Original subtitles

Hello, everyone. Today is March 4th, and this is our session number nine of the

Wyckoff Trading Course. We're still working on the volume and price

relationship, supply and demand.

This is something that we're going to go through today, next session, and most

likely session number 11.

And then we're going to switch gears, and we're going to talk about relative

comparative analysis.

And then we'll talk about...

trading tactics and Wyckoff trading plan.

Quite a few upcoming events that are coming our way

and your way.

I will maybe inform you a little bit more next week, but the

main thing that we have going on this week is going to be

The webinar is with Linda Rashke.

Linda Rashke is a well -known trader.

She is so respected for her performance,

for her sustainability of such performance, and

for the consistency of the performance.

Linda and I, we've met at the conferences multiple times,

kind of developed.

the relationship through Golden Gate, through Hank as well.

And I've asked her to come to our students and give all this knowledge

has. And also she just published the new book, Trading Sardines. And this is a

lot of anecdotal stories about her time on the Wall Street.

And I would highly recommend the book. That's number one.

Secondly, I would highly recommend to register for this course, for this

special. Now, usually I don't prefer when beginners

in our classes are taking specials, but I always tell you

guys which special you can take. So there is always like one or two specials

that you can take throughout the year, even if you're taking the course.

So this special is going to be more about being in the presence of a great

trader, listening to her, extracting beliefs on the

markets, on how she trades, how she creates her routine, and so on and so

And so, yeah, I would definitely highly recommend that.

Then what else do we have? I think that's it for now. We'll talk about

specials next time.

So today we're continuing our exercise.

Just go there.

We're going to continue our group exercise.

We're going to talk about the volume phase analysis, and today we're going to

switch gears.

We're going to discuss the demand signature under the volume case studies.

And the volume case studies were created

out of the need to show the students

different interpretations and variations on the volume and price, how those

interact, and specifically on the supply and demand.

This is just another way for me to show you that interaction.

And we're just trying to approach the same topic, the same subject of the

and price, just slightly from a different angle.

And sometimes what I kind of notice with students is that you give them a little

bit of a different angle, and it's going to lend a little bit more.

And so we're going to kind of attack this volume -price relationship from

different ways.

Homework, as for the last two sessions, is going to be a group exercise. This is

where I'm giving you something to think about.

And obviously the biggest homework related to this group

exercise is just to watch the video again and make notes and send those to

Next week.

We're continuing with the group exercise, and oh, I didn't correct this.

apologize. Well, we're going to see how many volume case studies we're going to

go through today, and there is one or two left after that, so we'll see what

we're going to do.

But it's still kind of like we're on the same topic.

All right, great.

Okay.

We're going to start with the Q &A. This question comes from Ronnie. And Ronnie

has sent me this chart.

Ronnie, is this a 60 -minute chart?

Let me know really quick.

I believe this is 60 minutes.

So a stock for the viewer.

This stock was shown to me right here.

So then I'm receiving an email from Ronnie today, yesterday, that

the stock actually went down.

And it had two down days. And we could see that on the 60 -minute chart, how

intraday move has happened, a lot of sell -in, capitulation through the gap,

then another sell -in, and then we're not taking off.

So what was my advice here?

And hold on a second.

Sorry guys, having a little bit of a hectic day today.

Okay, so at least you had a chance to look at this.

So the question was, first of all, what is the structure?

And then the second question is, how do we trade this?

And by the way, there could be already a position established here, and I'm not

sure. Rony, just let me know.

I think this was a live trade, so we could discuss it from that perspective

well. And another question, Ronnie, that I have for you is, was there an

anticipation of some kind of event here?

Was there like earnings report or anything?

Yes, what, earnings?

Okay, so yeah, so that was obviously an essential information.

So we're going to kind of like look at all of this here.

The previous movement is good.

We see that there is some kind of leadership, even on an intraday basis,

will have to look at the daily just to figure it out a little bit more.

Climactic action, first reaction as a change of character.

Everything that we've studied here in the class defines the range by the

and the resistance.

Suggest that the price is going to move up into a secondary test.

Substructure right here as a secondary test takes us down.

After phase A, we go into phase B.

In phase B, we have multiple tests.

One, two, three, four, five.

So at this point, we might be thinking that our phase C could be here.

So this is B.

and that we could take a position here, even though this is a 60 -minute, so we

would have to look at the daily and so on and so forth.

Why am I saying this?

You know, obviously, we see the drop, a big drop to the support, you know, and

that's kind of like the main question, how, you know, what has happened. You

know, there was a favorable, bullish analysis.

And look at this whole structure.

in phase C around the January 28th, end of January, there is nothing

that tells us otherwise.

And this is where you still will have to come in and to establish this position.

Our position here is going to have two possible scenarios of how it's going to

unfold. So let's say that we open the position right here.

So scenario number one, we are going into a major sign of strength.

And then we're going into a backing up action.

And then after this, the price either consolidates and then, you know, or

without the consolidation just goes up and overcomes the point of the

right here. So that would be the most preferable scenario.

Scenario number two.

That's number one.

Scenario number two, we are actually going into an upthrust situation,

and then we are failing.

So that's how we usually would be approaching any trade out of the

consolidation. We should be always remembering that there are two

Scenario number one, when our bias is going to be confirmed. Scenario number

two, where...

bias is not being confirmed, and usually when you look into a bullish scenario

that we have had here for quite some time, and even this,

and even this, when it looks bullish,

why wouldn't we open this position?

Indeed, we would.

I mean, obviously, there should be a little bit more analysis on the daily

basis, on the daily time frame, on the weekly time frame.

combination of those and so on and so forth.

But we should, and then if it's gonna work out, great, we're just gonna trade

that. And if it doesn't, we're just gonna close the position.

