplistic steps

when we judge the market. We have to have a much deeper understanding and

therefore we have to have more data points.

With more data points, you know, with the analysis of that, we just naturally

get lost.

And there is a tendency to go and just to say, okay, well, I want the rules. So

give me the rules.

And then, you know, I'm going to just go by the rules.

And usually I see that with students. They just kind of like take the rules

then strictly want to follow those rules. But there are quite a few

And you have to either remember all of those exceptions and have the

very much clearly defined rules Or you have to be a little bit more flexible

allow the analysis to unfold, allow the picture to kind of like this puzzle to

be connected, you know, all of the spots to be connected to each other.

So it's a rollover analysis, so to say.

All right, let's go to the next one.

All right, we're doing great on time. I like that.

Okay, so composite.

And again, I'm just gonna go right away into the labeling here.

So three small, three trading ranges. The first one is very small at the top.

So we're looking at just probably even intraday picture right here that we need

to figure out.

And this is a very quick trading range. Well,

another reason why this happens so quick is because it's a tippy formation so we

have speculation on the way up and this has been happening in the beginning of

2000 and then urgent distribution on the way down we see that from the volume

signature increase and how the price reacted to the downside after this

there is no way we don't see the bias

why well because it did not developed like this,

where there is no progression to the downside by the price.

It did not develop as a horizontal trading range.

It developed as an urgent sell -in by institutions on two legs to the

actually three legs to the downside.

At this point of time, you already should be thinking that this is a

deterioration to the secular trend.

And therefore, most likely, long -term bias is going to be down.

Now, short -term bias, because of this reaction right here that has elements of

diminishing downspread, diminishing supply signature.

That suggests that the short -term bias is going to be to the upside.

That's another difficulty in students' analysis that I see.

Thinking about two biases at the same time for different time frames.

Thinking that the long -term bias here is to the downside, but that the short

-term picture most likely is going to be technical picture, is going to be some

kind of rally.

and most likely out of this always -sold condition, which is extreme at this

point. Think about for the whole time that the trend was up, especially in

when the price was going up, up, up, without stopping, kind of like a 2017

of market that we have had just recently.

Going down so fast, so quick is going to...

define an oversold condition for us and that's going to be an extreme oversold

condition just because we've never seen this before in the last year or so.

So that suggested a rally. A rally suggested that we might have some kind

upthrust situation.

So we're looking for the upthrust, we're looking for the test.

That usually would define phase C for us.

And then we're also looking at the upsloping structure of this whole

And we're seeing, you know, we could connect the highs and then from the lows

the selling climax, extract the next parallel line. And then from the lows of

the secondary test of the sign of weakness in phase B, extract the next

And look how perfectly the major sign of weakness, I don't know

why I don't have this label in here, major sign of weakness.

is being defined by the commitment below on multiple closes down, four closes

down, rather than just an attempt to go down.

And then a last point of supply rally has some aggression to the upside, but

finds the resistance at the level of support.

And then the second rally shows that demand is starting to deteriorate and

that... The result to the upside is also deteriorating, suggesting that this is

the time right now for the price to go down.

As the price goes down, another trading range. This one is a peculiar trading

range because it unfolds so quick.

So you have to think, because we're looking at the historical chart as to

is my last point of supply.

where the downtrend is going to start. And we know that the trend has started

this point. So most likely this is going to be phase C.

And then a selling climax, automatic rally, secondary test, and then

in between is phase B.

Okay, questions here.

Can a distribution occur without phase B?

This is a really good question.

Some distributions with fewer bars to my eyes appear to not have phase B, but

proceed from A to C. And we obviously are talking about this trading range

here. So the way how we would be looking at this trading range is there could be

multiple ways.

We definitely recognize that this is a major sign of weakness. This is a change

of character.

We also recognize that this level of support is probably crucial because the

rally comes exactly to this level. So we're most likely talking about just

picture right here.

Again, I have mentioned a TP formation.

In a TP formation, we're going to have two types of charts.

We're going to have what we're going to call a hypodermic TP formation.

where there is a speculation on the way up and speculation on the way down,

something like this.

And then we're going to talk about the TP formation, where there is an urgent

selling in phase A, and then we are residing in the lower part

of the trading range, and we never touch the buying climax high.

And then the price fails.

So in both of these cases, the

distribution at the top is going to be very fast.

So therefore, your phases are going to be all collapsed.

And the rule here where we say that phase B is going to be the longest phase

not going to be applicable just because there is an urgency to sell.

So that's the key to the collapse of the phases in

either a hypodermic scenario or on the accumulation, we're going

to see that collapse in the shakeout type of situation that we recently have

had.

Okay, next one.

Can a secondary test in phase B be lower than the saline climax level?

Secondary test in phase A, so somewhere here, be lower than the saline climax?

Yeah, of course.

We could have this. Look at this, right? So this is why this question is here,

yeah.

So look at these two scenarios.

In the first scenario, we see that the secondary test is a high or low.

In the second scenario, we see it as a low or low.

And in both cases, there are suggestions.

What are the suggestions? A high or low suggests some kind of strength.

And think about this. I'm saying strength. I don't want you to think

about this statement because we defined that the long -term bias after this

move to the downside was...

down, and then a short -term bias was defined by us out of the oversold

condition here as up.

So therefore, a high -low and this strength that secondary test shows at

point of time suggests that and confirms the short -term bias to the upside.

It doesn't confirm a long -term bias to the downside. It just suggests that

short -term we might have some kind of reaction.

In this case, a low, a low on the secondary test suggests what? Suggests

presence of the supply and suggests that demand is poor.

