All language subtitles for Session 08-WTC (Feb 25, 2019)

Hello, everyone. Today is February 25th,
and this is our session number eight of

the Wyckoff Trading Course.

Thank you for sending your homeworks,
your notes, your questions. We're going

go through this today.

Next session is going to be March 4th.

At the same time, a few comments here,
really quick. We have a lot of things to

cover today, so this is going to be
really fast.

I kind of highlighted the thoughts that
I wanted to talk about from your

comments. You could read the full
comment after the class when you watch

video.

So here is a comment. I'm moving from a
state of feeling I'm understanding this

moment to total confusion.

I'm sorry. I'm moving from a state of
feeling I'm understanding this to

of total confusion.

And then another comment here. I
interpret this as a good sign of

which I really like.

You said to grind it out.

And this course is so interesting. Okay.

Yeah, so definitely from a teaching
-learning perspective, this is

a great comment, and I'm really pleased
to hear that. Why?

Well, because...

The course is constructed in such a way
that I'm giving you layers of

information.

So, for instance, we started with the
price structural analysis, and there

so many sublayers under that subject.

Now we switch to the volume and price
analysis.

And the first session was the hardest
session for you guys.

A lot of you were telling me how it was
difficult.

to understand those concepts and they
were kind of like not very intuitive

concepts.

So therefore, you are absolutely going
to get into the point of confusion again

in the course.

Why? Well, because that knowledge is not
there or it's not maybe

a correct knowledge. Maybe it's not
cemented correctly.

So we kind of...

Build the foundation again.

And to build that foundation, you've got
to get uncomfortable first with

something that you don't know.

And then just trust the process. Trust
me as a teacher to get you to the place

of understanding.

And this is what I'm receiving today
from all of you throughout the week, is

that the message in the email is like,
I'm getting it. Yeah, I am getting more

comfortable. I understand the concept.
So that's great. That is exactly the

process that we want to go through.

all of the concepts that we have, all of
the concepts that we go through.

Next comment. And here, I just want,
again, you know, kind of like to go to

same statement of grind it out. You
know, just it's the stuff that you have

learn. If you really want to use this in
a very practical way, either

understanding the market, analyzing the
markets, or trading the markets, then

you have to study.

And you have to, you know, study
consistently.

I was just today watching the video with
Arnold Schwarzenegger, and he was

talking about, I don't know what it was,
but he was talking about how he was

practicing for the Mr.

Universe and then the movie career and
the politics and so on and so forth.

Every day I was in the gym for five
hours.

People were asking me why, and he said I
have a goal.

So we have a goal here. We have a goal
to understand this material to the point

where we can practically apply it to the
markets and extract the money from the

markets. That's our goal.

So let's keep grinding to the point
where...

we go from a state of feeling of
understanding to the confusion and then

understanding again.

And that would definitely make me so
happy.

This first lesson has really helped to
solidify things in my mind, even though

there is so much more to learn for
certain.

Now, after only seven lessons, I can
visualize the markets in a whole

light. And this is very important as
well.

This is the time when students come to
me and they say, like, whoa, now I see

differently. Now I see the structures
everywhere. I see the change of

environments. I see how different phases
unfold.

I mean, obviously, I have to learn more
and I have to develop the skill, but

that's the initial feeling.

It's like a feeling of excitement that
you see the market in a different light

now, and it makes more sense. Why? Well,
because it's more systematic.

You know, it's more kind of like
something that where you translate the

that comes into your mind through the
visualization, through the chart. And

you're saying that I know this pattern.
You know, it seems like this is the

behavior of composite operator or, you
know, something else.

So if you are there, if all of this
changes, that...

different students are reporting to me
via emails, are happening to you, you

in the correct phase of your studies and
you're developing correctly.

If you feel that you're not there, if
you feel like still the price structural

analysis causes some hesitation, some
kind of like level of uncomfort, and

specifically with the volume and spread
analysis, you're still uncomfortable.

You know, shoot me an email and say,
like, what can I do?

And my answer is probably going to be
kind of the same. There are multiple

options here.

And if you want to continue with the
studies and understand this material

well, then my first suggestion would be
continue with the course right now.

Finish the course.

And then next cycle, which will be a
summer cycle, enroll as an alumni.

The alumni rate.

for the next cycle is going to be $398,
something like $400.

I'm doing this with the purpose that
some of you are going to come back.

There are quite a few alumni in this
class, and it's always beneficial to

this material. So if you feel like
you're a little bit behind, no worries.

You could repeat the course again. You
could just watch the videos again. That

would be the easiest, cheapest way to do
this.

But in general, I'm pretty satisfied
where the group is.

So we're just going to build on what we
have built in the seven sessions.

And specifically, volume and spread
analysis still needs a lot of work,

needs a lot of repetition for us to feel
comfortable about that. So for the next

two, three sessions, we'll definitely do
that.

Today, we will go first through volume
phase analysis.

This is where we are identifying volume
in the specific phases of the

consolidation. And today, specifically,
we will be talking about supply

signatures, whether we identify those in
accumulation or distribution.

Next session, session number nine.

We'll talk about the volume phase
analysis again, and we'll talk about the

demand signatures.

We're going to go into some Q &A. There
were a couple of very interesting

comments and questions. I want to go
through those.

And then we're going to come back to our
group exercise on the supply and

demand.

And as usual, I look forward to hearing
from volunteers.

Again, you know, our volunteers are
going through the exercise of me giving

guys live feedback. So be prepared.
Whenever I'm going to ask you, just say

and I'll unmute you and we'll do this.

Group exercise is this, I'm sorry,
homework is a group exercise again.

And this is where, again, I want to
receive your notes after watching.

recording again. We'll talk about this
at the end of the session again. It's so

crucial to do that, especially if you're
extremely serious about this stuff.

Again, I totally feel okay with students
who

are more advanced students and I feel
from them

kind of like a determination to get this
material and to assimilate this

material to the highest level of
understanding.

And this type of students, I'm going to
be most strict with, and I'm going to

push you guys so that, you know, you
would produce even more during this

time with me.

Having said this, for somebody who's
just attending classes and just... to

observing the classes and listening and
kind of incorporating it at just the

level of listening, that's fine too.

You know, I totally understand where you
are and I think the most important

thing for a student like yourself is
just to listen, just to be present. But

be present for this two and a half,
three hours with full capacity.

So if this is the only time when you can
listen to this recording or when you

can attend a live class, do me a favor
and yourself a favor.

Be fully engaged and be fully kind of
like present, and that will go a long

way.

All right, next session, we're also
going to go into some volume case

Those are one of my favorite case
studies, just in general, because volume

just so fascinating to me.

how we look at the volume, how we
interpret the volume, especially in the

relationship to the price. So we're
going to look at some of the case

Okay, let's go to the material.

And we're going to start with the volume
phase analysis.

And specifically, we'll discuss the
supply signatures in accumulation and

distribution. The question that I want
you to keep addressing in your mind is,

what are the main supply signatures?

in accumulation and distribution
formations.

How do they differ?

So supply could increase both in
accumulation and in the distribution.

Supply could decrease in both
accumulation and in distribution.

So what are the differences there? And
what are the price structures would look

like if supply signature occurs under
different bias definition?

All right, let's look at the first one.
So this is a schematic that I built for

you guys a long time ago.

The most common question here,
unfortunately, is not related to the

signature. The most common question here
is, why is it not a horizontal range?

Well, guys, I don't know. I was just
drawing.

I was not thinking. It just kind of came
out of the inspiration, and this is

what I drew. And when I drew it, I
realize that it's just a downsloping

So there is no intention here to show,
you know, let's say an increase of the

supply signature and then relate this to
the specific structure.

It's just what it is, just a schematic.
It's the theoretical representation of

the supply signature in the accumulation
throughout different phases.

And we'll talk about the two main
examples.

of the accumulation -reaccumulation
supply signature.

That is example number one and example
number two.

These two examples have very specific

characteristic of

supply signature between phases A and C.

As you could see, going from phase A to
phase C, we do have a decrease in

supply signature.

And that's a very important thing for us
to see.

Because everywhere else, we're going to
see either increase into phase B

or increase of the supply into phase C.

So the more common supply signatures and
accumulation, reaccumulation, the ones

that we really look for...

to see and identify are going to be
where supply in general, and we're going

say that this is a long -term supply
signature, supply would go

down from phase A to phase C.

Now, there could be some variations on
the volume signature in phase B.

Sometimes it's going to dry out a lot,
and then it's going to locally increase.

from phase B into the phase C test.

And then we're going to say that from
phase A to C,

which is kind of like a long -term
supply signature for us in the

supply went down. And this is a bullish
sign.

And then from phase B to phase C.

which is a short -term supply for us,
more of the local formation supply.

going to say that supply could
potentially increase, but that also is

draw an increase in the demand signature
because increase of the supply

signature is going to be identified by
the selling of weekends.

selling by weak hands, I'm sorry.

And then the increase of the demand is
going to be identified by strong hands

buying.

Weak hands are selling because of fear.

It's the second point of fear.

Strong hands are buying because there is
liquidity in phase C and value.

all right um and then a variation where
phase b still would have

a considerable supply relative to phase
a so phase

b here the characteristics of the supply
is going to be still considerable

and that requires some kind of testing

and therefore

diminishing supply signature into phase
C. So these are the two most common

supply signatures that we want to see in
the accumulation, reaccumulation.

Now let's look at some of the supply
signatures that are going to be

somewhat difficult for us to interpret.

And we would really have to rely a lot
on the price action in the work like

this.

Supply signature number three has a very
interesting increase

of the supply into phase B.

And usually that type of increase of the
supply into phase B is going to be

associated with some kind of, you know,
shakeout type of action, shakeout type

of reaction.

Let's think about the sentiment here.
Why is it that there is a lot of

Think about what has happened before, a
downtrend, a stop in action. So supply

was increasing a lot at this spot.

So the sentiment is still very much
bearish. And then if that sentiment

persists, then on the next reversal
after the automatic rally

or after some kind of upthrust, we are
going to see that the bears are going to

come back.

and they're going to still be dominant
on the sentiment side.

And that's going to produce a wave of
selling that could take us to a lower

Now, in this case, you know, the
downslope actually works really well

definition.

So we would see that increase in phase C
of supply.

We could see that the price might go.

below the level of the support, and the
supply is gonna be higher than supply in

phase A, the stock in supply.

And then going into phase C, what we
wanna see, we wanna see two things.

The first one is that the supply
decrease

from B

to phase C

And then the second thing that we want
to see is supply decrease from phase A

phase C.

So why are those two important?

Phase B supply is the highest.

It almost sometimes could be identified
as the stopping supply.

And in some cases, I see labeling
mistakes where phase B lower low looks

like selling climax.

But the change of character has already
come prior to that.

So the change of character would define
phase A, would define the stop in

action, would define the automatic
rally.

And then phase B would just have, you
know, a sign of weakness.