And we're gonna close it by our risk parameters, right? So what are our

points of entry?

So our points of entry are gonna be somewhere here, that's number one,

here.

It was in a practicum actually last week, but we had such a great campaign

that we did on Apple.

So here we are establishing first point of entry.

Here's our second point of entry.

Our stop loss is most likely going to be below this loss, so somewhere here,

slightly lower.

Here's our stop loss. And the way how we establish in this position is we are

scaling in.

So let's assume that our assumption, rather portfolio or position

risk assumption,

is going to be that we're going to

spend 1 % per position.

And obviously you could have 2%, 3%, 5%, you know, whatever you guys want,

whatever your risk aversion is.

Let's say for me right now, it's 1%, right? So I'm kind of like thinking more

an institutional way.

And obviously institutions are not necessarily going to be extremely

in the intraday, but imagine this is daily.

So 1%. So how would I scale in into this position?

And this is something that we'll go through in the last portion of the

but I'll give you a small preview.

So I'm going to divide this position to one -fourth.

So one -fourth plus one -fourth plus one -fourth plus one -fourth. Or you could

say 25 basis points each time. So here

we're opening 25 basis points. Here we're opening 25 basis points.

And we are halfway into our position.

So if scenario number one unfolds, We're going to add to this position

either right here or right here, and then on the breakout.

So let's just assume our point of entry number three, point of entry number

four.

That's how we would get in into the position. Now, why do I do that?

And please think this through of what I'm going to say right now.

Scaling in into this position, we, with each entry, reconfirming

our assumption on the bias and the timing.

And also on the character as well as a part of the selection.

And each time we have the progression in the direction of the bias, it acts as a

confirmation that we are correct.

And if we are wrong, most likely our loss with this type of strategy is not

going to be even close to the regular loss of, let's say, 1 % that I've

identified here as an assumption for the position risk.

It usually is going to be lower.

It usually is going to be either 75 basis points or 50 basis points or 25

points. So we will not expose ourselves too much until everything is confirmed.

until the bias is confirmed, and bias is being confirmed by the establishment of

a trend.

And obviously, here the trend has been

violated. And here, you know, we have an event, and that's why I was asking

Ronnie, is there something that has happened here?

It's very important for us to understand how we behave before the event.

So before the event, just because we might be so close and, you know, we

not be sure, we don't have to necessarily open the second position.

But let's assume that we did.

There is nothing wrong. I mean, maybe our expectation is that the reaction to

earnings is actually going to be favorable.

And instead of going down, we're actually going to have, you know, move

upside.

By the way, a little bit of a bad timing with the market in general, right?

So the market is prone to the reaction. I think I mentioned this to you guys

last week. Those of you who are attending Wyckoff Market discussion

heard this from me last Wednesday.

So we are expecting some kind of reaction.

So think about if the market is going to give us some reaction.

Could the market weakness influence the...

the stock, especially at the event, at some kind of catalyst, what kind of

reaction we could possibly have.

So the question here is not even like what's going to happen. It's more as to

what kind of risk we want to have going into that situation.

So now that we've dealt with the risk, now that we've dealt with the buys

the trade, now let's look at the backing up action. So a major sign of strength

and everything is...

Kind of classical here.

Why? Well, because we have a commitment above the resistance cluster that was

created in phases A and B. And look how the price commits.

So overcomes the resistance quite significantly.

There is no reason for us to think otherwise that this is not a major sign

strength. And then the price comes down and look at where it finds a point of

support.

Right here.

Right at the previous resistance now, it's acting as the support.

This large bar has the increased volume signature.

That detail suggests the presence of the demand.

And the increase of the supply, which is the local increase.

And we would be thinking that, okay, we could compare it to this.

We could compare it to this.

The reaction here suggests a couple of things.

So compared to this reaction, we're definitely seeing that supply has

So we would need to see some kind of test.

Here's this test.

So out of the test, we're waiting for some kind of reversal here to enter, to

scale in more into this position.

And then we're looking at this reaction and we're seeing that Supply actually is

lower on this smaller reaction, and the result of it is smaller, right? The

distance is smaller.

The spread maybe is slightly smaller. And more importantly, there's not a lot

selling.

So we still would be thinking that this is probably the backing up action where

supply is coming in and produces a change of character.

And this change of character is going to lead to some kind of trading range. So

again, some kind of testing that needs to be done.

So here's that test.

But here's the question.

Has this test been confirmed?

And obviously by the confirmation, we always talk about a reversal, right? So

confirmation.

In our case, equals a swing reversal.

So do we have a swing reversal here? No, we don't. So therefore, we can't open

additional position here. So we're just kind of stuck with these two points of

entry.

And that's what we're dealing with.

You know, that's our risk. So it's half of the position risk at this point, and

then the price drops on earnings.

What can we do here?

Well, obviously, our stop losses are going to be somewhere here. If we're

aggressive and we're using the intraday, the stop loss is going to be somewhere

here already, right? If not earlier, that we would be getting out.

But let's assume that we're swing traders and we are weak, and for that,

know, pick up the momentum to the upside and continuation of the uptrend.

So what do we do here?

Nothing.

We are...

going to close this position and be done with it we're going to close it on this

bar you know it doesn't really matter where you could close it on the open

because the gap has happened and that suggests by itself that we have to close

this position as not necessarily the bias has changed but the timing

has changed for sure so now we know that this price is not going out of the

consolidation

And more importantly, the selling is of institutional quality.

So that suggests that there should be some kind of buying absorption

that should happen now. And therefore, the structure could develop more and we

could have a much larger trading range.

So obviously, we just don't want to participate in something like this.

It's inefficient.

We're going to be in this trade for quite some time, you know, if the

range is going to develop for some time.