So therefore, we would be thinking that the next

rally that we still have to have into phase B and phase C could be of weaker

quality.

And therefore, we're definitely interested.

in the trade to the downside.

Shouldn't redistribution start with the buying climax?

No, why would it?

Right? So how does redistribution happen?

Okay, so maybe we didn't go through this material.

But we did go through the reaccumulation.

So I'm kind of, you know, in my mind thinking that you guys are...

converting that into the redistribution.

So reaccumulation is going to start with what? With the stopping action.

It's going to be an intermediate buying climax.

And then after that, we're going to have an automatic reaction, secondary test,

and so on and so forth. But it's going to start with the buying climax.

Why? Because the price was going up.

We were in the buying mode here, specifically with weekends.

On the way down, we cannot have a buying climax because there is selling going

on. And in some instances, I know that, there is some references

to labeling this as a buying climax rather than a selling climax.

And the logic is that institutions are buying here.

Okay, well...

Let's talk about this really quickly.

Didn't want to go into this, but I think that's necessary.

So why sell in Climax and

not buy in Climax?

The pros for buying Climax identification here in the

redistribution. The suggestion here is that institutions are buying

at this point.

And therefore, this is a buying climax and not a selling climax. Okay.

So think about just the semantics of this.

Climactic action suggests that there is a

stopping, a conclusion of some action.

What action is that?

It's the price going down.

Why is it going down? Well, because there is a lot of selling.

So it's a conclusion or a stopping action of selling.

So therefore, it doesn't make sense to say a buying climax at this spot.

Then also think about, you know,

A buying climax at this spot in the redistribution.

Who is buying? Okay, well, some institutions are buying, but what hands

those institutions?

They are weak hands.

We know this because the price went up short -term and then it went down.

So they were on the wrong side of the long -term trade.

So therefore, weak hands.

So whatever they are buying here is going to be temporary.

And it's going to be only temporary to a long -term trend that is developing

here. So therefore, we don't want to call the stopping actions buying

climaxes. We want to call them selling climaxes. And they're going to be

the same way as a rate accumulation, only mirror image.

Selling climax, automatic rally, secondary test,

phase B, phase C, phase D.

everything is the same. So only phase A might have some kind of issues for us

here.

Okay, let's go to the next one.

Okay, so multiple trading ranges here. One of the examples

that I like for the hypodermic action.

So we've talked about the hypodermic distribution patterns where we said that

there's going to be a collapse.

of duration of phases.

Why? Well, because there is an urgency to sell.

When there is an urgency to sell, phases are gonna be collapsed.

And this is what we see there.

There are quite a few ways of how we could label this.

We could label buying climax at the top right here.

and then just say that we have automatic reaction secondary test, sign of

weakness in B, phase C, either here or here, and

this whole thing is our distribution.

So that's one way. Another way is just to recognize this as a potential

change of character and as a first stop in action after the climactic run.

And then recognize this as an upthrust of the distribution.

And then a major sign of weakness and an LPS.

Either labeling is fine.

I doubt that a lot of us will be able to catch this trade to the downside.

But I want a lot of us to catch this trade to the upside.

The money here is to the upside. It's not necessarily to the downside.

you're kind of running into the problem of, well, what if this is a trading

range? And if it collapses like this, you might be far away from the ideal

of entry.

So sometimes it's not even worth it to think about the trade to the downside,

but it's definitely very profitable to think about the trade to the upside.

All right, accumulation, you can go through this yourself.

The only comment that I have here is kind of like this apex formation.

with the sign of strength still committing above and holding on there

support area. So it just works really beautifully.

All of this, you know, test number one, test number two, test number three

works. In the apex formation, the second point of fear is not going to work.

It's not going to look as a point of fear just because there is a

diminishing volume characteristics.

Next trading range.

Relative to this rally, we see a reaction that suggests a change of

and suggests a trading range.

Lost attempt to go up before a major sign of weakness. Major sign of weakness

well -defined.

Increased spread to the downside.

Commitment to the downside multiple times.

and increase in the volume signature.

So before the major sign of weakness, we are probably experiencing phase C.

Because this is a lower high, we are going to label it as a last point of

supply.

After that, after the major sign of weakness, a rally that has multiple

to go up, but it can't overcome the point of the resistance that was defined

the automatic reaction.

in phase a and therefore suggest more weakness and this is the point where we

could open the position to the downside the next trading range is uh

weird because it um has a very short duration and high

volatility so think about think about this trade in general

so we have a lot of speculation on the way up then institutions are selling.

Then somebody is seeing short -term value coming in and buying at this

As they buy, they produce a really good rally that comes to the previous point

of selling, and then it's being sold again.

We see this from the increase in the volume signature here.

There's a lot of selling behind that volume signature and the way how the

starts to create lower highs and lower lows.

Increased volatility suggests distributional pattern as well.

So then this is extremely volatile, very short duration, and

we probably identify this bar as kind of both a selling climax and an automatic

rally at the same time.

Secondary test as a sign of weakness, as a low low suggests more weakness, and

we just need to wait for the rally to open the position.

As the price goes into the up thrust, reversal acts as a perfect point of

in this case. And you could be thinking that you could still be in phase B at

this point.

So your goal is just to create some kind of lower low below the previous low,

just because of the weakness that we've seen. And it goes exactly to this point.

At this point, you might actually reassess and just say, okay, well, maybe

the rally is weak, I'm going to... continue holding on to this position.

Three times the rally tries to go up, fails, and you could add to the position

somewhere here into the climactic action right here.

That would be the trait.

Questions here?

Okay, so we've covered this.