Sometimes it happens just because the
sentiment has not changed and there are

still quite a lot of sellers in the
market.

And then, obviously, we could also argue
that the quality of the demand itself

might not be sufficient enough in order
for us to

create the low that is going to be on
the same level as the selling climax or

more favorable higher low.

So we want to see how supply in Phase C
is going to diminish relative

to what we've seen in Phase B.

So it has to be a somewhat considerable
decrease

of the supply.

And we also want to identify the
decrease of the supply from

phase A to phase C.

Because at the beginning of this trading
range, of this formation, phase A

supply was a stop in supply in a way
that...

It increased the liquidity, which
brought in the demand increase, and the

overall volume signature has increased,
and that produced a stop in action. So

I'm just saying stop in supply from that
point of view. But then going into

phase C, we want to see that supply is
so exhausted, and it has been

observed in phases A and phase B, that
supply in phase C is just negligent.

No one else is selling at this point.
And that would be the timing for us to

identify the beginning of the move for
this particular stock.

Okay, supply signature scenario number
four.

This one is even more tricky because we
have a very substantial

supply of increase.

Increase of the supply.

going into phase C.

So let's just think why this would
happen.

Why would we have a period of
accumulation?

And then at the end of the accumulation,
we're going to have almost like a

climactic type of supply.

Well, there are quite a few things that
could happen.

in such a way that the structure, the
price structure, will be constructed as

accumulation. And that supply signature
will be the highest in phase C.

Imagine a situation where a composite
operator,

strong hands, were accumulating the
stock for quite some time.

And then the news, let's say some
earnings, or maybe some management

maybe...

unfavorable government ruling against
the company has happened.

What that is going to produce is a quick
general liquidation out of

this position by weak hands.

And while this is happening, CO
accumulates with the purpose

to have a sustainable business cycle
move.

in the stock.

So therefore, they see this increased
liquidity and opportunity and the point

fear from weak hands as an opportunity
to load up even more, to create a

very sizable position, to control more
supply.

So therefore, they are absorbing a lot
of the supply that's coming in.

And the not only supply signature,
demand signature is increasing.

very rapidly, and the volume signature
increases rapidly just because of both

supply and demand is increasing.

In other words, only the CEO is
believing that the company is going to

a bad news in the moment, and the CEO is
observing whatever supply from

we can is coming at a very rapid pace.

So that's what could happen here. So on
the price structure,

we usually would see this type of moves
as sprints and

rather deep sprints or just a shakeout.

Please note that if this supply
signature is going to come on a sign of

weakness, it's going to look the same.
Because if we're talking about the

shakeout, and the major sign of
weakness.

In a lot of cases, they might look the
same.

And it's only what comes afterwards is
going to define in reality what it's

going to be.

So keep this in mind that we always have
to come back to the price structural

analysis. We always have to see with the
increase in

supply signature.

What does the price do?

All right.

Let's go to the next slide. Well, let's
look at some of the examples.

So here is our first scenario where we
see that there is a long -term

deterioration of the supply from Phase A
to Phase C. And then locally, we could

see that Phase B has kind of like a
smaller supply.

And then locally, supply is increasing
going into phase C.

So let's look at the example. This is
Amgen weekly chart.

We have had an uptrend, so therefore
this is a buying climax, automatic

or a shakeout, however you would label
this. I would probably label this as a

shakeout. Why?

Look at this bar right here with the big
lime signature.

That suggests...

some kind of in the reaccumulation, more
of the rotational shakeout type of

action where some of the institutions
are taking profits.

So they get rid of their position or
scaling out. And then other institutions

seeing still a lot of value.

And that usually happens in a lot of
leadership stocks.

Boeing just recently, look at Cisco just
recently, and by recently I mean 2018,

the trading ranges that they have had.
They have the same type of structure of

upsloping reaccumulation range that
starts with the rotational distribution

has elements of the shakeout action
right here on the increased volume,

signature increase, spread, but an
ability to produce a significant result.

and commitment to the downside below
support.

So that's what starts the trading range.

It's that shake out rotational
distribution type of action.

So then the next rally is going to be
automatic rally and look at the

characteristics of the automatic rally
here. A lot of volume coming in, a lot

demand coming in and then it produces a
really good quick jump back

to the area of the resistance.

Those are the characteristics of the
automatic rally in the reaccumulation.

just tells us that whatever supply has
come in, quickly it's being observed in

phase A. And then the next test is just
going to be a test of what has happened

on the changes of character twice, on
the way down and on the way up.

So in that final test shows us that yes,
supply is under control and whatever

supply is coming in, specifically on
this bar.

right here after that it's even lower
low low throughout this local structure

all right so then as we go through phase
b look at how supplies diminish and

just stay in very very low and it's only
going into phase c that we're starting

to have you know some volume spikes that
are not necessarily uh we're not

present in phase b They were, but we are
looking also at kind of like the

overall picture, overall volume
signature, right, or averaging. We're

here, I don't know if you guys could see
this. This is the moving average right

here on volume, and we see how the
volume signature diminishes, diminishes,

diminishes, and then we have that volume
spike that has a little bit of the

consistency of the increased supply.

So we are seeing that.

locally from phase A to phase B, a very
clear, definitive decrease of the

supply. Look at the price, what the
price is doing with that decrease of the

supply. Is there an ease of movement to
the downside where the price starts

committing below specific levels of the
support?

No, right? So every time we come to the
level of the support, we are springing

back. We are springing back, springing
back, springing back.

not even springing back, but going up
without touching the support.

And we're not even touching the lower
support in this area right here.

And all of those spring -type actions in
phase B, they happen much, much higher.

So that is an element of strength. That
would act as a confirmation

of what we've experienced in phase A.

And you kind of could see at this point
how analysis...

becomes more of the rolling over
analysis right so I've used this

before and I really like this rolling
over analysis meaning

that in phase a we are determining the
bias and then we are rolling over into

phase B and we are confirming that bias

phase B and then we are rolling our way
into phase C and we're confirming it in

phase C so that way you have more handle
on the

logic as it unfolds all right so locally
we could see that phase B

supply is very low then slight increase
into phase C and I like how supply

slightly increases into phase C it
doesn't have to be you know a big volume

signature but even with this small
increase of the supply it

tells us the story that whatever selling
we have by weekends

it's not very strong

and

Because it's not very strong, then
whatever supply comes in could be easily

observed by institutions at the levels
probably of a higher support level

than lower support level.

And we kind of see that as a spring
situation happens and relates to this

support level in Phase B, not at the
support level in Phase A. And that's a

big distinction.

We'll talk about this more in the wake
of practicum.

Those are more advanced concepts.

And then, obviously, we want to compare
the emergence of the supply in Phase C

to Phase A, and we're seeing, obviously,
a long -term deterioration of the

supply. So all of those elements are
confirming our reaccumulation bias.

Then, by itself, increase in the volume
signature.

suggest that we could be possibly in
phase C.

So all of those definitions for phase C
that we went through, we said that we

need to have three tests.

Then we need to have a second point of
fear.

And look how second point of fear is
going to be related to that local

of the supply from B to C.

So that's that second point of fear. But
second point of fear in a lot of cases

is just going to be obviously not as
fearful as our phase A.

And then you could identify phase C also
by the

volume signature.

And specifically in this type of
structure, we're looking for the volume

increase.

or we're looking for the supply increase
and demand increase at the same time.

So that's our volume equation right
there.

Okay.

Comments, questions, let me see.

Any particular time period for the
moving average? So I don't know what the

moving average right here.

I would just go with some basic
definitions like 21, 22, 20.

This would define the month to month
average, so something like this.

On the weekly chart, though, you
probably would want maybe like two

So that would be like 40 weeks, I
believe.

Actually, not two quarters.

63 days.

So that would be, yeah, about 63 days.

But I'm not necessarily using that type
of indicator. I already don't remember

how it got in here.

I think this is from TradeStation.

So you could see and visualize the
volume in different ways. You don't have

have the volume average.

I am seeing that in this area right
here, the volume is completely different

than, let's say, somewhere here.

and then it just has some kind of
characteristics of the increased volume

signature. So to me, the volume
signature still looks the same, right?

going lower into B, slightly increasing
into C, and still there is a diminishing

supply signature and volume signature
into C from A.

Okay, great. Let's look at the next
example.

And this one is where the volume
signature...

in phase A is going to be the highest.

And usually this is going to be a CO
seeking that opportunity to accumulate

stocks at the point of fear.

So accumulate majority of holdings in

phase A.

So we're seeing from the volume
signature that the stop in action is

where supply is going to be the highest
and is going

to reflect the supply that is of weak
hands and supply that is

a panic supply where we are clearly
experiencing a first point of fear.

This is where big institutions are
seeing value.

We were discussing the other day Goldman
Sachs trade that Warren Buffett was

conducting in 2008.

He was buying on the way down because
that presented an immense liquidity and

value opportunity for him for the stock
that he considered to be a leadership

stock in the value at $120 and below for
that particular stock.

Going into phase B, we're still going to
have a considerable supply.

And again, you know, the story here is
all about the sentiment.

I mean, think about the sentiment at
this spot right here.

You just came down really sharply. You
stopped for a second. You had a rally.

And then after that, all other
subsequent rallies are failing.

There's one failed rally. There's a
second.

failed rally relative to this high of
the automatic rally.

So what do you think the sentiment is at
this point?

Well, obviously, there were a lot of
sellers on the way down into the

action, but some of them have not sold.

And some of them still are keeping
positions.

So as the price starts to reverse and it
starts to go down, they will be saying,

well, I don't want really to lose this
opportunity again to sell at a slightly

higher level, and I don't want the price
to tank.

They're going to be feeling extremely
good at around the new lows.

And then as the price would come back
into the trading range, then they're

to start experiencing some emotional
pain.

Why did I get out of this position? Look
how it came back.

Maybe the price will go from this level
up.

And then as the price finally goes down,
they kind of lose their whole interest

in this stock and they go away. And
that's why, because they go away, they

their focus to catch the reversal,
that's number one, and then to get into

early stages of the uptrend.

And once they miss that early stages of
the uptrend, they have to function.

in the trend that is already in
existence.

And this process repeats over and over
and over again, and we're just trying to

find this on the chart.

So still significant, quite significant
supply in phase B, suggesting that we

have to have some kind of retest around
the area of the support, both in phases

A and B. So we have this support
cluster.

after the price rallies, it has to come
back and retest.

So on the failure right here in phase B,
there are quite a few trades that you

could have.

And they still will be in line with the
kind of like non -spoken

bias.

Lower highs, lower lows.

Still definition of a downtrend,
conventional technical analysis.

So a lot of people are going to see this
as a downtrend and not necessarily as a

structure. Well, we definitely would see
this as a structure. Why? Well, because

the structure is defined by the change
of the environment that comes from a

change of character.