So, therefore, there is nothing really that you can do here.

This reminds me more of a situation, and for those of you who don't know,

I actually love playing poker.

I think poker has the same strategy, you know, gaming strategy as trading.

I always recommend, especially for day traders, to play poker because there is

lot of money management rules.

There is a lot of pattern recognition rules.

You have to train your mind to think, not just act or react, but to think.

And in some cases, you might have the best hand, but going to the last

card on the board, you might still lose.

So that kind of reminds me of this type of scenario where everything before that

was okay.

I mean, we could argue, of course, about this area right here.

But everything prior to that looks extremely bullish and looks like a

continuation of the upside potential.

The only thing that we didn't take into this account is this upcoming event.

So, and obviously...

A portion of that relates to the market as well, how the market has been so

overextended was due to the reaction.

We've talked last week that here we go. We've seen some slight increase of

volatility, so we're expecting that the reaction is going to come.

Nothing you can do about this.

That's it.

Just get out.

Take your loss.

and go and find something else, and obviously post -analyze.

But here's this whole post -analysis, and I still would prefer you to find

candidates like this, right, where we have a lot of bullishness, and

it's being confirmed by the move to the upside.

Imagine if the reaction would be positive. What would we be talking

probably would be talking about the gap to the upside like this, and then a

continuation. So it just...

really differs.

It really kind of like depends on

that uncertainty.

We say market is uncertain.

How is it uncertain?

Well, because we don't necessarily know how institutions

are going to react to a specific event.

And this capitulation here, the way how it

went down so fast was more of this institutional capitulation where on

bad news they're just basically saying like we need to get out and that's it

they're capitulated which brings me to the next question that Ronnie is asking

is this an extension of phase B then yes this could be and again we're going to

discuss two scenarios scenario number one we are still bullish

So what do you need to do with this scenario?

Confirmation. You need to find some kind of confirmation that we're still

bullish. In this scenario, we are definitely in phase B.

Second scenario, maybe we see here distribution.

And again, I'm not saying that the distribution has taken part prior.

it's taking part on the way down.

So there are a lot of distributional qualities here.

So if this is a distribution, then we probably already into phase D.

And that's how I would approach this. And this whole group exercise is just

based on that.

We look at the chart, we are trying to define where we are in the structure,

what is the bias and what is the timing for us for any type of positions.

So I thought, Ronnie, this was a really good example, and thank you for telling

me that that position did not work out because it's a really good lesson for

everyone.

You study this material, and sometimes I feel like the feeling is, wow, this is

so great.

I have a feeling that now my trading is going to take off. You will be in these

situations.

I get into these situations too.

And the key is to understand first that with uncertainty in the market, it can

happen.

Secondly, obviously, to post -analyze this a lot and not to create

false emotional assumptions for the future.

Because sometimes what happens with people, they look at this trade and they

think like, huh, this turned out to be a bad trade. It's a loss. There is a

negative emotional connotation now that I'm going to.

take from this, and now that I'm gonna see this type of pattern, so every time

see this, I'm gonna assume that this is gonna be a loss.

So it all happens kind of like on a very unconscious level for us, just because

of the way how we function emotionally.

So don't think about this as a bad trait.

Think about this as a good trait where you executed this trait correctly.

And you got out when the price shown to you, you know, a final capitulation.

And that's it.

So really good example. Thank you, Rami.

All right. Now let's go to our volume case studies.

And as I mentioned, we are studying supply and demand. So this is our

concentration. Today we're going to look at this relationship from a slightly

different angle.

And here is the slide that I thought that I want to convert more into an

exercise. It's a slide with Apple's chart, daily chart, 2015

-17. And under the volume case studies, I'm showing you the

case studies of the supply and the demand.

Each of them have specific ways of telling the story about how effort has

emerged and how the price reacted to this effort.

So the first case study is the absorption of supply on a

horizontal basis.

So we talked about the absorption of supply through phases, so this is

new to you. Obviously, duration.

is gonna be extremely important here.

And I'm just gonna kind of show you both here, right? So we're looking at the

climactic action, automatic rally, secondary test, phase A, up thrust

phase B, secondary test in B, and then phase C.

And through phase C and then going into phase D.

Let's look at the supply signature, right? We're talking about horizontal

absorption.

What should happen during the horizontal absorption?

I've shown you guys how, you know, different supply signatures going from

A into phase C and D.

We've discussed that. We did some exercises on that.

So look at the supply signature.

or just the volume signature in general.

So going into phase D, we have the volume diminution.

We also, that suggests supply diminishes.

And at least let's just look at supply first.

So this is the absorption through time, through structure,

through phases.

And the key here is to look at all of the phases and to understand how supply

being observed in accumulation through phases and what kind of story,

institutional story, is being created through all of this. And we're seeing

supply through all of the phases is diminishing and then going into phase E,

into a trend, look at the supply signature.

It's the lowest on this chart.

So that's kind of like a natural wave.

of absorption of the supply through the horizontal structure.

We also would be thinking about the duration here.

And duration originally was not discussed by Wyckoff or SMI or anyone

This is just something that came out of my conversations with more advanced

students. One of the questions in the practicum was could we identify a

duration?

of the trading range, how long it's gonna unfold.

Let's say in phase A or phase B, or early phase B.

And yes, there is a way to think about this, not necessarily to determine

exactly, but to think about this. And the way how we would be thinking about

this is all of the emerging supply into, let's say, phase A.

and this emergence of the supply suggests that it's gonna take some time

absorb this supply.

And just because of that, we're thinking that we're gonna go into a trading

range. And then once we're in the trading range, the timing becomes a

simpler, right? Now that we know how the price structural analysis works, we are

waiting for phase C as our timing tool.