Can we have a situation where the secondary test is a sign of weakness?

in phase B is so extreme that it causes the formation of a newer and lower

trading range.

Okay, well, interesting suggestion.

I'm just trying to identify where this is.

Yeah, I don't see it here.

Okay. Yeah, probably these two questions should not be on the slide.

Okay. In a third trading range, I identified secondary test in your chart

a buy -in climax.

So third trading range. Okay. Identified secondary test as a buy -in climax and

secondary test as a sign of weakness. Okay.

As an automatic reaction, could you please go over how we identify the

for this range from the wish. Yeah, so I think I mentioned this, right?

Climactic run relative to this rally.

This reaction, is this the largest reaction?

Yes, it's the largest reaction.

So this could be either a preliminary supply or a buying climax.

So the way how I confirmed this automatic reaction was more by the

the last point of supply.

So they come into the resistance that acted before as the support.

So support based on what? Well, based on the definition of the automatic

reaction. And that's how it kind of is being confirmed.

But you could definitely do exactly what you said and then put here preliminary

supply and then buy in climax here.

Now, the problem with this is going to be...

all in the characteristics of the climactic run. You kind of could see how

two are so different.

And even if you overlook that, then let's say from the bind climax into the

automatic reaction, secondary test, this is going to be phase A.

And then going into B, we're probably going to define a sign of weakness right

here in B.

So test at the high, test at the low.

Maybe phase C here, major sign of weakness, LPSY.

You probably could label it like that, but then it seems like a trading range.

I'm sorry, it seems like a downtrend rather than a range.

So I would probably just be thinking that this is the range right here, this

the range right here, this is the range right here.

So this smaller range belongs to this one more as...

a major sign of weakness, and then LPSY, and this range stands on its own.

Okay, yeah, so I don't think that there is, well, okay, so down sloping range,

yes, you could probably, you know, try and do it like this, but I think it's

well defined. I mean, like in this case, there is no need for that.

Look at how LPSY rally comes exactly to the point of the support, and that's

exactly what we want to see.

If anything, this is not down sloping range.

This is more of the expanding formation where we see that the

support starts to expand to the downside, and then we see deterioration

the other side.

probably would look at this like that.

But again, the major trading point is gonna be somewhere here, here,

here. All of those are great points of entry, also here.

So all on the way down.

All right.

Okay, next one.

Okay, so this was probably like, The most challenging.

I have it in reverse. Okay, it doesn't matter.

Yeah, let's just do it on the one without labeling here.

So, yeah, this by far was the most challenging

chart.

It's a chart of Yahoo.

There are multiple trading ranges right here.

The key here was to define

the ranges themselves.

So let's maybe have a volunteer. Let's have a discussion here because this is

going to be a good learning point.

So say yes and I'll unmute you.

Okay, let's go.

Nilesh, how are you doing?

I'm doing good. How are you? Good.

Okay. So what are the trading ranges that we are looking at?

Sure. So the first trading range, which I identified as a,

it's like a preliminary supply where we have the highest volume

signature on the map.

That I identified as a preliminary supply.

Okay.

And then at the top, there was,

the trading range, which was like kind of very condensed and that would have

been my upthrust after distribution in that trading range. So it's very small.

Okay, hold on a second. I lost you. I lost you.

Let's just address the question first.

So what are the trading ranges that we'll look at? So give me the timestamp

where the trading range starts and where it ends.

Or maybe just approximately, like with the timestamp.

The timestamp?

Yeah. Like, for instance, I see that there is a trading range right here.

Okay. So where is the next trading range?

The next one would be 2000,

I think. Is that 00?

That's the, yeah.

So that's where I have the second trading range at the top.

I'm sorry, what is that?

The peak before that, where you have highlighted, right?

Okay, I'm right here. I'm at the top. So is this where the trading range starts?

No, the high before that.

Okay, this one right here?

That would be my buying climax of that range.

That would be after distribution.

Okay, got it. So what is the trading range? Is it this trading range right

Right, right. I see. Got it. All right. So what is the next trading range?

The next one is the next biggest reaction that we see to the

upside, right?

Okay, this one?

No, the high before that.

Yeah.

Okay. Okay, can you go to the lowest point in that?

Yeah, that would be my trading range.

Sorry, timestamps, there is not much timestamps or dates that I can do.

Okay, that's fine, that's fine.

So can the next trading range?

The next trading range is the one that we just marked, right? So the

end of that trend.

That would be my selling climax.

And then we have a very narrow trading range which starts from there. Yeah,

there and there.

Okay. All right, got it.

Okay.

So... Okay.

Let's think about this.

this way so i'm going to direct you with the questions and i want you to listen

to the question do not deviate in your answer from the uh from the question

kind of like stay on it stay aware and just be present with me and then we're

going to go through the logic of this and this is going to be guys an example

how we should be thinking about labeling especially

labeling of the historical charts that we go through. This is our first task on

the historical chart to be able to recognize specific elements of

and distribution to recognize what elements belong to which phase and

to understand where is the final capitulation before the trend starts or

is the emergence of the trend.

So what I would suggest, Naresh, is to look into this area right here

is this a distribution or a uh is this a distribution

or a reaccumulation distribution distribution why is this a distribution

by looking at the chart uh

because the price went down after yeah i think in the most

simplistic terms that you could possibly think of, right? The price was going

up, then it had some kind of distribution, and then the price went

On the way down, it had what?

Another distribution, or is it a redistribution?

Redistribution. Redistribution. The reason why it's a redistribution,

the price was going down before.

Then it went to the consolidation, and then it went down.

All right, so our attention is on this area of the distribution.