At this point, we would be expecting
more of the horizontal structure, but

because we have lower highs and lower
lows, we will be curious to see.

after the change of character, how to
build a down slope in trading range.

And for that, we will take this four
points, five points,

connect them together, and look how
nicely it projects an

attempt to spring here, and then also
defines for us the level of the

which has to be overcome by the sign of
strength rally.

And because we are thinking about
downslope information, we are looking at

volume signature and observing the
volume signature so that we would

what's happening with the supply
signature going into potential phase C.

As we're observing at potential phase C,
the question is here, is there

sufficient absorption of the supply that
has happened?

throughout all three phases, and
specifically going into phase C, that at

point, if the price will start going up,
the new upswing and the new uptrend

will be sustainable.

And looking at the volume signature, we
definitely see diminishing supply

signature, overall diminishing volume
signature.

Diminishing supply is telling us that
there are fewer

So that's bullish.

Overall diminution volume signature into
phase C suggests to us

also that not only there are fewer
sellers, but that CO is

somewhat less active.

Why CO is less active? Well, because

CO is close to full position or to full

position risk that it's

exposed to at this point of time.

So therefore, whatever volume signature
we're seeing here, that bind by the CO

at this spot is less aggressive than,
let's say, in phase A.

And by itself, it suggests.

the bullish buyers because we're
thinking, okay, why would they be so

phases A and B and then inactive in
phase A? Well, they've accumulated

So if the price confirms by going up and
coming back into the trading range and

specifically with the leaving of the
trading range, that would be a major

confirmation for us that this is an
uptrend developing.

But as the price goes up, it confirms.

this theory about what CEO is doing and
what the sellers are doing. And we could

be thinking that we should get in into
the position.

This is the market, the spiders. This is
one of the charts that you guys should

definitely study a lot.

And this area right here, in different
methodologies, it's defined differently.

For instance, in IBD, And please correct
me if I'm wrong. I don't want to be

wrong. Follow -through day.

And in other methodologies, or
specifically in Wyckoff, we would be

about momentum days.

So those momentum days define buying for
us.

And define buying, When the result to
the

upside is actually increasing for the
first time in such a way that

suggests to us that supply is down.

Please note that momentum is present
here as well and demand is increasing.

But this is a slightly different
picture. It's almost like a smaller

demand.

slightly diminished in demand, produces
kind of, if not the same,

but then close to the same type of run,
if we especially take a couple more bars

right there. So maybe the same distance
has been covered. But it's done on

smaller demand.

So it tells us that supply is so
exhausted.

at this point, that an ease of movement
is happening on diminishing demand and

when the price travels the same way.

And that gives us the timing for the
price

finally leaving the trading range.

Again, this is very quick on this
specific

structure and how...

supply and demand are interacting with
each other, how, you know, momentum

confirm that supply has been exhausted.

But this is something for practical for
us to discuss.

Again, you know, a little bit slightly
more advanced concept when we involve

momentum into the, let's say, demand
signature or the price signature.

Let's go to the next example. So this is
scenario number three. So under this

scenario here, we are observing supply
increase in phase B.

So supply in phase B will be the highest
supply. And sometimes it will look like

a stop in action by itself.

And students usually would put a selling
climax into this lower low.

And their argument is very appealing
because the volume signature is

and the spread is also going to be
climactic. And that Is the low a low at

point of time?

Now, what is being overlooked a little
bit in this case is the automatic

rally that defines a change of character
for the drop to the

downside for the reaction that we have.

And that reaction also has the largest
volume signature at the time.

So with the highest volume signature and
the change of character, we're thinking

that this is a trading range.

In this case, again, a downsloping
trading range. How would we confirm that

would be indeed a downsloping structure?
Well, take

phase C and look into the major sign of
strength and see if the

backing up action comes exactly to the
level of the support that acted before

the resistance.

And if it does, then that's your trading
range. And if it does, if this is your

trading range, then this is probably a
selling climax with the change of

character, secondary tail here.

And then this is just phase B.

So now that we know the structure here
in phase B, we are puzzled with the high

supply signature.

And then again, see how it all unfolds,
the structure.

There is a lot of selling.

So weak hands are capitulating here, or
ITF,

institutional trend followers, are
capitulating here.

And then as the price goes up, it
doesn't really show a lot of strength on

move up.

So we still could be thinking that
there's going to be a continuation to

downside, so the sentiment is pretty
bearish at this point.

And it's only here on this test.

That's the first time when we could say
that it's stopping.

So at least for now, we're going to be
in some kind of consolidation.

All right, so then let's look at the
supply in phase C.

So what are we seeing here? This is the
supply in phase C.

And we're seeing that definitely it's...

you know, somewhat smaller than supply
in phase A.

And definitely, you know, it's
decreasing from phase B to phase C. So

both of those requirements for phase C
supply after such a strong increase of

the supply in phase B, where supply
diminishes relative to both phases A and

And then if we miss that,

Then we want another test, right? So
here's another test, but it comes as a

structural high or low, but the volume
signature increases.

And today I'm going to show you a couple
of slides from somebody in this class

that discusses this exact concept.

So look at the volume increase, meaning
that supply has increased, and it's a

high or low. So usually we talk about a
testing action.

as an element of two things.

The price structure, which should be,

in this case, a high or low.

Let's just put it here as successful
test.

And then we need to see on the volume
side, dimension supply signature.

In this case, we see that supply is
increasing.

and the structure is still high or low.
So we don't have both characteristics

that we need. But then look at the next
reaction into the back -and -up action.

This is where supply diminishes, and
maybe even the average supply is even

somewhere here.

And it happens on the high or low.

So this is the first time when we have
both conditions here for the successful

testing, and that suggests that From now
on, the price is going to move much,

much freer to the upside.

All right, let's see some comments here.

Okay, yeah, this I'll have to address.
This comes from Liam, and the question

is, notice that this is an S &P.

500 index ETF instead of the index
itself. For analyzing the market, is it

better to use respective ETF?

The volume pattern might be different
between the two.

Yes, the volume could be different
between, let's say, a cash market

ETF and, let's say, futures.

Yet, my argument to that always is that
the volume structure

being in the way how we see those ups
and downs and how the

volume is in generally behaves is going
to be the same

and if you are going to have some big
days like you know this one right here

most likely it's also a big day in the
futures in the cash market and so on so

forth so i definitely get the idea that
um the volume signature could be so

different for the same underlying but
different instrument, right? So

different capacity, different way of
representing that underlying.

But at the same time, the volume
signature, those patterns are going to

somewhat the same. And that's what I
want you to concentrate on. And thank

for asking this question because every
cycle it comes up.

Okay, now I should say in phase C
tested, and it's kind of hard to see

It's just like almost on the same level.

Phase C test happened on a higher supply
but still made a higher low, which

looks bullish. So are we talking about
this spot right here?

Yeah, this is just an area of increased
effort, in this case

to the downside, and then diminishing
result.

to the downside, which looks bullish.

In this case right here, we're seeing
diminishing effort to the downside

and diminishing result.

So there is a synchronicity between
effort and the result.

And therefore, it's also bullish.

So bullish in both cases.

but different interpretation.

And we're coming to the conclusion that
it's bullish bias based on different

effort signatures.

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

This is that scenario, scenario number
four, that

sometimes could produce difficulty for
us.

Because when we look at something like
this, and this is the Amazon daily

where there is a huge spread to the
downside, and we instantly, on

increased climactic volume signature, we
instantly are thinking that this is a

sign of weakness.

And we're looking for the commitment to
the downside.

And in a lot of cases, we're going to
look... at this range of the horizontal

range and we might be saying okay well i
see that the price is below that

support level so therefore a sign of
weakness is going to be um

a valid concern now there is a big
difference

between a sign of weakness and a spring
or a shakeout

in this case

Even if we are using horizontal range
right here, we only have two closes

that go below support and then the price
recovers. So this looks more on the

horizontal range even in the spring
rather than a shakeout.

And it happens on a lot of the supply
that's coming in. That is

capitulation supply.

Probably just bad news or anything on
that particular day.

And we're seeing a lot of absorption of
the supply as the price starts to show

short -term liquidity and value for
institutions.

Please note where they did this. Again,
in phase A, on that rotational

leadership distribution.

And then in phase C, where a second
point of fear just produced some kind

quick, bearish sentiment, and weak hands
want to get out.

And this presents an opportunity for
strong hands to get in, absorb the

and then hold on to the supply.

So from that perspective, it's always
going to be difficult to see this type

volume signature, where there is an
increase from phase A to phase C, where

there is a substantial increase from
phase B to phase C.

Because that would be always attributed
to the increased supply and therefore

more of the distributional
characteristics.

And those are going to be wrong.

Why?

Look at the price.

What does the price do?

And the price is coming back really
quickly into the trading range.

And whether you're using downsloping
trading range or just horizontal,

Already somewhere here in phase D, you
might be thinking there is something

wrong with this sign of weakness.

It should have committed below, and the
rally after this should have been weak,

and then we should have had a
continuation. Instead, the price came

into the trading range, and then it
stays up in the reactionary mode, and it

doesn't go down.

So our buy should change at that point.

if not before.

All right.

Okay, let's talk about the supply
signatures now in WICO phases of the

distribution.

And again, you know, there was no really
a

lot of thinking about

the trading ranges that I wanted to
identify here.

But then after actually drawing for the
distribution, it does make sense. It

does make sense to discuss specific
scenarios.

So it's not like we're discussing a
specific scenario of the upsloping

distribution. It could have been a
horizontal distribution as well. But in

the second case, you know, the
interpretation of the structure with the

signature is going to be crucial.

So let's think about just very common
beliefs from

our methodology as to how the supply
should be behaving in the distribution

redistribution structure.

So in general, the two most common
volume signatures that we should see is

increase of the supply throughout the
whole structure, and not

just into phase C, into phase D.

Because phase D is going to be the first
phase where we're going to see that

increase of the pressure to the downside
as effort increases.

And at the same time, result will follow
that pressure and it will produce a

much better result than anything else.

Those are the characteristics of the
change of character.

And that change of character suggests
that we were in the distribution

and now is the time.

for the downtrend to unfold.

And that increase of the supply is going
to be throughout the whole structure.

So in general, for accumulation, we
would be talking about absorption of the

supply, so therefore diminishing supply
signature.

And then for the distribution, we will
be talking about the increase of

volatility, increase of the volume
signature, increase of the supply

that should produce some kind of result
to the downside with the emergence of

the downtrend on the lower highs and
lower lows.

So that's the most common signature.

Signature number two is just going to
have a variation on phase B supply.

And, you know, we might go into more
detailed nuances.

In the practicum course where we'll be
talking about that phase B volume

signature in the distribution, sometimes
signature with lesser supply

would suggest that we are going to have
some kind of more of the upthrust action

into phase C.

And then a higher supply signature might
actually suggest that we are going to

have more of the LPSY in phase C.