We are calculating

you know, on the number of tests, number of

panic on the way down in phases A and C.

And that helps us to figure out where we are

going to take off.

So that's... that's kind of like all what i wanted to say today about the

horizontal absorption and we've done this before so um we went through this

material on phase analysis and specifically supply so if you guys don't

this uh definitely revisit that you know from the previous session now

the next couple of items are going to be something familiar

but Definitely new, the way of how we're approaching this.

So there is another way to absorb the supply, and this is called a vertical

absorption. I always highly recommend David Wise's book,

which is called Traits About to Happen.

There, David talks a lot about different elements of absorption.

At this point in your development, as of a coffin, this would be an appropriate

book. So go to Amazon, order that.

And then, you know, if not during the course, but then once you're done with

course, please read it. I think it would be a great read over summer.

And obviously, I want you to read the same way how you learn from this course.

Take notes, write it down, think through, don't be lazy, don't be just a

But even if you don't have time and you can just only read, then it's better

than not reading. So do that as well.

So in the vertical absorption, we're always going to see different scenarios

to how supply is being absorbed.

We're going to talk about how supply is being absorbed on the way down, on the

way up, a feather situation.

or if I have a scenario, and then absorption through the test of the

bar.

So all those four scenarios are on this chart.

And then on the demand side, we're going to see a stop in demand, we're going to

see urgent demand, and we're going to see diminishing demand. So stop in

is always going to be increasing.

Urgent demand is going to be always increasing a lot.

More than stopping demand sometimes.

And then diminution.

Demand is obviously everything is going down.

So I want to use this as an exercise today. And your goal for the

next minute or so, I'm going to give you a little bit of a time to think about

it. I want you to find all of these scenarios for me. So vertical

absorption and

So let's go one by one.

Let's start with the vertical absorption on the way down.

Where can you define this element on this chart?

And obviously, let's think about first what it means.

So there is an absorption on the way down.

So this means that we're going to see supply increase, and we're also going to

see a demand increase, which would bring us to the overall volume

increase in the volume signature.

So please find me this element where you think this is, and give me a

time step.

Year, months.

Okay, labeling as well is fine.

Okay, so Eric's saying selling climax.

Okay. And Lash is saying, what is it, February?

February 2017.

A bar with the high volume signature.

This one right here?

Lash?

Okay, so 2016.

So this is what, February 2016?

Yes. Somewhere here, okay, got it.

Okay, Adam is talking about the same thing, yeah.

So we could see that there are quite a few places here where

we could see this type of absorption on the way down.

So on the climactic action, we're definitely gonna see a lot of increase

supply.

So how does absorption happens here?

There is a lot of supply that is available at this point of time. And

obviously produces that institutional requirement for the liquidity.

And also there is some value at this point.

So what institutions are doing with this increase of the liquidity is that

they're coming in and they're absorbing this supply.

And therefore demand signature will increase.

And because both supply and demand increases at the same time, that's going

to...

propel the volume signature in general and we see that this is the highest

volume signature here because this is the first point of fear and it acts as a

general capitulation therefore

we are expecting that the volume signature is going to be the highest. So

the highest volume signature because of general capitulation and because of a

lot of interest from institutions on value and liquidity at this point of

Supply increases, demand increases, and institutional demand starts to observe

the supply.

But it still happens on the way down.

As the price goes down, demand comes in. It cannot stop the price from going

down right away.

And therefore, absorption is happening as the price still goes down.

Look into the second example in Phase B. We see the

same phenomenon.

We see the supply increasing.

We see the demand increasing.

Therefore, volume signature in general is going to increase relative to what

we've seen before somewhere in this area. So this is a local increase of the

supply signature.

And the same process happens here. In phase B, as the price comes to the

level, institutions are feeling that this is a good value proposition to

especially with the bias that they consider a bullish bias.

So they're trying to acquire more at the same price level as

they did on the selling climax itself.

And please note that selling climax was kind of like a quick event, right? Like

a V bottom type of event.

So not a lot of institutions were able to get in into this position right away.

So they are seeking other opportunities at the same value zone to scale in more.

And the scaling in technique that I've shown you with the chart that we've

discussed from Ronnie, they're going to use it in the same way and

create the position by

buying in the value zone multiple times.

And this could be the second point of entry for them here in phase B.

So as the price goes down, and supply increases and weak hands are getting rid

of this position, whatever they have left, institutions are coming in and

they're presenting the demand.

This demand absorbs whatever the share is still available.

There are fewer shares available, and this is great. This is our phase

here, right, from phase A low to phase B low. And that suggests the confirmation

that the buys, the bullish buys, is being confirmed at least temporarily

There is also absorption on the way down right here. I'm not sure if anybody has

mentioned this, but here's another one. The price goes down, supply is

increasing, demand is increasing, and demand absorbs the supply

and stops the price from moving further down.

So therefore, we know that only institutions could do that.

And therefore, it again confirms the bullish buy.

There are some other smaller spots and pockets where we could use the same

thinking. So for instance, this spot right here,

we're seeing how supply signature has increased and then the price has stopped

from moving down.

So what does it mean? It means on this last two bars,

even though supply has increased, but demand has increased as well. And

therefore, from here, the volume signature has increased.

So that's a sign of absorption, especially making a higher low

after this spring and so on and so forth.

So this is also the same example. What about here on the backing up action?

Same thing.

Supply is increasing.

Demand is increasing on those bars as well. Again, volume is highly misleading

tool, visual tool, right? So even though we see it in, you know, volume bars

in red, and in this case, gray, dark gray,

it doesn't tell us everything about what's going on.

So therefore, we are...

could be confused and a lot of people are on the increasing volume signature

on the way down, we could be confused how to interpret this and we would be

thinking that this is probably interpretation for the bearish bias.