Okay, so on the way up, how would you characterize this rally?

What do you see on this rally?

Is there a lot of speculation that's going on in this rally?

I mean, think about the way how it went up, right? So we have...

Two quarters here.

And price went up from 40 to 120.

What do you think institutions are going to do when the price goes up so fast?

They're going to at least at the minimum take some profit.

So I'm working with one of the institutional clients right now. And one

requirements for the system is to be able to take the profit at the areas

the position is in the extreme overbought condition.

Because they know that there's going to be a reversion to the mean.

If the price went up so fast, it has to revert to the mean at some point.

So it's a very logical place for them to do a couple of things.

to scale out of the position, to close the position, or to hedge the position.

So therefore, we know that whatever selling is going to come is going to be

institutional type.

Look at the selling that comes.

This is a significant volume signature over anything that we've seen before on

the downside.

Okay, well now, let's kind of like visualize this a little bit. So there is

speculation.

on the way up, which leads to some kind

of urgent selling by institutions.

When do we have that type of price behavior?

where there is a speculation on the way up and then there is an urgency to sell

by institutions on the way down.

How do we call this type of distributional pattern?

Parabolic trends?

I'm sorry?

I don't remember the exact name, but it's like whenever we have like a

moves to upside.

Hyperdermic formation, right?

So we would say hypodermic formation.

And by the way, guys, I really would like you to study those. I mean, like I

gave you all of the schematics, all of the characteristics are there.

We also talk about teepee formation, right? So teepee family.

So hypodermic is going to look like a hut, Indian hut, right?

So it's going to have a speculation on the way up and then urgent selling on

way down.

We don't have it here. We only have speculation on the way up. And then we

like the first leg where we see some urgent selling.

But then it goes into a trading range.

So the TP formation of the same kind of like qualities is going to be something

where we have a speculation on the way up.

And then we have phase A, phase B.

With urgent selling, and usually it's going to be labeled like this.

Phase A, secondary test is going to be very weak into one half of the whole

to the downside. Then we're going to experience a sign of weakness in phase

And then after that, the price is just going to create an apex.

And then it's going to go down.

It might have different variations.

It might have an apex. It might have some kind of upthrust attempt and then

down.

All right. So these two I gave you last week. So you should be aware of this

schematic and the way how characteristically the price and the

behave. So does this remind you of anything here on the chart?

Yes, it looks exactly.

What we just referred to.

Which one?

The hypodermic, I think that is the one, right?

Well, hypodermic is this. Do we have this type of structure up and down?

Yeah, then TP.

Yeah, TP.

We have up, speculation on the way up, and then we have an urgent sell -in,

but it doesn't really negate all of the profits. It doesn't go lower.

Like the Alexian. Remember, Alexian went down much more significantly.

So this one is more of a tippy formation.

Okay, Nilesh, I'm going to take over here. Thank you.

Thank you.

All right, guys. So study, study, study, study.

You know, this is, you know, the patterns that we need to know by heart.

So when we look into the formation, it should come.

visually to you all of those elements, and then you just visually confirm those

elements. You're thinking, okay, well, I see this speculation on the way up.

This could happen in both of the scenarios.

I see that speculation on the way up.

Then I see that on the way down, there is a lot of urgent selling.

We see this from the volume signature. This is the largest.

selling signature that we've experienced.

Prior to that was actually on this bar. Some selling came there, but supply was

observed really quickly and the price continued to the upside.

As we look into this picture and we're thinking about this whole trading range,

obviously it starts with the buying climax here. This is the stop in action.

And then the first leg to the downside is an automatic reaction.

The next swing to the upside is a secondary test. That's our phase A.

So we're here and here.

And look at this attempt to go up.

At this point of time, we would be thinking this is a very weak secondary

And right away, it falls down. It falls into phase B

on a lower low.

which suggests sign of weakness.

This point right here. So at this point, we would be thinking, well, they

urgently sold.

There is something that's going on and they want to get rid of this position.

And therefore, there's going to be an urgent selling and then there's going to

be a period of inactivity.

So the whole pattern, the sentiment of this pattern develops as extreme

speculation on the way up.

That's number one.

Urgent sell -in into the loads of phase A and phase B.

Number two. Those are done by the composite mass. So this urgent

sell -in suggests that their positions are closed.

Institutional positions, and specifically CO, are closed.

So who's left?

in this position.

While institutional trend followers are still in this position, the trend is not

broken, right? So we have a higher high and we have a higher low at this point

of time.

And because this is the period where CO is inactive.

we're going to see the diminishing volume signature.

And therefore, from this diminishing volume signature, we're concluding that

both supply is diminishing and demand is diminishing.

So what is happening here?

Somewhere here on the short -term oversold,

there are some buyers, weak -hand buyers.

And they bought in into this position. So they're fully invested.

Fully in.

The composite is fully out.

And then trend followers are still in this position and they are doing

ITF are holding this position.

So it's a period of time when everybody is inactive.

The COO has sold, and there is no reason for the COO to come in and to establish

the position either to the upside or to the downside.

It's too late for the upside. There is no potential for the upside in their

and their evaluation.

And then it's definitely not the time to open the position to the downside

either.

So they are standing on the side for this stock.

The weak hands, having identified the value at the lows of phase B, they are

into this position, and now they're just holding their position. They're doing

nothing as well. They're just waiting.

And then institutional trend followers are in this position. They did not scale

out.

Maybe it scaled out, but they did not exit this position, so they're also

waiting. And this waiting period is going to be like this on the lower

signature where both supply and demand goes down.

The weak hands are going to be excited if that picture is that Apex is

resolving into a fake move to the upside.