And it all relates to the levels of the
supply that we should be observing in

phase B and how, you know, phase C and
phase D could unfold.

Then let's go to a more specific
distributional information, which we...

we'll call a TP formation.

Please don't forget that TP family would
also have

a hypodermic

structure, could have hypodermic.

And basically the volume signature here
in hypodermic is gonna be the same with

the exception that there's going to be a
collapse between phases A and D, and

everything is going to happen so fast.

So you could see a lot of volume
signature increase even throughout all

of the phases rather than just in A or
D.

But for the TP formation, one of the
things that we need to remember is that

there is an excitement on the way up in
the upswing, so weak hands are buying.

And then strong hands, the CEO is
selling into strength.

And then there is something on the
horizon for this company or maybe for

market in general or maybe for the group
that CEO does not like.

And the CEO wants to get rid of this
position as soon as possible.

The CEO does not want to wait.

It's going to sell on the way up and
it's also going to sell on the way down.

And this distribution on the way down

is going to happen really fast, so
therefore we're

given a definition of urgency to this
action.

There is an urgent distribution by the
CEO. There is an urgent distribution by

institutions at this point.

Now, this urgency to distribute lowers
the supply of their

stock significantly.

So, CO is

either out completely or

it has a very low level

of...

supply of shares that is left.

So what does it mean? It means that
going into phase B and C and

even potential D, but let's just keep it
at B and C, the CO is going to be

inactive.

And if CO is inactive, then overall
volume signature should go down.

Supply should go down, demand should go
down.

And usually this type of situations
where volume goes down and both supply

demand goes down are going to produce
some kind of apex formations, triangles.

And usually apex and triangles are going
to be always associated with

indecision.

If you think about this, guys, why
indecision at this spot?

Who's in decision?

Who doesn't know what to do?

Well, the CO is out, so there is no
decision there. So in a way, that's kind

cool that there is no decision by the
CO. The CO has made the decision, and

it's inactive.

So in decision, more by who?

Well, I would say more by ITFs.

institutional trend followers why
indecision here

well because there is they are still in
technically in

an uptrend definition

because

this trend for them is going to have a
higher low a higher high,

and then it's going to have a
consolidation, a trading range.

So the trend is not broken yet.

But then once they go through more than,
let's say, two quarters

of, let's say, absolute

and relative underperformance,

So think about the market in this period
of time might be going up. So absolute

return on the stock is not going to be
there.

And the relative performance also could
be in jeopardy.

So therefore, what would institutional
trend followers do? They're going to

start scaling out of this position. And
that's what's going to finally increase

this size. So ITFs are selling.

And ironically, this selling, that's
what's going to produce after the low or

high, the next low or low.

So and then the structure becomes more
with the more visually

detectable bias to the downside.

Everything is so connected.

It's like a living organism.

You know, there is a selling, there is
still some hope.

failure of that hope, and then there is
a final capitulation.

That's how the sentiment unfolds through
the structure.

Okay.

Let's look at scenario number four.

And it's just basically the same, we
could apply the same structure, right?

We're still gonna have some urgency to
sell.

And relative to phase B and phase C, the
supply is going to be quite significant

in phase A.

But then more supply in phase E. So what
it would tell us is that the sell -in

here on the way down out of the APACs,
sell -in is much more

than in phase A.

And therefore, we know that some of the
institutions sold in phase A.

it doesn't mean that all of the
institutions sold in phase A.

So they're going to start selling again
in phase D, and that's what's going to

produce a more meaningful volume
signature.

And usually with this type of volume
signature, that movement is going to be

much faster. Because think about, you
know, increase of the supply as kind of

like an urgent supply coming in.

on the capitulation after the apex
rather than off the top.

So in this type of environment, you're
going to have a lot of gaps down.

And that's going to happen on kind of
like this extremely climactic volume

signature.

Okay.

All right, great.

Question from Philip. Why are we using
phases D and E instead of C

as an accumulation?

Okay, so this is a good question.

So we think about phase C here, right?
So usually in the accumulation, we would

be thinking about phase C as an element
of

supply increase because the weak
hands...

are selling here at this point they're
capitulating now in distribution is

to be the opposite right so we we're not
talking about the demand we would be uh

demand and rally um demand trial is
going to be equivalent of this and this

in accumulation and the distribution but
we have we are talking about supply

signature not demand signature So
therefore, we want to look at the

the distribution.

And this is where phase D is going to
have that major sign of weakness as a

reaction. So we're discussing that.

Okay.

Let's look at some examples.

So this is a redistributional trading
range.

JCPenney monthly chart.

after a big downtrend that had already
seen a lot of selling.

We have a move out of the deeply
oversold condition.

And actually, I remember I was, you
know, trading consulting some of the

institutional clients on this stock.
They were extremely excited at this

because the big news at the time in
2011, I believe, was that

one of the Apple designers is coming to
JCPenney and he's going to produce

the same type of following with the
stores that Apple

has created by that time.

And nothing from that materialized and
then we kind of went back into...

a downtrend again but look at how
technically we would define that this is

distribution based on the supply
signature in this trading range as

we go through different phases look how
gradually supply is increasing

throughout the whole structure and again
we're not using phase c rally for

identification of the supply

we are only talking about reactions in
the trading range so on these reactions

we see how supply is gradually
increasing increasing increasing

and then what happens with the result
look at this reaction look at this

reaction and then look at this reaction
so this is where result to the downside

is increasing

on the increased volume signature or on
the increased effort to the downside.

Bullish or bearish?

Definitely bearish. And this defines the
timing for us. There is a synchronicity

between the increase in effort and the
increase in the result.

And that's exactly what we look for for
the change of character and so on

and so forth.

So this is the most common.

supply signature.

Here is a TP formation.

So we've talked about this, but I'm
using a slightly different schematic

And I'm doing this just because it looks
that maybe, well, actually supply

slightly increased here, definitely
increased here, definitely increased

So probably it should be scenario number
three instead of scenario number two

here. But the principle is going to be
the same.

In a tippy formation, as we went through
the schematic, a big climactic run,

speculation on the way up, then our CEO
is going to say, I need to distribute

really fast.

Something is coming up for this stock.

And we are at such high prices here,
speculative prices, where it's

quickly trying to close out this
position, and they're just basically

the way down.

And that produces those gaps, those
quick moves, that sign of weakness in

phase B, just because they still keep
selling and selling until they are done

with selling.

And once they are done, the CEO is done,
Look what happens.

There is some value here at this spot,
at this low, for some

people, for some institutions.

And that's what produces this biggest
rally in Apex.

It's kind of like the foundation of the
Apex. It's going to be the widest rally

just because of value proposition in the
leadership stock.

after a significant move to the downside
that was produced by the urgent

distribution by the CEO.

Please note how if CEO is smart money,
strong hands, and it's out,

still some other institutions, and this
is an institutional signature right here

on this rally in phase B, some other
institutions, specifically

trend followers.

are going to get in into this position
because they're thinking this is a high,

low. The uptrend is still in place.

So we are in the oversold condition,
which is true, short -term oversold.

And there is some value here.

What they are not recognizing is this is
all short -term. Short -term oversold,

short -term value, short -term
liquidity.

And they are getting trapped.

And once they are in this position, they
bought in into this position, look what

happens.

CO is inactive.

And I'm repeating all these concepts
just because we do need to repeat all

concepts.

ITF are in.

So they are not biased.

So they're in a position.

Therefore, they just hold in to the
position and doing nothing, so also

inactive. And then public weak hands

is in the position as well

on this low right here.

So I have quite a few friends that
definitely know what I do for a living.

know that I trade. They know that I
teach trading.

And in a lot of cases, especially in the
very good market, like 2017 was the

market like that, where everybody would
come to me and they would ask me

questions as to what do you think about
this stock and so on and so forth.

So a lot of them in 2018, at the
beginning of 2018, were coming in to me

rally.

And they were basically saying, we're
still in the uptrend.

This is a substantial reaction, so that
suggests some value. So I bought this

stock, and I want to see what you're
going to say. So my answer always

was more of let's just wait and see
because we need to go through the period

testing. And in a lot of cases, they
would buy stocks like this that would

short -term bullish, but long -term,
they would fail.

And that failure is going to come
through all of these people being where

they are without a lot of activity.

And this inactivity, that's what's going
to produce the apex formation.

And then only after the period of
underperformance, and in this case, this

quite considerable period. I mean, look
at this, one year of underperformance.

And this is 2005, so we could assume
that this could be both absolute and

relative underperformance, if you
remember how the market is unfolding.

And then after this period of
underperformance, the ITFs that were in

position, they're going to give up. So
this is them right here giving up on

their positions.

So ITFs fell in.

And then they're going to start selling
again. And then with that selling, it's

not only going to become institutional,
but also going to become more of a

general selling, where both weak hands
and institutions are selling, leading us

to the conclusion like this, where we
are thinking about maybe a climactic

action.

All right.

Go to the next one.

Oh, this is a group exercise, so this is
great.

So look at this supply signature.

And by the way, I need one volunteer, so
say yes.

Look at the two supply signatures for
accumulation and the distribution.

And I want you to think about when we're
going to look at the next chart

about the commonalities.

that we might have in the accumulation
and distribution.

And the biggest question that we'll have
to address with the next exercise is

going to be, how do we look at the same
supply signature and yet

define the bias in a different way?

So let's look at these two charts. And I
need a volunteer, so...

For a volunteer, please say yes.

So it's the same stock.

Apollo, it's an educational stock.

Weekly timeframe, but the period is a
little bit different, right? So we are

here in 98, 2000.

Here we are in 2004, 2006.

So definitely different market
conditions.

But still, we're looking at somewhat of
the same structure.

what are we looking at? We're looking at
the previous uptrend.

We're looking at the first leg to the
downside.

Then we're looking at the series of
lower highs and in phase B, not

necessarily lower lows, but kind of like
this apex formation going

into the next move to the downside right

here.

So it looks kind of the same. And look
at the supply signature.

From phase A volume, where it's really
high, we

are going into the diminution supply
signature into phase B.

Diminution supply signature into phase
B. And then we have somewhat of the

increase, flight local increase.

of the supply in the case of the
accumulation into phase c and then the

the distribution into phase d so um
everything looks very similar

so my question to you here is if
everything looks

so similar

with the supply and the volume
signature, and the structure looks

same, and I'm like, look at the
structure. It's just uncanny how it

Then how do we in this world going to
define accumulation and differentiate

accumulation to the distribution?

So let's go to Philip, and let's kind of
have this discussion here.

Hi, Philip. How are you doing?

Hello. Great.

How are you?

Good. So what do you think would be the
difference for us here? How would we be

differentiating between those two biases
with the same structure and with the

same volume signature?

Well, I don't really know.

I have no idea.

Okay.

Okay, well, that's great. Okay, so...

Let's think about it together, right? So
what is

different here on these two charts?

What is the main major difference that
you see?

Maybe the slope of the uptrend
beforehand?