Okay, let's go to the next one.

How about vertical absorption on the way up? Where do you see examples of that?

So write it down, give me a timestamp.

September 2016.

Okay, great.

Yes, definitely that.

February 2017.

Yes, there is an element of absorption which is vertical on the way up.

November 2015.

Not sure about that.

All reaccumulation on the way up.

Not sure what Eric you mean by that.

Okay, Joe is saying August of 2016.

So I'm assuming, what, somewhere here?

Joe?

Is it there, Joe?

August of 2016, end of July 2016.

So somewhere here.

Yes. Okay, well, I think that we are getting a handle on this, as to

what this is.

I could also tell you that, you know, this is the vertical absorption right

here. These two bars right here.

Look at the volume signature. Demand is increasing relative to what it was

before, and supply has increased before that. So supply is coming in, taking the

price down below the support.

That increases capitulation by weak hands, and then suddenly demand

and the price goes up.

So there is a movement to the upside and actually this whole rally could be

thought of as like supplies being vertically observed. Supplies coming in,

observed on the way down, on the way down, and then on the way up, and then

the way up.

You kind of see guys how I took this whole area and now I've shown you two

of how supply has been observed.

And as a result of that, the price has stopped at this level.

On the way down first.

And then on the way up.

Same process.

Institutions are buying in both cases.

Same bias, still bullish, but short -term different results.

In the first case, on the way down, we're still going down.

There is still not enough absorption that has happened in this moment, and

therefore the price still goes down.

On the way up, the picture is different.

There was an increase of supply first, but demand is so urgent that it

observes whatever remaining supply is left, and that urgency, overwhelming

demand, already pushes the price up instead of

traveling down or stopping that downtrend.

So this is more of how the price

moves easier after the demand has absorbed a big portion of the supply.

And obviously other cases here as well, right? So vertical absorption on the way

up. There is definitely a lot of supply right here.

And yet we're observing this supply on the way up.

There is an increase of the supply here on the reaction.

And then look at this absorption on the way up. There is so much. This is the

best example.

of the absorption on the way up that we could see on this chart and this one too

um again you know supply comes in and uh there is a data absorption

uh to the upside okay so uh let's now look at the feather

so you guys still don't know what this is so i'm going to explain this a little

bit later on but i want to show you where the feather is

And the feather, a really good example is right here.

Then a little bit here, probably less so.

Yeah, so this is a really good example of the feather.

So what is happening here?

Well, first of all, the precondition of the feather, and we'll study this, I

have a slide on this for today.

we're going to have an increase in the supply signature. So supply emerges and

produces some kind of reaction.

And this reaction usually is going to act more as a change of character type

reaction. We kind of could see that maybe the trading range is going to be

developing here.

But look what happens next.

We are testing the initial change of character as a high -low.

And then with that test, we are concluding that supply is actually at

low level.

And therefore, there is a possibility for the price to come to the resistance.

And as it comes to the resistance, it does two things.

The overall supply and demand signature are diminishing

while we are making slightly higher highs.

and higher lows in the context of the structure where

we are residing close to the resistance or at the resistance level.

So this is more a function of diminishing supply

rather than diminishing demand.

And from here, because we're close to the resistance, once the demand is going

to come in, it's going to produce some kind of momentum signature, increased

momentum signature.

So we definitely want to study this type of absorption.

It's not very fast. It's laborious. It's kind of like grinding out to the...

resistance type of movement, especially in this area right here. Look into this

movement. It goes up, but it doesn't really break out and runs away.

It's still there and produces those small reactions that do not contain a

supply.

And that's what feather is, and we'll look at this in a slightly different

A test of a momentum bar.

So here is that example.

Here is the first momentum bar. Here is the second momentum bar.

The first momentum bar has the test

that, and both of them, by the way, will have some kind of increase of the

supply. So there is no way that, you know, the increase of the supply is not

going to happen. This is an event. This is probably earnings.

Therefore, a lot of the institutions are going to be selling into earnings like

this. They're going to be selling on the assumption that a mean reversion trade

is possible here and that the price is overbought, short -term overbought, and

therefore it demands some kind of reaction.

In this case, they will be wrong because supply is being observed almost

instantly on the test.

And some of the tests are not going to be that great.

But in these two cases, these tests are pretty good.

For the next two days after a momentum bar, we're seeing that the reaction has

not gone below the low of that bar.

That's really important.

So that shows us that whatever supply has came in, it's been absorbed.

And the price has an ability to hold on to these levels and then actually

advance.

Usually the advancement of the price after that is going to happen on

diminishing demand signature.

Why is that?

Well, there is a lot of demand here on this bar.

And this demand is actually absorbing whatever increase of the supply we have

had. So imagine that this absorption happens at this higher level, and once

supply that came in has been observed, what's going to happen with the price?

There is no pressure anymore from the supply.

So the price is just going to go up and up and up and up.

So this is a very easy trade, by the way. Well, one of the things here is

to wait for this type of event and see how it's going to play out. So it plays

out favorably here.

Wait for the test.

And then once you see that the test is successful, come in into the position,

maybe somewhere on like a breakout of this local highs.

And here is your small trade here on the breakout of this high. And here is your

small trade right here.

So that's a possibility as well.

And, you know, obviously a very...

Visual pattern attracts a lot of attention, so you cannot miss it if

following a specific stock.

All right, now let's talk about the demand.

So let's talk about the stopping demand. Think about the definition, stopping

demand. So what are we stopping? We're probably stopping a downtrend.

So where on this chart could we find...

and evidence of demand coming in when the price is going down and

stopping the price from going further down.

Automatic rally.