They are getting into this position.

So that creates a second point of excitement.

And we know that this is a characteristic of the upthrust.

And we confirm that by one close and then almost immediate pushback into the

trading range.

So an upthrust. An upthrust and a second point of fear could happen only in

phase C.

So this seems to be our phase C.

This is phase C. We know by the TPU schematic that a bind climax is going to

followed by the automatic reaction, secondary test, phase A, sign of

B, and then phase C.

And then it's on the break of that apex formation or TPU

formation here where ITFs are going to give up.

they're going to capitulate.

And with this capitulation, the volume signature is going to increase and the

price is going to go down. So the result to the downside is going to increase.

And that's going to create a sign of weakness.

And then the price is going to come back into the area of the support that acted

before as the resistance. And that's going to create the last point of

And that's the whole formation.

I'd like you to think and to consider the story behind

the price formation.

What does it mean for institutions?

How do they behave there?

It's a very important knowledge that we have to have.

Now, as we continue with our story here, right, so some

volume increase.

on institutional trend following capitulation and then co

has sold itfs gave up on this position

and then also the weak hands

which are public hands got in here

And then they sold on the way down.

So what do you think is the sentiment at this point of time?

Does CO want the stock here?

Well, we don't see a big bounce here, so CO is out.

There is no value here for the CO.

We know that if CO does not have any value for this stock, then most likely

are going to go down even after this reaccumulation.

The weak hands, which are public institutional hands, they are not

because there is too much emotional pain.

So they just stay away from the stock. They forget about it. So they're not

selling nor buying.

And that's why the rally is not that big.

And that's why the selling does not continue right away.

And then institutional trend followers are predominantly, you know, long -term

players. So they are completely out of the stock either.

And because there is no emergence of the trend at this low, they are not

participating. So what the stock will do?

Kind of do nothing.

And look how that nothing looks on the volume signature.

inactivity. And look how it looks on the price signature.

So you've got to think in these charts in terms of how

the sentiment changes for all market participants and how the price structure

basically a reflection of behaviors that we all exhibit in the

market belonging to a specific group.

either strong hands or weak hands.

Now imagine yourself and you are given,

let's say, $100 million to manage at the level of the

knowledge of the market that you have.

Think about what kind of trades you're going to have.

And if you have some mistakes losing trades, how are you going to get out of

this position and capitulate?

And that's what's going to produce those big gaps, big spread increases, big

increases in the volume signature.

Institutions are people.

And people are skin and bones. They are like us. There is nothing different.

The only difference between them and us is that it's their profession.

So they have to spend a lot of time studying this material, developing the

skill, and then applying it in the most successful way.

And they're getting paid for that, getting compensated. Us, it's our money,

right? So we invest, and if we miss, okay, it's on us.

So we're not necessarily dependent on the income, you know, from trading. And

I'm talking about retail traders, obviously, here.

So all is being driven by the behaviors of different market participants.

This chart is just like such a case study of how it all happens.

All right, well, let's go through the labeling here.

So we've labeled the first trading range right here. The

second one is easy once you put the slope and

you kind of right away see the emergence of the major sign of weakness.

a really strong momentum rally back into the trading range on the increased

demand signature.

So this demand signature suggests that the duration of this redistribution

is going to increase and we're going to have another trading range.

At the end of this trading range, there is a very, very good rally to the upside

on... increase in volume signature.

So that's our second point of excitement.

And therefore phase C for that small range.

And off we go to the downside.

Again here, look at this bar.

Second point of excitement, phase C.

Second point of excitement, phase C.

Second point of excitement, phase C.

So even by that, you could just quickly define phases and the timing.

Another thing that we could mention here is, and this was, and Elisha started

with, is this trading range.

Someone could label it.

this way.

Buying climax on the climactic run on the extreme volume signature.

Automatic reaction, secondary test, phase A.

Phase B, phase B, and then the upthrust into phase C.

And then the first big reaction, sign of weakness, and LPSY comes exactly

to the point of resistance which acted before as the support.

that's a possible interpretation of this area right here. But once you are in

this range, you've got to do it the way how we did it because it's a TP

formation. So it's going to have a very specific label in which I want you to

remember.

All right, great.

All right, so now that we have, oh, hold on a second. Is this distribution?

Oh, I'm sorry. I have to correct this.

Yeah, this is not the distributional label, and this is Apple.

So we're going to look into the history of Apple.

And I'm giving you all of the slides. So just as usual, they're going to be

uploaded below all of the slides, homework slides.

Print those out, label those.

send those to me. So on some of the charts, I don't define the trading

want you to kind of think about this.

This is the next step for us.

On some of the charts, I do define the trading ranges. I want you to, you know,

go through all of those and label those.

Again, now trading ranges, trading ranges.

Okay. So you kind of could see where we're going with this.

Now, these charts, have volume signatures.

So it's going to be interesting to see if you could come up also with some

volume comments on that.

And this is very intentional because the next class we're going to start on our

volume definitions.

All right. So quite a few trading ranges, quite a few slides.

So I would like you to maybe start earlier a little bit.

And again, you know, it all depends on how you're doing with this course, you

know, what kind of commitment you have for this course. You could definitely go

at your own pace.

You could, you know, do the whole homework or just a partial.

I'm fine with any way as long as you're improving even marginally from one class

to another.

Okay. We do have some time, so we have like around 30 minutes here.

So let's go through the Microsoft homework and let's see what we could

And I'm just going to go through some of the probably most common mistakes or

most common questions and comments that you could possibly have about this

labeling. So the first chart.

And right away.