Okay, how about now?

Okay.

Okay, so for everyone, what is the major
difference between these two

charts? Guys, don't overthink this.

There's nothing really to think about
this.

Look at how the chart unfolds up to this
point, and then give me

what you see in a different way of what
happens afterwards.

direction of the continuation of the
trend.

Yeah. Maybe I should just do this
exercise in a slightly different way.

should just show the chart up to this
point right here and then for us to

discuss that sprint situation.

And then to see different results to the
upside and to the downside here. So

let's come to this point right here and
let's just think what is happening in

the potential phase C. Because when we
look at the accumulation, we could

definitely see that phase C, but it
looks the same to me,

Philip, on this example as well.

Where is the point of decision for us to
decide that one is an

accumulation and then another is a
distribution?

Yeah, the direction of the trend after
the... Which particular bar?

Okay.

The bar...

So in the graph on top, the bar

right after the 2 ,000, the second bar
after the

2 ,000.

Okay. This one, why?

Yeah.

Why not another bar?

Because of the gap up and the size of
the bar, and when I compare it to the...

bar at the same position in the graph
down, there is a clear difference in

So maybe that.

Okay, but what's that different?

The direction of the candle.

Okay.

Okay,

so direction of the candle. Well, we
have a directional candle up right here

well.

Okay.

Something very fundamental that is being
missed right here.

Okay, so Philip, thank you. Let me just
go through this myself.

I want to make sure that we will see
this right away.

So think about phase C here, right?

If we're thinking about accumulation and
we're kind of confirming that this is

the pattern that we want to see from the
supply signature.

This is the structure that we want to
see. We want to see going into the

a low, a low, and then a test of this
low

as a higher low, right?

And then after that, we want to see a
resumption of the

uptrend. How would we see this? And I
think that's what Philip was trying to

communicate.

This was a reversal bar.

out of the test.

Now, what happens here? The same
potential phase C.

And after this screen,

we are waiting for the test.

Now, the test, again, should be a high
or low and should be on diminished

signature.

Instead, what do we have?

We have a commitment below the sprint.

So this commitment right here is where
sprint definition fails.

And it becomes a sign of weakness.

It's that sprint number one that I don't
like that much. You know, that

definition. Why I don't like this much?
Well, because I think it's better to

define the bias here.

I mean, this is the absolute... lost
place where we're going to be thinking

about the change of bias.

And it's still okay.

You know, it's better than let's say
something below that.

So if that's the case where we just have
to come to this place, you know, and

decide that the bias has changed, then,
you know, so be it. You know, this is

where we are with our bias definition.

But obviously we want to identify some
of the better characteristics that would

suggest a distribution to us and we
would get out earlier.

But that's the main thing.

One of the main points that I'm making
throughout the last two, three sessions

about volume is that when you look at
the volume

signature, sometimes you are distracted
by the volume itself.

and you forget to look at what the price
is doing.

And volume does not necessarily a good
representation

of what the price could be

doing, right? We could have an increase
in the volume signature and it could

suggest different things. It could
suggest

an increase in the supply, or it could
suggest both increase of the supply and

demand at the same time. And those are
two different things.

That's why volumes could be so
confusing.

As a tool, I think visualization of
volume is really bad.

It confuses people just because there
are two different forces in a

single bar.

And the volume bar is usually given some
kind of biased definition just by the

default. If the price goes down and
closes below the previous day's close,

volume bar is going to be red.

But this volume bar could contain a lot
of demand, and this is where confusion

comes.

So therefore, we need to look at the
price to define.

what supply and demand are doing on a
specific volume bar.

So in the first case, the price is
reversing up after making a higher low,

then it slowly starts to go up. So we
are suspecting that our accumulation

is being confirmed.

In the second scenario, once we have the
commitment below the low of what we

thought was a potential spring,

That's it. The scenario of the spring is
negated. And because of the failure,

we're starting to think that the bias is
to the downside and that we need to

acknowledge this

commitment to the downside as a sign of
weakness.

And that's the main difference.

So even though we studied the volume
signatures, we studied the supply

signatures and the demand signatures,

It's all useless if you're not using the
price and what the price is doing, how

the price reacts to that emergence of
the supply.

So this exercise is all about that.

And if you're going to take something
from today's session, take that.

This is a very, very important concept.

All right, great.

Now let's go to the next portion.

of our class we're at 4 30 so we'll
definitely go to 5 30 and let's just see

where we are with that at that point so
i keep showing you guys uh the homework

that you keep sending me um i really
like so many variations that you send so

this one comes from jose and this is
just phenomenal work I like the table.

I like all of the abbreviations here. I
like all of the comparisons. All of our

material is here.

And then such great, you know, forum to
show the explanation for each bar.

And then, you know, there is a legend
here. So that's just very cool.

So thank you for sending this, Jose.

Another example from Doug and this one.

has a little bit more elaborate
description for each bar.

So again, I love this a lot. And with
that also comes, you know, a more

abbreviated version for each of the
bars. So that's also great. A couple of

questions from Doug. So let's address
this right away.

The volume.

When evaluating volume effort.

So let's make a distinction.

Volume and effort are two different
things.

is going to be looked at as the
difference between,

let's say, volume number two and volume
number

one, right, between two different bars.

And we're going to say that, okay, there
is a huge difference in volume, so

something like this.

And we know that, let's say, demand has
increased here.

So we're going to say that the effort to
the upside has increased.

And I know that it's going to look the
same. Volume is going to increase.

is going to increase. Effort to the
upside is going to increase.

But it's important for us to make that
distinction that effort is just kind of

like a force behind the volume
signature.

It could be on the demand side. It could
be on the supply side.

And it's the difference of what we've
seen as the force before to what is

happening right now.

And the question here is, are we
recording the absolute level of volume

its relationship to the previous bar or
even a series of previous bars?

And this is a great question because,
and we kind of addressed this already

today to a certain degree.

We are going to look at...

A couple of things. We definitely would
like to understand the relationship

between, let's say, a single bar and
maybe another single bar, or maybe a

series of bars that would show us the
same type of action, right? So

if there is selling, so we want to look
at the increased supply signature, and

then we want to see how supply is
decreasing on the next reaction.

So imagine that maybe on the one single
bar, we could have a bar like this, just

a big bar, and it's going to be to the
downside.

And then where we have more of the
consistency of saline, right? So this

reaction might have just, you know,
different bars.

But basically, these are the same
things.

These are reactions.

They just happen in a different way.

One is happening on the climactic volume
with the big move to the downside on

the single bar.

Another reaction happens on the series
of bars.

So therefore, what we want to do is we
want to compare the volume signature in

different ways.

We could look at the absolute

volume signature metric. That's number
one.

We could look also at, let's say, the...

we could look also at the consistency of
the

demand and supply.

And by consistency, I mean that for
multiple days, the price goes down and

is some selling. That's consistency.

This type of selling, where there is
only one bar that occurs, is not

consistent. It could be just one day
selling, one day reaction, and then big

hands coming in, absorbing all of the
supply, and then we are done. So there

no consistent selling from day to day,
week to week.

So those are the three things that we
would be looking at. And we'll

discuss it more as we go through the
exercise.

Let's look at the second question. It's
on the intention.

On an upswing, is the intention...

is to suppress the resistance.

Yes.

This is always going to be the intention
for the price to do, right? To

overcome the resistance or to commit
below a support.

So this is the intention for a bar

or a price.

Now, COO has intention to push the price
back into the trading range.

So let's say that we have a commitment
to the upside, but let's say supply

signature increases.

So we are suspecting that COO is
selling.

So what is the intention by the COO?

Well, obviously, it's just to sell,
right? So to get rid of the position or

to short the position.

Short. hedge, exit, scale out.

So those two intentions, Doug, are
completely different.

One is just for the price.

In the first case, we just want to see
the price committing above the

or below the support.

This is just price related.

In the second case, the CO's intention
could be different at the point of the

resistance. It could be to sell, to
short the stock, to exit the stock, to

scale out, or to take some profit.

It also could be different, and you're
kind of describing it in the next

question, is where we could have that
increase of the supply on one bar, and

then there is some kind of absorption
that is happening through next bars.

And then the intention for the CEO are
going to be different in this situation.

The first scenario that you're
describing is more of the distributional

The second one is going to be more of
the accumulational qualities.

But I think that the key here is just to
understand that when we talk about the

commitment of the price above or below
the resistance and the support, the

intention there is just for the price.

or for the specific bar, and then with
the SEO, it's all contextual.

What do they want?

Are they selling or are they buying?

All right, great. Let's go to the next
one.

This is another example. This one comes
from Rick, and I thought that was really

cool because it just shows you guys that
there is no discrimination to how you

approach this work as long as you do
something.

And I see here a lot of something.

I see that Rick has gone through this
visually, manually,

with the pencil, going through all of
these concepts, labeling those, putting

them in the way that he understands for
himself. And that's what just excites me

so much when I receive something like
this from you.

Yes. There are so many different ways of
how you could go through this material

and all of them are correct and all of
them are okay because it's just you.

So just keep doing what you're doing and
I support you all the way.

All right.

Next couple of bars are quite
entertaining and those come from Lee.

And this is the concept that we
obviously have mentioned multiple times.

This is the concept that I'm thinking,
Lee, that these are great slides, so I

might have to ask you to incorporate
some of them into the course without me

creating all of that.

But the concept here is the concept of
the test of the

supply. And the key here, and I'm just
going to go really quickly here, but you

could guys...

You can stop the recording and, you
know, as you go through the slides for

class, you could stop and just read this
whole explanation, which I thought was

really good.

Look at the increase of the supply at
14.

And we are saying with the increase of
the supply, we should have a test of

supply.

And we're kind of seeing that.

Around 15, 16, 17, supply really went
down.

So locally, this is a test of the supply
that came at 14.

This decrease of the supply suggests
that we are going to have a rally, which

happens.

But we also would like to have a test of
the same magnitude.

And that's why the current market is
suggesting.

that we are going to have a reaction at
some point.

And that reaction is going to bring a
lot of fear into weak hands.

They're going to capitulate.

Not only that, a lot of institutions are
going to capitulate.

They're going to take the profits that
they've done in the last two months.

And do you know that January and
February are becoming one of the best

in the history for money managers?

Why? Because...

In a lot of positions that those money
managers are, even without adding to the

position, those positions would produce
such big rallies off the low of

December 25th.

And it just coincides with January,
which is the first month, and it just

produces such good returns.

So they're going to take some profit.

especially when we're going to see that
the market's going to start

deteriorating and imagine any bad news
coming at this point. And then we're

probably going to consolidate because
that increase of the supply, like here,

suggests that we're going to go through
the consolidation.

It suggests that the supply needs to be
tested again.

And it needs to be tested on the same
magnitude level. And sometimes the

magnitude...

could be defined in two ways.

Sometimes magnitude could be of the same
proportional reaction.