Okay, so we're going down, Eric, right? So we're going down. Okay, now I should

say selling climax.

Yes, definitely. This is a stop in demand. So whatever demand is on this

It's the demand that absorbs weak -hand supply, and because of that, the price

stops from going further down.

What else? Another selling climax.

Late April of 2016.

Late April of 2016.

Yes. So when we were discussing a vertical absorption on the way down,

basically the stopping demand.

We're kind of looking at the same type of action.

We just were discussing how supply has been observed at these spots, right?

Now think about in here, in here, and

look at where they come.

This is actually so great because it shows you guys where institutional

demand

comes in and becomes more of a stopping action.

And look how nicely we are seeing how institutions

are functioning and how their trend is starting to emerge.

So they're buying first in the value zone in

the lower part of the trading range.

And as they buy, think about the supply, right? So in other ways, I want

you to imagine maybe, let me give you the analogy.

And today we're going to use a lot of analogies.

So analogy here would be that, let's say that our supply level

equals 100 units.

So we come to the selling climax and we are consuming an immense amount of

supply units.

So let's say that we've consumed here as institutions 50 units at this spot.

Then in phase B at the secondary test, we are consuming another maybe

20 units.

Please note that the volume here went down, right? So from 50 to 20.

We are decreasing the volume signature, and therefore we are decreasing also

supply that is available, because now we are left only with what before phase B?

We are only left with 50 units of supply.

So supply is still present,

and yet

supply went down.

And that's, again, that misinterpretation by the beginners

that could be made because they are looking into this area of the beginning

2016. They're looking at the volume signature and they're saying, wow,

lot of supply. The supply has increased. The volume signature has increased

locally. And that's true.

But relative to phase A, we see how supply has diminished slightly.

all considerably, it doesn't really matter, but there is a decrease.

So then the next time we have in phase C, two times where

CO is buying on the spring

and then a test, let's imagine that it

buys another maybe

much another 15 plus 5 another 20 units of supply so

now what are we left with we are left

with so 20 20 50 with

10 units of supply that's very interesting think about this only

10 units of supply

is in the weak hands and 90 units of supply in strong hands.

If that's the case, who's going to be selling to push the price down?

Well, obviously, only weak hands are going to sell at this point.

And as they do, they're probably going to sell at some kind of break -even

point. So maybe somewhere here at the higher levels, right, in the backing -up

action. But once we come to the backing up action, we might be thinking that,

okay, in phase D at the backup, we are, you know,

consuming another 10 units of supply.

You know, we, I mean, institutions, right? So consuming another 10 points of

supply, and supply is not available. And we see that from the volume signature

here after phase D going into phase E.

Supply is in strong hands at this point.

Weak hands don't own this supply, and that's very important. So if supply is

strong hands and their intention is just to see how the price is going to

progress to the upside, they have the valuation much, much higher than the

current price, what do you think is going to happen with the price?

Obviously, it's going to go up.

And that's what's going to establish the trend, the upward spread for the trend.

When you look at it like that, and then you go through this whole process of how

absorption happens, then it becomes clear as to where the trend is going to,

what the bias is going to be, that's number one, and where the trend is going

start to emerge.

then you're just seeking for the confirmation.

So with Ronnie's chart that we had at the beginning of the session, we went

the major sign of stress.

We went into the first leg of the backing up action, and then it failed.

Here, same scenario, but is unfolding differently.

Instead of having this increase, first increase here in October, November,

And then having the test and continuing to the upside with the reversal like

this.

In Rony's case, it just tanked on the event.

And that's what just happened.

Nothing we can do about that.

But in this case, we would be thinking of adding to the position on the

as a confirmation of this bias.

We'll save you a lot of money.

And I will talk about this maybe in like four or five sessions.

We still have to discuss this. And obviously, Wyckoff Practicum is going to

lot about the strategy.

And by the way, I wanted to mention this, guys.

So we're almost done with the page for the Wyckoff Practicum.

Wyckoff Practicum is going to start.

It's going to be on Mondays for summer sessions, and it's going to start.

After the last session that we're going to have, our last session is going to be

April 15th.

WTC, April 15th. And then the practicum is

going to start a week after on April 22nd.

So put this on your calendar, and this is a free session.

So I want you all to come, and we're just going to...

Continue our discussion, you know, and I'm going to show you a couple of,

actually probably one exercise that we're going to do.

Go to our YouTube channel.

We've just posted the video from the practicum, from this cycle, from the

current cycle. I kind of wanted to do this so that I could refer people to

particular video. And I'll give you the link next time, but you could explore

this. So I would highly recommend that video under the Wyckoff Practicum.

And if you can come to the free complimentary session, do that.

And I'm expecting that a lot of you are going to continue this education with

the practicum and move to more advanced knowledge here.

Before I...

erase all of this.

I also want you to see something else.

Because we started talking about how supply is being observed at the level of

the support on the way down, and then we see the same picture on the way down at

the higher level. So the value zone for institutions is higher now.

Now I also want you to think about other ways that we've discussed.

of absorbing the supply so look into this area right here

and this is by itself not only a

vertical absorption on the way up but it also shows an urgent demand

here's another

urgent demand that's coming in here is another urgent demand that's coming in

And then we're seeing diminishing demand in the feather signature right here.

And you would say that, well, diminishing demand doesn't really, like,

it have to do with anything?

Well, diminishing demand with the price moving up like this suggests that supply

is exhausted.

So now let's look at this whole picture and kind of imagine of what happens.

throughout this whole picture and i'm thinking i should be i should do the

study here we are seeing the first initial absorption

on the way down on the saline climax itself but it's so quick that not

all of the institutions got in at the appropriate price that they want but

supply goes up a lot

demand goes up a lot too.