When I ask you this question, guys, as to what catches your eye

on this chart, I always want you to think in terms of extremes and in terms

concepts.

So let's think in these terms.

And to me, this is kind of like the way of the nonlinear thinking, right?

We are not going to start at one point and then going to go strictly from that

point on. We're going to try to identify some of the things that are going to be

catching our eye in a lot of ways.

Well, right away, right here, I'm thinking, hmm, very interesting increase

the downspread.

Usually that's going to be associated with the increased volume signature.

And then after that, the price went up and had some kind of test.

So increase of the supply and then the test.

And that happens after we first defined the low and then we

tested it. So we have the first test, second test, and possibly a third test

as an area.

So that suggests the behavior that's going to be congruent with the price

behavior in phase C.

So if this is phase C, we are probably in the second point of fear. We see that

the previous reaction has other characteristics or slightly more bullish

characteristics than the one that we think phase C is.

So if this is an attempt to spring, then the next low is the test of that

spring. Right away, we could start thinking this is phase C.

Even without thinking what has happened prior to that.

If we define phase C, then we could define phase D easily.

How? Well, we know that in phase D, we're going to experience a major sign

strength. That is going to be followed by a backing up action, which is going

be a reaction that's going to come to the support level, which acted before as

resistance. We know that the definition of the major sign of strength is going

to state that from the lows in phase C, the price is going to go through the

whole trading range, and it's going to overcome the points of the resistance

that were created in phases A and B.

It's going to commit.

And we see that the commitment is multiple progressive closes to the

spend some time above that resistance and then react exactly to the point of

support that was defined by phases A and B.

And that happens exactly that way. So in a lot of your

homeworks and in a lot of my remarks to your homeworks, I mentioned phase D

boundary.

So a lot of you are very comfortable now with phase C boundary.

Some of you put maybe like this type of boundary for phase C. I would include

the test because it's a local test to what? To the action that is phase C type

of action.

So you have to include it together.

But then I have seen also where the boundary was put maybe somewhere here.

Maybe it was an assumption that... There is a small commitment and then a

reaction. Well, you have to look at the swings, right? Like we're going through

the swings on the Apple chart, right, where we had this type of picture,

automatic reaction, secondary test, and this was not a full swing.

The swings were well -defined there. So there is no reversal here, and

the reversal only comes on this bar. So here is a swing.

a swing to the upside, and then swing to the downside.

So we don't want to put the boundary in the middle of the swing. We want the

conclusion of the swing to the upside, and then we want the conclusion of the

swing to the downside.

And then the reversal out of that position will define the boundary for

phase. So now phase C and phase D are defined.

The problem is usually somewhere here in this labeling.

in the labeling of this area. Why? Well, because in some instances you might say

that, okay, well, what about this trading range, horizontal range?

Just because this looks as a change of character.

And this looks like a climactic run. So we're buying climax here.

So you would be right. It is indeed a change of character.

The only problem with this change of character is that it probably belongs to

this trading range.

It's a distributional pattern before the shakeout happens.

So you could label this as a selling climax and a shakeout.

Please note that you could also label this as a preliminary supply and then a

buying climax.

And then you could have a selling climax or a shakeout.

And that would be fine as well. I actually like this type of labeling.

But the climactic run at the end kind of suggests that this is more of a buying

climax. And if this is a buying climax, it stops the uptrend, defines the new

environment on the change of character, and then upthrusts as

a part of the distributional pattern, and then a downtrend.

After that, the next hardest part is...

a couple of automatic reactions that we have.

So in some instances, we could have that.

A big, quick move as an oversold move, and then a rally that is short.

It still acts as a change of character.

Change of character to what? To this move to the downside. It's the largest

rally on the way up.

But because of how supply is so available, it cannot be big.

So therefore...

you know, it's small, and then only on the next absorption, after the next

absorption point at secondary test, that's when we have this capacity to

in a much more meaningful manner.

All right. Well, everything else could be...

Self -explanatory.

So let me see if there are some comments. Can be lunch swing on

be interpreted as a buying climax and shakeout? Okay, well, we went through

this, so yes, it can.

Could you go over buying climax and Utah in 87?

Okay, well, again, climactic run, buying climax, change of character,

attempts to go up, secondary test.

sign of weakness in phase B, and then the upthrust action, and then a major

of weakness.

And this is just a small distributional pattern that happens often before we go

into some kind of reaccumulation structure.

But please don't think that this is extremely important.

I mean, it is important for us to understand how to label this. That's

But if we are mistaken and if we label this in a different way, let's say I

label it like this.

Did anything change to our trading strategy at this on the right of the

No. I will label it like this now.

I was buying Climax and let's say automatic reaction secondary test.

And this is the range.

Did anything change on the right side of the chart?

Nothing.

We still would be seeing phase C as it is here and phase D as it is here.

And therefore, our points of entry are going to be 1, 2, 3, and then

4.

Nothing would change no matter how we label phase A or what comes prior to

All right, next one.

So one of the things here for the lower trading range, it was to define the

slope.

And that slope gives you the definition, a more correct definition of the major

sign of strength.

And it gives you a much correct definition of the backing up action.

how the character of the move to the upside changes after that.

That's because the supply has been observed at the level of the support.

and then at the level of the resistance where it has been sold before.

So, and that's what we are expecting from the backing up action. A backing up

action is a test of supply at the level of the

resistance.

And usually this level of the resistance is going to be defined by the price

selling. We see how the volume supply has increased here in this area.

So we are naturally going to produce some kind of stopping action and see

kind of supply comes there. And it doesn't. So that suggests that the

is going to be very favorable.

Second point of fear.

First point of fear.