And in other cases, it could be more of
a prolonged consolidation

action.

So I think that we're probably going to
see something like this rather than a

much deeper reaction to the lows in
December.

just because of how Rally is so
aggressive to the upside. That suggests

that there was a lot of institutional
demand, and as the price is going to go

down, they're going to provide some kind
of support, and they're going to see

some value as the price goes down. So
that's going to create some trading

that's going to be unfolding for quite
some time. So that's kind of like my...

one of my assumptions for the markets
but coming back to schematic number one

here on this slide we see that the same
magnitude reaction into 21

22 even though produces a decrease in
supply from phase

a the supply is increasing relative to
the previous test in areas

number 15 16.

So why would that be happening?

Well, as we know, and as Lee actually

explains here in this text, this
increase in the volume signature

could also suggest...

Just a second.

would also suggest that there is not
only increasing supply, but there is

increasing the demand.

So that's a given. But we know that,
again, increasing the supply, as it was

increasing the supply here, suggests
what? Suggests retesting.

So therefore, we know that the retest,
the true retest, the successful retest,

after which we should have a much better
movement to the upside, should come.

with two points one structural point
higher low and then the second volume

signature uh dimension supply signature
and then at 24 we have that test

and that test is a lower supply test and
a higher low structural

test so we finally have tested the
supply that came here and then here

and finally we're saying now the price
is ready to move out

So that defines the timing of when the
price could potentially leave the

range. So I thought it was really cool
how Lee worked us through this on this

slide. I wanted you guys to have this,
and Lee, thank you for this work.

There is more explanation here, so just
go through this, and hopefully Lee, you

don't mind that I'm sharing this. I
usually assume that Whatever guys'

you sent me, whatever questions you sent
me, it's okay to put them into

the context of our discussions because
usually the questions that you ask are

the minds of many students.

It's just been proven from cycle to
cycle that if you have a question, most

likely somebody is thinking about the
same thing.

Please do send me the questions. Please
do send me work like this.

It excites me to see that there is so
much deep thinking and refinement on

this material.

Okay, and then a couple of questions
here from Lee.

And then we're going to go into the
exercise.

So an assumption here that the
professionals will be carrying out mean

trade into

the overbought areas

above the institutional value zone.

The professionals here will still be
considered as strong hands. That's the

question. And let's just think about
where the value is.

for the professionals here on this
particular chart.

So this is Apple, and this is a daily
chart,

just as a reference.

So we defined the institutional value by
how? Well, we saw some buying here on

the change of character, these two bars.

And then after that, this was more of
the selling that came on this bar, so we

don't want to include that.

And we're thinking that anything above
is overbought, anything below is

oversold, kind of like the same distance
that we have.

So somewhere in between, in the middle,
this is where they really like the value

here. So anything that goes below $0
.70, they would be buying. So that's why

see how the price recovers really quick.

out of these oversold conditions.

So think about the professionals and

mean reversion trade that they're going
to do.

They're going to identify those
oversold, overbought conditions, and

just basically going to buy at the short
-term oversold condition, and then

they're going to sell at the overbought
condition.

And they're just basically recognizing a
trading range condition.

Now, this is one thing that people might
forget about mean reversion trades

and how professionals use that.

Because a mean reversion trade in the
trading range is going to look different

than a mean reversion trade in the
uptrend.

So we know exactly how this happens.
Now, think about what happens next.

right so buying and then selling

and then shorting again on the mean
reversion trade and

then this becomes a loss for them now
once this becomes a loss that

dictates a switch um in the definition
in their minds and the definition for

environment why well because now that
this is a loss This just basically tells

professionals that this trade no longer
works in this environment.

So therefore, most likely, we are in a
different environment. What environment

is that?

Higher highs, higher lows.

An uptrend.

So in the uptrend, the mean reversion
trade is going to work in a slightly

different way.

I think we've talked about this, right?

Overbought condition, oversold
condition, both are short -term. So long

uptrend, short -term oversold, short
-term overbought. So mean reversion

in the overbought condition is going to
be technically executed the same way.

They're going to short into the
overbought condition, but it's going to

the definition of a longer -term
uptrend.

Their move to the downside, their target
is going to be defined by the short

-term oversold condition.

And then again, they're going to be
buyers in the short -term oversold

condition, and then they will be sellers
in the overbought condition.

So that's how this mean reversion
trading is

going to change for the professionals,
because they also will be looking at

the... difference in the environment.

Okay, so let's see what happens next
here. If these professionals are,

are they what, strong hands?

Okay, yeah, it looks so different for
some reason. If these professionals are

strong hands, and we're going to assume
that professionals are going to be

almost always strong hands with an
exception of this trait right here.

So it's only on the change of
environment.

this is where they're going to be wrong.

Everything else, if they define the
environment correctly, then it doesn't

really matter.

This is actually one of the best
consistent traits that you could have,

could possibly have.

Think about this simplistic system.

Step number one, define the environment.

Step number two, Define short -term
extreme conditions.

Step number three, execute.

There is nothing else to this strategy.

I mean, there might be some variation
from like extreme price movement,

climactic movement in the volume
signature and so on and so forth. But

how simple trading could be.

And obviously, this simplicity only
comes after a deeper understanding of

the market works.

So sometimes to be that simple, we have
to become more complicated first.

Okay, so if these professionals have
strong hands after the

mean reversion trade, they will be
reaccumulating their shares again in the

value zone as well as the...

oversold areas, and I think that we went
through this, right? So they're going

to make this trade, they're going to
sell here. This is going to be a loss,

then they're going to, again, do a
different mean reversion. They're going

sell here, they're going to buy here
after the trend has been defined.

Explanation about the party which is
responsible for MIT so far was referring

the professional zone. Does it mean that
ITFs or the CEO are not participating

in conducting a mean reversion trade?

Yeah, I definitely see the point that
you're making, Lee, and it's true.

Both CO and ITF could be involved in
that type of trading.

Maybe it's not going to be necessarily a
predominant strategy because the CO

strategy is all going to be about big
secular

and business cycle moves.

And then ITF are going to be all
oriented to trend following.

And then professionals are going to be
doing the mean reversion trade. So the

reason why I kind of grouped them
together like this is because those

are different types of trading that is
available to institutions.

And even the CEO could be at some point
conducting those type of trades within

the context of the trading range.

They might be selling here some of their
position that they've acquired at this

point just to take the profit and be
profitable for that position. Because

risk is always like this looming
question is, how am I exposed to the

How is my portfolio exposed to the
market?

So they might take some profit and that
could become a mean reversion type of

profit taking.

And they could even have some hedging
mechanism, which is the mean reversion

trade by itself.

To me, what was important is just to
understand that there are institutions

operate on a very, very high timeframe.

And then there are institutions that are
definitely following the context of an

environment.

in both ways, whether it's trending
environment or non -trending

Or a trending environment, but you
still, the trades are kind of like with,

the uptrend, downtrend, in the mean
reversion trade, they are going to be

of isolation trades between the short
-term oversold and short -term

overbought conditions.

All right, great.

There was one more question.

Why don't we do this, Lee?

Why don't we leave this for next class?
I think we're going through too many

questions today.

And instead, and Lee, by the way, thank
you very much for all

this work.

And instead, what we're going to do is
let's jump to the exercise. We have

25 minutes or so.

So I want us to do a little bit more. So
let's just see where we're going to

stop. Maybe we'll go beyond that. Maybe
we'll go beyond 530 today.

I need a volunteer.

And the first thing that we're going to
do as we come back to the group

exercises, we're going to look at the
trading range from 33 to 37.

And then we're going to discuss it. We
want to understand what the bias is

We want to understand.

you know, what phase we're in. We want
to understand what might happen next and

so on and so forth.

So volunteer.

Just say yes and I'm going to unmute
you.

We should have some music while I'm
waiting.

Okay.

Let's go with Rick.

Hey, Rick, how are you doing?

Rick, are you there?

Yes, can you hear me?

Yes, yes.

Some noise, background noise a little
bit.

So maybe you could just be a little bit
closer to the microphone.

That would be great.

Okay, and then... It's settled.

Uh -huh, okay. And then I think that we
stopped at 32, 33.

right, about this area right here,
right?

Okay. And so what I want to quickly

repeat is 31 and then 32 and then 33.

So on 31, let's quickly talk about 31.

What is effort doing?

efforts increasing?

Yes, effort is definitely increasing.

This is the highest volume signature, so
we'll talk about the effort, you know,

what it means.

So if we would be looking at some analog
bars, the bars that are overcoming the

point of the resistance, like this, like
this,

like this bar right here, maybe this bar
right here with

this resistance here.

So look at all of those bars and look at
their volume signatures.

In all of these cases, there is some
kind of increase in the volume signature

relative to what we've seen before.

And that's what effort is all about.

Effort, I'm sorry, this one right here.

Effort is more about the difference,
right? So we've had a lot of effort.

to the upside at this level right here.

And that's the effort of the demand
that's coming in and trying to

produce a new commitment in the
direction of the bias.

And whether it fails or whether it
doesn't fail, it doesn't really matter.

just want to measure how effort changes.

So now look at...

how effort has changed here.

This is the difference in effort.

So we definitely see that the effort has
increased tremendously.

What is the result? Yes.

Rick, what is the result? Is the result
increasing as well?

Bar number 31?

Yes, I would say it is.

Yeah. We see that it's spread.

This is the largest up spread that we
have seen so far.

So the spread is increasing.

The close is in the upper part of that
spread.

And we are committing heavily above the
resistance level of bar number

30.

So it's definitely increasing the result
as well.

Bullish or bearish?

Bullish. Bullish.

I'm glad that you said bullish because
obviously I'm showing you what happens

next. But short term, we are still
bullish at this point. Now, even though

are bullish, what is the hesitation that
we have about bar number 31?

I think that

Huge increase in effort?

Yeah.

The volume is so big, we know that
demand is increasing, but what

supply is doing?

Supply looks like it might be
diminishing.

Okay, so let's look at the supply from a
different perspective.

Let's look at the supply on these bars.

And this is the bar signature.

And then where do you think supply came
before this bar?

Obviously, it came probably on some kind
of reaction on the previous bar, right?

Oh, yeah, supply.

Yeah, where's the... 31 opposed to 30?

Yeah, so where's the evidence that...
Oh, some kind of news or something.

Yeah, so look at the Barnabas 30.

Yeah, just the spread and the volume
increase.

We see that Barnabas 30 has a supply
tail.

So supply tail is going to be the
difference between the high and the

we see that it goes below the one half
of the spread. So we know there was some

selling on the intraday basis right
there.

So we don't have to go that far away to
see the presence of supply on

nearby bars.

So think about the supply that we have
had on bar number 30. It's still a

bullish bar.

because from close to close, we're still
positive here.

But then some supply came here at the
end of the session.

So out of this volume signature, we're
probably seeing some demand, some

maybe something like this, maybe like 50
-50, maybe demand is slightly better,

so maybe like 60 -40, right?