In the second case, supply still increases but increases less, and

demand is increasing maybe the same way.

Next time, supply is still increasing locally, but yet demand

is increasing as well, maybe not as much as in the first two cases, but that's

sufficient to stop the price from going further down then we see how the

price starts to go up on some kind of uh emergence of the demand

here is and then demand is increasing more and more

next leg up demand is

increasing a lot

Next leg up.

Demand is not increasing a lot, but supply is exhausted.

And then the next move up, this is where demand is increasing a lot again.

So what does it all mean?

I mean, all this, you know, demand supply signatures that I put in right

And why is it important at those places?

Well, you kind of could see how first, again, first step for institutional

absorption is always going through the process of accumulation in the

trading range.

And institutions predominantly are going to first accumulate the stock on value

and liquidity in the trading range in the area of the support.

We have to distinguish this.

as a slightly different process than the one that happens afterwards when the

price is moving up under the conditions of exhausted

supply increasing demand signature.

And we're seeing how demand has been high throughout the first three phases,

but still maybe not as in control as in phase D and

phase E.

And through that, through how demand is emerging here, you could see the

characteristics of phase D and phase E.

Why I always refer to supply as the most important studies, volume studies for

us? Well, because supply is going to be the initial point of concern in the

trading range.

Is it still there?

Is it at the higher level?

Is it being under absorption through phase analysis, through phases?

How is this absorption happening?

Is this happening fast?

Is this happening slow? And so on and so forth.

And then after that, once supply has been observed relatively well,

that's when the price is going to start showing you the emergence of the

uptrend. And with the emergence of the uptrend, institutional trend followers

are going to be very attracted to this area. In fact, all of these increases of

the demand in phases D and E are going to be associated with the bind waves by

institutional trend followers.

And we kind of could see all of that.

Really good chart. I thought, you know, this chart kind of shows so many

examples.

of how supply and demand are emerging, how supply

is being observed, and how urgent demand starts to occur.

All right, let's see if we have any comments, questions here.

Can you repeat the title of the book? This one is from Joe, and this is

obviously in reference to David Wise.

Okay, so David Wise.

trades about to happen.

Okay, great.

How to read the big volume spike in February phase E, especially if we are

already in position since phase C and D from Nilesh? Yeah, this is a really good

question. Because usually that's what produces some kind of doubt, hesitation,

and I've seen students come to me and they're like, this has a lot of supply

behind it, I'm out.

Yeah, you can definitely do this, but you have to think about where you are in

the context of this whole structure.

Hold on a second, guys.

Such a weird class today.

Everything distracts me today. I'm so sorry, guys. I feel like my mind is

just... I'd rather just concentrate on this. It just takes me away from all of

the things.

Okay, so coming back to the question, how do we interpret this volume

Well, we kind of talked about this, right? So definitely a lot of supply

coming in.

So with the emergence of the supply, we need what? We need a test, right?

We still cannot make this assumption that this is going to be the stop in

supply.

It's just, you know, we are at the beginning of the structure. This is a

strength, a backing up action, test, feather.

And then after that, we're jumping out of the structure. So we are relatively

early in phase E.

Just on this assumption alone, on this structural assumption knowledge, I would

just say that I want to see what's going to come next.

And more importantly, we need to understand how the test is going to

So the test obviously needs to be judged by what happens afterwards.

So the next two or three days.

And we see how favorable the test is, how favorable the test is here as well.

So therefore, we would be on the, after the test is successful, we would be

thinking, should we add to the position at this point?

And again, depending on who you are as a trader, are you a swing trader?

Are you a long -term trader? Those entries are going to be somewhat

So those distinctions, obviously for the practical, but for now, We just want to

make sure that we could analyze this spot correctly, meaning that supply

emerges.

We need a test.

Test is successful or no.

Yes, successful.

Then here in the middle of the range, yeah, we could open the position. That's

another point of entry for us right here. And this is just a sign of

bar. When we look at the actual true range, remember we

had that slide?

Where with the gap action, you take the close of the previous day. Then you take

the high of this gap day. And this is your true range for the day.

There were some trades done by institutions behind the doors overnight.

We don't see those unless we have the software that shows us that type of

But this is a sign of strength bar.

And sign of strength bar, we definitely buy.

But because of the emergence of the supply, we want to test it. We don't

necessarily want to buy it right away.

Okay, what else?

From Adam. When you see a gap like in February of 2017,

does the gap have to be filled in the future?

What does it mean if the gap is filled or not for the trading purposes? From

Adam. Really interesting question.

Because it kind of goes, the way how I'm explaining this to you guys, right,

kind of goes in a different way than the conventional

technical analysis definition.

And I see what Adam is implying here, because Adam knows technical analysis.

in technical analysis, we would say that, you know, the gap should be closed

at some point revisited.

And usually that revisit, like look at this gap right here, happens relatively

fast. Well, we kind of see the testing of the gap right here. By itself, this

a sign of strength just because it didn't go below this area.

We don't see the path here in the second case.

But what we need to understand, Adam, is that

We are talking right now just about this small scenario right here where supply

emerges and then we want to go through the test and therefore through the

vertical absorption.

But this is a very good, relevant question to our discussion. So thank you

this question. We definitely can address it a little bit more.

Usually when the gap happens,

there is a tendency of the price to come back to the gap area in order to retest

what kind of line we had.

I still think that you could define that retest here at this point.

And that strength could show you that even if the price comes back, we still

probably will be thinking more bullish about this, just of how this has

happened, rather than the scenarios where...

let's say maybe something close to this, right? So we have some kind of

gap, and this is not a big gap, so not a really good example, but still.

And the volume signature is not extreme.

But this could be an example of where we see how the test might be somewhat

failing slightly, right? So look at this low, and the price commits below.