First point of excitement.

Second point of excitement.

Phase C could be defined in both biases.

Pretty easily.

And everything else, I think, was okay here.

All right, let's go to the next one.

Okay, so one of the things that I kind of was looking for, and now I see that

even I'm not doing this, is putting the boundary of phase C somewhere here.

And the reason why is because this is a test.

definitely something that I would correct here on my slide.

And then a lot of you, not a lot of you, but some of you define this as a sign

of strength and then phase D as just this.

So again, we need a reversal, right? So we need a continuation of this swing to

the upside until it actually reverses. And then we would...

say the major sign of strength has happened and the backing of action has

happened in this case this is uh one two three abc formation so the boundary is

going to be here um okay so what else oh look into

this move to the upside stop in action a trading range and then again

a small distributional range within buying climax and up for us That should

remind you of the chart before, right? And then that defines the causality for

the change of character reaction.

And then after that, it's all the same kind of, the same structure.

So again, could we have this as a trading range?

Probably not.

Probably this is more of the distributional character.

And then you start your trading range with big swings like this.

and then everything could be defined.

All right.

Okay, fill it.

Let me unmute you.

Are you there?

Yeah, sorry.

Yeah, so what's the question about the upvote?

Yeah, it was regarding the chart number two.

There was an upthrust in the accumulation range, and I thought if it

labeled as upthrust action.

Okay, yeah, all right. Thank you. Great.

Yeah, I was looking at this and couldn't understand it. All right, that sounds

good. All right, next one.

We have about 15 minutes here.

So a downsloping range, this is a very interesting spot because

that, a spot suggests that we might be in phase C. So how would we be dealing

with this?

Obviously, we would be trading it if we're thinking that this is a

reaccumulation.

So our points of entry are going to be around this area right here.

We would be looking actually at the very favorable gap, favorable continuation,

and then a failure.

Failure to overcome this resistance.

And then after this failure, we would be out in this area.

So that's going to be our first trade here. Again, this is not a bad trade.

It's almost like a probe trade that we have to put on.

And it doesn't necessarily get us in into the position fully.

I mean, like if you think about the points of entry, which we will study

on, guys, so don't worry about this.

Here is our first point of entry. This could be a second point of entry. So

let's just say that we have two points of entry.

We can't really add to the position here or here. This is too far away. This is

in the resistance cluster.

So let's say that if our position risk is going to be,

let's say, 2 % of our portfolio.

So we would define...

our point of entry number one and two risk

as one -fourth and one -fourth

of the full risk.

So this means that we've opened half of this position. This means that we've

invested 50 basis point and then another 50 basis point for a 1 %

risk of the portfolio.

So how would you think about this risk?

If you have, let's say, 10 ,000 as your portfolio, then 1 % risk is going to be

1 ,000.

So 1 ,000, that should be the difference between the price of

entry and your stop loss.

So let's just kind of like play around with this. So let's just say that we're

entering here at $5.

and that our stop loss is going to be somewhere here at 475

so uh 25 cents and this is obviously a low price stock

microsoft oh well this is after the split so uh definitely going to be

different but you know the calculations here are going to be the same so you

could define the number of shares as 1000

of risk divided by the actual risk, which is $0 .25.

Actually, let's do it in a different way. Let's do it $0 .50.

So let's just support that our stop loss was here.

Divided by $0 .50.

So that's going to be what?

That's going to be 2 ,000 shares.

That's our position size for each point of entry

here. And let's just even imagine that we enter in just once, maybe like on the

breakout. Well, actually, let's just go with this example. So two points of

entry. So that's our 1 % risk, 1 ,000 we are risking.

It's actually for both of the positions, right? So 1 ,000.

So we are opening, let's say, 1 ,000 shares at one spot,

1 ,000 shares at another spot.

And then we are exiting this position either on this bar right here or on this

one right here. So our average exit price is going to be maybe like around

535, about.

So we actually have even a slight profit here.

So 5, maybe 5 .10, 5 .15, something like this. So we have

maybe like 20 cents of profit.

But what this example, what I'm trying to show to you guys is that we only had

two points of entry as we're scaling in into the position.

We have not opened.

Position fully yet.

And that protects us from any type of moves like this that we have.

Obviously, we are being protected by the exit criteria itself.

A backing up action fails.

So this means that we can't open positions anymore

at backup reversal because it didn't come.

and then also at the breakout of a backing up action. So these two

add -ons are not going to be in the play.

And even if we gave up somewhere here or even lower, we're only risking

half of the position, and also we

technically could be much faster and close in this position much faster.

How would it work in the example where we actually would produce some profit?

So here is our first point of entry. Here is our second point of entry.

Then we're going into major sign of strength and we're waiting for the

up action.

The backing up action happens, the test, and then we are entering the position

somewhere here.

The next point of entry is going to be somewhere here.

shows us the breakout out of the apex formation on the backing up action.

So all of the positions are going to be profitable, and look at how gradually

we're coming in into this position and establishing all of the four trenches.

That limits our risk. That allows us to only risk half of the position.

On average, our, you know,

average price is going to be somewhere in the middle of the range, and then

we're still going to have the same size that we wanted.

So these are very simplistic tactical mechanics, and we'll study this a little

bit more, of the spots like this.

One is going to be a failure and we have to be ready to recognize that this

failure will come and we will have those type of trades.

And one is going to be a success.

And when we have a success, that's when we want to be pigs, right? So we want to

create a sizable position, especially if we're long -term investors.

All right.

All right, next.

So this was interesting because...

of phase C.

You could, and I've seen some of you do this, you know, increase this phase C

into this testing action.