So demand and supply.

Now, look at the next bar, bar number
31, and look at the high volume

Is it all demand?

No.

No, obviously not.

Okay, so if it's not all demand, then
could you think about

the levels of the supply that we might
have on this bar, especially knowing

comes next?

We know that there is some kind of stop
in action that is happening.

Yes, we are.

I'm sorry, Rick. I know that's coming.

Okay, so then the next question, is
supply increasing on bar number

31?

Yes. Yes, so we know that supply is
increasing.

Could we visualize this increase of the
supply on this big bar? I mean, where

would you put the supply? I mean, demand
is definitely dominating this bar.

So demand may be like, what, 80 % and
supply maybe 20 %?

Something like that? Would we say that?
So let's just say maybe supply is just

debt right here.

Well, actually, let's do the demand
first.

Let's just say that maybe demand is all
of this.

This is all demand.

And then supply is just this.

So relative to the previous bar, where
we see supply

is like this point right here. Let me
take another color.

Like supply is only this.

Now supply is this.

Demand still dominates supply so much.

But is supply increasing relative to
what we've seen on the previous bar?

No. Look at the level of the supply on
bar number 30 and compare it to the

of the supply on bar number 31.

Oh, just relative.

Yeah, the supply is increasing.

Yeah. And that's the whole point, guys.
Yeah. And that's why the volume

signature that we look at is so
confusing because we don't understand.

the relationship, the proportion between
demand and supply.

I'm going to show you some of the tools
later on when we're going to go into

more advanced studies and specifically
in practical.

We studied the market profile that helps
us to identify supply and demand a

little bit better. We also studied the
up and down net volume signature a

bit. It requires specific tools, but you
could definitely do that.

as well.

So, and it shows the picture more of
like this than the volume signature.

So, that's why, you know, a lot of the
traders just don't recognize that on

type of bar, supply is increasing.

I mean, relative to demand, it's
definitely lower.

Demand still dominates. But that
increase of the supply suggests some

that is happening already on this bar.

institutions are selling into the
strength of weak hands on this bar. And

suggests that they're going to still
keep selling if the price goes high

it creates more and more overbought
condition, overvalue for them for this

particular stock. So they will be
selling.

Okay. Well, Rick, what happens on bar
number 32 then?

What is happening with effort?

Effort is decreasing.

Decreasing. Effort to the opposite.

Decreasing. And then the result?

And the result is decreasing.

Okay. Bullish or bearish?

Bearish. Bearish. Short -term bearish.

Absolutely. Because we see that the
effort to push the price up is lower.

What does it mean? This means that the
demand is going down. So on the previous

bar, if we had demand signatures, all of
this, so now maybe on this next bar,

and we see some selling at the beginning
of the session right here, so maybe

demand now is...

something like this so even though this
bar looks uh foolish

we have seen deterioration of the demand
on this bar and by the way supply is

not necessarily growing on this bar it
could be the same it could be slightly

lower than on bar number 31 but because
demand starts to deteriorate that's

where the price is is kind of like not
capable of producing the same type of

results as on bar number 31.

Okay, so we're seeing on bar number 31,
supply is coming in. On bar number 32,

demand is diminishing.

Okay, so bar number 33.

Okay, bar number 33, what happens there?

Let's talk about the effort.

to the upside and the result to the
upside.

What is happening with the effort?

Slightly higher effort to push the price
up, right?

Yes. Or maybe the same.

And then what about the result?

The result is down.

Yeah. We are not doing anything.

with the progress to the upside.

So therefore, the result is going down.
So on the same effort, instead of a

better close, that is above the close of
32, the close

of 33 is to the downside.

So a negative result.

So bullish or bearish?

Bearish. Absolutely bearish.

And now we're seeing that...

there is a synchronicity between the
attempts on

the increased supply signature to go
down, and for the first time, it

goes down.

So that synchronicity suggests the
timing for the beginning of the move to

the downside.

All right. So we're kind of seeing how
it changed.

comes so ever gradually.

Again, let's go through this.

Increase of the supply on 31, invincible
to amateuristic eyes.

There's a lot of background noise.

You're probably close to the microphone
with some of the things that you do

there. Then on 32, there is a decrease
in the demand signature.

And then on 33, we are trying to
continue to the upside, and we're seeing

supply is starting to come in. And then
we see also the result to

the downside.

That suggests a synchronicity between
the effort and the result.

And that suggests a timing for us for
the beginning of the move.

Okay, great.

33 will be labeled as how, Rick?

Buying climax.

Buying climax. Okay. So then where is
our next Wyckoff point?

Where is our change of character or
automatic reaction?

I call the automatic reaction at 35.

Okay. Okay, so...

This reaction.

Secondary.

Okay, secondary test, somewhere in
between, right?

Right. Okay. And then phase A.

Phase A, okay.

So look at the change of character,
guys.

This is the distance that we traveled to
the downside.

Is this, Rick, is this the largest
reaction since we had the low at 1516?

Yes. Yeah. Something else, kind of
slightly under,

this is definitely the largest distance.

So downswing increase that we see.

Okay, so that suggests, change of
character suggests what?

Trading range.

trading range, a change of environment.

Okay, so now once we're in the trading
range, we want to identify a bias.

Okay, let's keep this in mind.

And how would we define the boundaries
of this trading range?

The high of 33 and the low of 35.

Okay, great.

So we defined the resistance and the
support, and we are saying that the

should, majority of the time,
consolidate between those two points.

Okay, and we are putting here a phase A.

All right, let's talk about the buys.
Let's talk about the buys from the point

of view of the supply. We just started
this today.

So what can we say about the supply in
phase A?

there was a supply increase in payday.

Yeah, and we could even take these two
bars here as well, this one and this

because we know that there is an
increase of the supply at 31.

We know that supply is still somewhat
high at 32, just because the

volume signature is high.

Okay, and then look at the bars after
that.

What is the difference? I mean, like,
this is the first time when I see here

one, two, three, four, five bars in a
row where there is a selling. Have we

this before?

No.

Maybe here.

First time on this chart. This was just
three days.

But look at also the volume signature,
right?

I mean, this is a different type of
supply that comes. This comes at the end

the move into the climactic action, and
then it produces the move to the upside.

This supply is different. This comes
after we already had some kind of

to the upside, so the context is
different, and it's

much, much harder. It's probably like...

times two and a half, and it's less one
and a half times more than the

supply that came at the end of the down
move here to point number six.

Okay, so what would that suggest?

I mean, there's a big difference in
supply signature.

It looks like there's a lot of...
institutional selling and weekend

Okay. Institutional selling, for sure.
Who would be presenting the market with

so much supply on these seven bars if we
take 31 and 32 into the same

area? Yeah. Only institutions would be
selling like this because this selling

is heavy.

That's number one. And secondly, it's
consistent.

So think about these two words. Heavy
selling.

Heavy defines the institutional
presence.

And then consistency of how they sell.
For seven days in a row, they sell,

sell, sell, sell, sell.

Does this look more like an accumulation
or more like a distribution in the way

how they sell?

An accumulation.

A reaccumulation?

Okay, so we're talking about
institutional selling. We're talking

selling. We're talking about consistency
of selling. So not only they're selling

a lot, they are consistently selling
throughout seven days there.

We're probably talking more about the
distribution rate, right?

Oops. So I want to repeat this so that
we would get this correctly.

Look at the volume signature.

In this area, this is the volume
signature that has both

the highest volume spike and that has
the most consistent selling that we have

seen on this chart.

We have selling here.

at number 14.

This is just one bar selling.

Remember, we've talked about this today.
What's the difference between

consistency of selling and then just one
bar selling?

Well, this is it.

This is how it looks.

At 14, we are being sold. 13 as well. So
you can say two bars.

And then after that, there is

diminishing selling in this whole
formation.

At 31, 32, 33, 34, this looks different.

This looks so much more selling that
comes into the market than at number 13,

14.

So we should be thinking that maybe this
is the distribution that is unfolding

just because phase A looks so different.

than phase A at number 13, number 14.

So at this point of time, even though we
are kind of like speculating, we are

trying to deduct whether this is a
distribution or reaccumulation, we are

that this is our assumption.

And this assumption either needs to fail
or we need to confirm it.

And why is this an assumption? Well,
because there are some other traits that

are still not distributional traits.

Rick, what do you think is not being
shown to us here? If this were a

distribution, what do you think is not
being shown to us?

I mean, what we would like to see maybe
in phase A for the distribution.

We've discussed.

volume so much how about the price what
would the price preferably do

um

maybe a little bit more yeah wants to

go down right now yeah so would be more
aggressive to the downside we still

don't see that right because uh and i
think that there is a comment here from

militia um Look at the distance between

14 and 15.

Compare that to 33 and 35.

Kind of looks the same, if not even
smaller, slightly smaller.

So we still don't have the result to the
downside on this consistency of

selling and on high, heavy selling.

So therefore, we are...

We are expecting a better picture as

a confirmation of the bias to the
downside.

So far, it's not there.

But it definitely catches our eye that
there is so

much distribution of volume that has
come in it.

Okay. So now that we have an assumption
on the bias, let's see if we could

confirm it. You mentioned a couple of
things. You mentioned that the strong

hands are selling.

They're selling from 31 to 35.

And then weak hands are buying.

basically on the same bars. And we could
see this through the tails

of all of those bars. If we would build
an intraday picture of this, think

about this, bar number 31, this is the
close.

Then the next bar, there is a slight gap
up.

Most likely there is some kind of
selling just because we had the selling

the close of bar number 31.

So we're selling first, then going
higher, closing positively.

This is 32 close.

Then we are slightly gapping down.

And again,

most likely with the gap down, the first
momentum is to the downside, something

like this. Then we go up, and then we
are being sold and closing below the

previous day. So this is 33 close.

Then think about the next bar, 33 .5.

So a slight gap down, attempt to go up,

continuation to the downside, and
attempt to be bought.

Then the next gap down, and slightly
maybe misrepresenting this.

Okay, so the next one gap down.

With the gap down, probably first move
to the downside.

Attempt to go up.

And then such a big sell into the close.

So this is 34.

And then 35 opens up kind of at the same
level.

maybe it goes down first, maybe it goes
up first. I don't know exactly here.

The overnight action does not give me a
lot of indication on the momentum. I

probably would be thinking maybe just
trying to go up again,

going down, something like this, maybe
in a slightly different picture.

But you could see, even from this, this
is our...

kind of like best guess on the intraday
structure so what do we see here we see

how there is selling selling selling
selling

a lot of selling here a lot of selling
here so those

are institutional selling and then as
you said the weekends are buying so

they are buying

They are buying on the way up. There is
some value here.

Then they are biased somewhere here as
well at the same level.

And then they are biased again at the
same level. So three attempts to buy

here, and then here.

All of them are failing just because the
price after this kind of consolidates

and goes down.