And I think that's appropriate. That's totally fine.

It comes at the same level as testing of the support in phase B.

So that makes a lot of sense. It's also a test of the screen itself.

So that makes sense too.

Major sign of strength.

overcomes the resistance, which I put here as an upsloping resistance in the

support, and then comes back into the area of the support, which acted before

the resistance.

There were some interpretations where people would put buying climax here.

Well, then think about this reaction.

What is that?

It seems like there was a climactic run, which is well defined by the volume

signature and the price signature.

It seems like there was a very meaningful change of character that

trading range. So it's probably we are at the beginning of the trading range.

And this whole rally, you know, which doesn't have, it has a climactic run,

not as good as the prior one.

So this rally right here probably suggests that we are.

in a secondary test rally, and then we go into phase B.

All right.

What else here? Five minutes. All right. So this one had the same type of

trading dynamic as the couple of slides before this.

So a well -defined climactic action on the climactic run, a well -defined

of character with the secondary test.

Could be labeled different.

It could be labeled automatic reaction secondary test.

The reason why I wanted to shake out is because it didn't go below the previous

low here.

But then in this area right here, we could be thinking phase C, point of

point of entry, and then a failure here.

So this would be more of the break -even loss.

And then after that, and I think that the...

Again, the boundary should be here.

I know why. I can't really... This is painted, so I can't remove that anymore.

I just need to redo all of this.

So there is a test, a definitive test of the local action, of the local

quality here.

So this would be our phase C.

And then after that, a major sign of strength committing above the...

resistance that was created by the buying climax and then a reaction into

support as a backing up action so here's our phase d

all

right uh this this uh distributional um top produced you know some kind

of issues for us as a group um We definitely want to define the

slope.

Up thrust in phase C.

Second point of excitement.

First point of excitement on the climactic run.

Secondary test is an up thrust.

Everything else in between is phase B.

A very strong rally here.

not very characteristic in the distribution.

But think about what Microsoft was for this market going into the height of the

2000. It was a leadership stock.

So leadership stocks are going to be distributed with the characteristics of

reaccumulation, which we see in this area right here in phase B. And that's

this rally is just so strong. Plus, think about what the market is doing at

point of time. The market is extremely strong.

The market has...

a huge breadth going up.

So a lot of the stocks, at least short term, are being pushed up. Some of them

stay behind and don't participate in the first quarter of the run of the market.

Microsoft is one of them.

All right.

What else?

Okay, so this is a very long -term chart here.

This comes after this distributional top that we've just seen.

Look how...

The distribution has happened into the lows of 2000.

And then Microsoft actually exhibiting some strength into 2000 to 2003 low,

creating a slightly higher low relative to the low in 2000.

So that suggests some point of selection.

But there is a lot of volatility in this trade range.

And then also there are some managerial problems at that point of time with...

What's the guy's name? Steve Boulder, I think.

The owner of Clippers right now.

The former Microsoft CEO.

So he's the CEO during this time.

So look how uninterested institutions in the products here.

Okay, so thank you.

So nothing is really happening here. Only in the last phases of the market

in 2006 -2007, There is some kind of activity.

And then what defines this long -term pattern is the second point of fear

So this leads us to the conclusion that this is phase C. A lot of you had phase

C as if this was a distribution.

But then if this is a distribution, then why are we not traveling down?

Why are we not in the downtrend? Instead, we're actually going up.

So that was an incorrect labeling.

So second point of fear, after the first point of fear, defined phase C.

And from there, we have a minor sign of strength, a bunch of LPSs, by the way,

lots of trade here that we've done with our students.

And then a major sign of strength defined by the highs, the long -term

reaccumulation, still shows a lot of strength, suggesting a continuation in a

very favorable way.

And that's exactly what's happening.

A very interesting pattern where the volume signature is going down and the

price is going up. I want you to think about this for a week, and then when we

meet next time, we may have a chance to discuss this. If not next time, then in

two weeks we will discuss this.

But I want you to ask yourself a question.

Why would the price go up so significantly without any of the

signs of the demand being?

and increasing.

All right. Last one, I believe.

A down slope.

And nothing really of big interest here. Maybe

a small climactic run into the backing up action before

the backing up action. So I'll just suggest that we're going to have some

of consolidation as a backing up action.

So these are small nuances that we need to catch in order for us to think how

the structure would develop. And obviously here in this small structure,

would be thinking, okay, well, here is a trading range, phase A, B, B, phase C,

sign of trend, and a backing up action.

So our points of entry are all going to be after phase C, on the way up.

And then here we're going to be entering on these two wires.

So again, our tactics are going to be very logical, very sequential in the

way how we enter in this position. The logic behind our points of entry is

to be such that each entry has to confirm the previous entry.

And that way we are controlling our risk.

Obviously, you know, we should have also tactical rules and

decision -making in place when our patterns fail, because they will. We

be always correct.

And short -term, we could be correct, and then long -term, we could be

incorrect, and that's what... could produce potential loss. So we need to

mitigate that risk both on the technical level and from the money management

point of view.

Again, something that we will be discussing later on in the course and

specifically in practicum, there's going to be a lot of discussions about that.

All right, guys.

That's it for today, all of the slides. So again, the homework.

Let me just go to that slide.

The homework is our Apple labeling.

And then next time, we're going to start our discussion of volume and price

analysis.

So it's exciting because this is probably one of my favorite topics, not

in the method, but in trading itself and the analysis.

So I'm looking forward to that.

All right, guys, that's it for today.

I'll see you in a week, and I'm looking forward to receiving all of your

homework. Thank you, guys.

Bye -bye.