And then weak hands are probably trying
to get back in right here.

So that's the intraday picture. That's
the strong and weak hands, how they're

interacting at this spot.

And please notice, once we're done with
this, this is the exchange of shares

that happens in phase A.

Then what happens afterwards?

I mean like going into this area right
here. Nothing, right?

Because SEAL might have sold and becomes
inactive.

Weak hands bought and they are inactive
as well.

And mean reversion trade here is
basically

off the lows.

And it's not an extremely deeply
oversold condition, so they might be

for a much better condition here to
activate this trade.

So we are going into the period of
inactivity.

And we're seeing this in this area right
here between 35 and

35 .5.

Oh, a mistake here.

35 from 36.

Volume signature goes down.

Okay, so the next thing that should
happen is for us

to understand, you know, how the trading
range is going to unfold.

So I'm going to leave you for a second
just to think about this, and I'm going

to step out for a second for just one
minute.

I want you to think about what happens
at 36 and 37.

Who's doing what and what it means for
the trading range and how it should be

unfolding at this point of time. And
I'll be back in a minute. Thank you,

Let's do it.

All right, guys, I'm back.

Thank you for that. I just had to get
that package. All right. So

what are we seeing here, Rick, with 36,

bar number 36?

Got a pretty large volume.

and uh very pretty good spread okay so
effort is doing what

effort is increasing increasing and it's
increasing

substantially right so it's increasing
over this bar over this bar this bar

bar any up bars since 33 this is the
largest spread this is the largest

so both results

and effort increase. Bullish or bearish?

Bullish. Bullish. Definitely bullish.
Short -term bullish.

Now, what was the intention behind this
bar, by the way?

Probably to overcome the

high

Is there between the two 35 bars?

Yeah, the two 35 bars. Unbelievable.

Yeah, right there.

Yeah, did it do that?

No. No.

Say again?

No,

it just touched it, but it didn't. It
closed below it. Yeah, the close is

here. The close is below that level of
intermediate resistance,

the level of commitment that we wanted
to see from this bar. Just think about

the effort.

It's one of the highest efforts on the
chart, historically.

And that was the intent, to overcome
this resistance by an

intention by the price, not by the CEO,
not by the CEO, but nobody.

It's just we're saying that the price,
the intention of the price was to commit

about this level and it didn't.

So even though we have a bullish
interpretation on the

result and effort, we have a negative
interpretation on the intention, which

puts us in a doubtful situation that
this is going to be a good rally.

Okay, well then bar number 37 comes.

So that's number 36.

So 37 comes, and what do we see there?

What is happening with effort?

Effort is decreasing.

Decreasing, substantially.

And then what is happening with the
result to the upside?

And the result is decreasing.

Substantially. So decreasing effort,
Decreasing result, bullish or bearish?

Bearish. Bearish.

Okay, so short -term bearish.

Now, let's think about what is happening
here on

bar number 31.

Let's kind of build those analogs. And
32, and bar number 36, and 37.

Do they look the same to you, Rick?

And you have to compare the structure of
the spread, the closes, and then

look at the volume signature.

Think about in the context of what the
price is trying to do there. In both

cases, tries to commit to the upside,
right?

Yes. So in the first case, we do commit
to the upside. In the second case, we

don't commit to the upside.

But price structure -wise, volume -wise,
it looks somewhat the same. We have

bar number one that has this momentum
characteristic, and it happens on the

increased volume signature.

Bar number two shows diminishing
qualities of this effort

to push the price higher, and the volume
starts to diminish as well.

So the same price and volume structure.

the same signatures. The only problem
here is that in the second case, we are

not committing above the resistance.

In the first case, there is a clear
commitment above the area of the

and it's a substantial commitment to the
upside.

In the second case, we are really not
committing above the resistance that

we need to. There is no clear path for
us.

So Rick, what do you think this means?

It looks bearish.

It looks bearish.

Because the effort to the upside between
these two analogs is

definitely diminishing.

The intention is not being fulfilled

in the second case.

And we're seeing that And that just
basically tells us that the result to

upside is also diminution.

So, diminution effort with no result.

Bullish or bearish?

Bearish. Bearish.

Now, one more point and then we'll make
our final conclusion.

So, this one's short -term bearish.
Well, actually, not just short -term.

know, for this whole structure, this is
bearish because of these two attempts to

go up.

Now, Let's think about selling itself.

So we said that they sold on 31, they
sold on 32, they sold on 33, they sold

34, and on 35.

All of this has been selling by
institutions.

What do you think they are doing here at
36 and 37?

They're inactive.

They were inactive between 35 and 36.
Then the volume signature has increased.

So they are not inactive anymore.

They're doing something. So we're trying
to define 36.

What is it that they are doing?

Think about the intention.

The price needed to commute the box, but
it didn't. So therefore... They're

selling. Yeah, they're selling again.
But they're selling less.

So... This is the situation where they
sold initially and then they don't have

to sell as much in the second case to
produce the result

of failure.

And that kind of gives us an idea that
also about the demand. If they don't

to sell so much, then this suggests that
demand is becoming poor.

Demand is decreasing.

So with this, Look at the next bar.

The next bar, let's call this 38.

Let's not call it 35.

So the next bar, bar number 38, the
spread is

increasing.

Yes, the close is very favorable to the
downside as well, and yet the volume

signature is going down, and we're
committing below the loss.

bar number 37, and we're committing
below one half of bar number 36.

So this is the commitment to the
downside.

So with this commitment to the downside,
and with the poor demand,

commitment to the downside on decreasing
volume signature,

This is an ease of movement.

This is what Drake said, ease of
movement.

And this ease of movement suggests that
we're kind of done with selling.

That's number one.

Done with selling, at least for now.

And then secondly is that demand is
poor, and that suggests that demand is

weak hands.

And that demand signature also suggests
some kind of timing, that it might

happen now. It doesn't have to happen
later.

So at least at the minimum, we would be
thinking that this ease of movement

should produce maybe a lower low here.

And if it's going to produce a lower
low, then could we be

either in like extended trading range
like this?

or could we just go down here?

So we'll just have to see what's going
to come next, you know, how we could

confirm all of this. By the way, could
we think of this trading range as like a

concluded trading range for us? What do
you think, Rick?

Or should we have more duration to the
range?

Looks like there's going to be a little
more duration.

But think about this. They sold here,
right? So selling was increasing a lot,

and then selling is going down, and yet
the result to the downside is

increasing, suggesting an ease of
movement, ease of movement by itself,

suggesting that demand is low, and
therefore the timing of maybe now.

All right, well, why not just...

look at this what has happened next so
let's just see and then we could just

comment on that okay so that that's what
happens next and

we see how the downtrend develops from
37 to 40.

um if we are thinking that the trading
range needs to develop here

we might miss this trade but you cannot
miss the exit

on the trade that we were in, right? So
if we were thinking that we were biased

here and then we were biased again here,
here, somewhere here,

then we are definitely sellers on this
bar.

This is our capitulation bar.

This is the latest bar that we could
possibly identify where we're gonna say

that that's it.

The trend is done. There is a break of
the trend.

And we are out.

Now, we should be out much earlier. This
is the last

exit for us.

And we're kind of back engineering this.

Our first exit should be in the area of
31, 32, 33.

And this is what we're going to call

our Wyckoff exit because we're going to
discuss other exits as well.

So our Wyckoff exit. Then the next exit
is going to be after the change of

character on the way up into the
secondary test.

So we want to exit some way here. This
is our second exit.

Our third exit is going to be on the
reversal.

of the last attempt to go up, number
three, and this is our number four exit.

So as you could see, this is how we
would be scaling out, out of the

We don't necessarily need to close the
position right away. We could wait out

and see, you know, what kind of change
of character we're going to see, and

we've seen that the change of character
here is not that decisive in terms of

the result.

we could be thinking there might be a
reaccumulation here. The only clue is in

the volume signature, at least at that
point.

And then as we go into 37, then we're
seeing how there is another

failure, and at least this failure
suggests a lower low.

So a big question, a tactical question
for us, if we're going to have a lower

low than 35,

what's going to be done with the trend.

And most likely, it's going to be
broken.

So if the trend breaks, what kind of
reaction we're going to have to the

of the trend?

Most likely, we're going to have some
kind of further capitulation that's

to lead to an established downtrend.

So we want to get out somewhere here and
the latest here.

All right. All right, guys. Rick, thank
you so much.

Okay, thank you.

Good job. And just let me quickly look
at some comments.

Are supply signature schematics that we
studied earlier applicable to

reaccumulation? Yes.

Yes, absolutely.

Okay, so homework.

Homework is going to be to...

Look into this area, analyze it, and
then come to the next class with the

analysis of all of these points up to
57.

You have to analyze each bar, you have
to analyze each swing, and you have to

give me a conclusion as to what kind of
next move we could expect from here.

That's assignment number one. Assignment
number two is always...

Watch this recording again, specifically
with the exercise.

And this is exactly what I want. I want
that exercise to go into your notes.

And send those to me. Email those to me.

All right.

I think that's it for today. Let's see
what else.

Eric is saying, what about the upsloping
channel?

You did draw the 34 seems like an
upthrust in the distribution.

Okay, so we're talking about this?

Yeah, so it's not necessarily an
upthrust of the distribution, right?

it's actually a stop in action.

So this is more a stop in action that
defines an overbought, overthrowing

condition and therefore suggests that
this is a buying climax as a stop in

action.

What we didn't talk about with RIG is
when we look at this trading range, look

at these two rallies and think about the
definition of a first

point of excitement.

and then a second point of excitement.

And usually the second point of
excitement is going to come where?

It's going to come in phase C, either on
upthrust of the distribution or on an

attempt to upthrust.

So you could see that there was an
attempt here at 36 .37 to commit above.

to produce an upthrust, and yet it
failed.

And the failure of the upthrust, which
basically leads us to the conclusion,

that we see the whole thing, that this
was phase C, and this becomes

a low or high LPSY, last point of
supply.

And then we're a little bit puzzled as
to how...

to label this whole thing. So as we've
noticed, there were quite a few attempts

to go up here. So here are your
secondary tests.

So this could be your phase A, phase B,
phase C, then phase

D, right here, sign of weakness, LPSY.

And then off we go into phase E, the
downtrend.

All right, so that would be the
labeling.

In terms of the slope, we would be
putting the slope actually down like

here, and then we would be looking at
this sign of weakness and LPSY here, and

look at how it comes exactly to this
point.

So it would be more of the down slope
here rather than an up slope.

All right, guys, good class.

Again, I'm glad that...

We are moving alone both with the
material on the volume. We have all

lectures, type of hours, and then we

exercise. We go into our drill exercise,
and we are trying to

repeat the same process over and over
and over again.

So next class, do your homework, and
let's see what's going to happen next.

All right, guys, thank you so much, and
have a happy week.

Thank you guys. Bye -bye.