Look at the true range, and the price commits below. So this is different than

what we have here.

So I would be less inclined to enter the position here than here.

Let me kind of see what else we have.

Yeah, it really has to be a gap like this.

I mean, like everything has to be compared apples to apples, right? So I

only really two places here on this chart where gap happened in a meaningful

way. in the direction of the uptrend and it has an extreme volume signature and

then we're looking at the test and they're somewhat similar so the gap

not an issue rather the future test of the gap is the real issue um i would say

so adam yeah at least this would be an issue that we would be extremely

concerned about or we would be extremely aware that the task is going to happen

and we want to see what kind of test is going to it's going to be and obviously

again We want to put the context on the small scenario.

All right, great.

Wow, what a great case study here we've developed. And thank you for all of the

questions. So now let's quickly go through some of the volume case studies.

Let's look at the absorption of the supply. Again, this is just my attempt

teacher to show you the same concept in a slightly different way.

So we've talked about horizontal.

absorption right absorption through the price consolidation or sometimes i say

through time it requires time to go through the absorption so look at um

how here in the first case in example number one we have a trading range after

the initial buying wave after momentum comes in supply increases and then until

supply starts to decrease

relative to what we've seen before in the trading structure.

And until we start showing the result on that diminishing supply signature, and

the result is going to be higher highs, higher lows, more of the bullish

characteristics on the rallies and more of the bullish characteristics on the

reactions. And we're going to say when we see that, higher highs, higher lows,

diminishing supply signature.

We're going to be on the springboard.

What is the springboard? Well, the springboard is just, again, another

tool for us.

Springboard has those definitions that I mentioned, high highs, high lows, the

mission supply signature in the consolidation.

And it just tells us that this is the area where it shows to us that supply is

exhausted to the point that the move can start right now. And therefore, that's

a timing tool for us.

In some instances, supply is not necessarily going to diminish.

It might increase locally, let's say going into a spring or a last point of

support. And that also could be interpreted as a bullish sign where

increase, but the result to the downside still is going to decrease.

And that's still going to be interpreted as bullish for us.

Okay, vertical absorption.

And I thought that these are very interesting two examples of the vertical

absorption, but they have the same characteristics where supply emerges

on the reaction, and at the same time, demand is also

trying to stop that supply from moving the price further down. So we have...

increase of the supply.

We have demand that's coming in and starts to absorb the supply.

But then in some instances, that demand is not going to be that great.

And what comes next is going to be more important because the price has been

taken down and on the short -term basis, there is some kind of value.

And this value is related more, and Adam, I think you'll appreciate this,

value is related to more of the institutional

long -term trend than anything

else. Within an established trend, we're seeing that this

spot is short -term oversold from value and some liquidity.

Not a lot, but still, it's there.

So what do they do, institutions?

They're just basically coming in aggressively, and they're having some

urgent demand that increases, like right here, these two bars.

And what it does is supply is still there, but because demand is so

overwhelming, it observes all of the supply and moves the price even.

higher from this point so let's just say this supply is increasing

demand is increasing even more and that's what pushes the price up

and usually this type of action will bring the price to the resistance

level in this case it's a cluster and then at this point of time

the test is going to happen

So think about the test that we've seen, you know, on the momentum bars, right,

on the previous slide. I'm going to come back to this slide.

And look at how here it's the same type of action, right? So supply is there,

but demand is so much more that it pushes the price up.

But because supply has increased, we need to test.

And we have a small test here.

Well, the same happens in this example.

We've seen that the price goes up, demand pushes it up to the resistance

and then we go into the test action.

If we were to come back here, our interpretation would be different.

But here, because of the successful test, we're assuming that we're still

to go up.

Now this happens here, this example number two happens within the structure.

Look at the structure. So we could say that this is a minor sign of strength

this is a minor backing up action.

In a different, more complicated way, the vertical absorption of

the supply happens

not within the context of the structure, but more within the context of

absorption itself.

So we see that the first initial reaction has all of the same elements,

supply increases.

Demand increases, too, behind the volume signature, but not as significant

because the price is still going down.

But we already see in the deterioration of the spread that demand is there. We

could see that. And then aggressive demand comes.

this big bar right here.

In this case, it happens on multiple bars.

In the example number three, it happens just on one bar.

But the principle is going to be the same.

Supply increases, but demand increases even more.

That pushes the price up significantly.

And then after that, we see supplies coming in right here.

And that suggests, again, it comes to the resistance point. It comes to the

resistance point. And at this point, the biggest question that we have is what

kind of test we're going to have.

And it's out of this test that we could produce some kind of minus swing trade

right here. Or it could act for us even as maybe like a point of an add -on, a

point where we are going to scale in a little bit more.

But more importantly for you guys, I just want you to understand the concept,

right? How does absorption happen? Supply emerges, demand could emerge on

way down, and then there could be an urgent demand. If there is an urgent

demand, then it's going to take us up to the resistance.

Same here on this chart.

Look at this reaction right here.

Supply is increasing.

and then demands that to emerge in two different spots, but still it does.

And look at where it brings us.

Isn't it uncanny how this pattern works?

And isn't it uncanny how technical analysis is not necessarily discussing

type of scenario? So that's why it's important for us to go into such details

understand this material because

If you see this pattern, it's going to act as a confirmation

to you not to get out of this position on the increased supply signature.

And it's going to confirm to you that, oh, we might be having a vertical

absorption right here, so I don't have to wait for the trading range to

And that's a big, big, big item on this list.

We're going to wait for the test. Test is confirmed with the reversal, and that

acts as a confirmation, and you can produce another trade or another entry

point. You know that the price is going to come to the resistance point, and

then it's going to test.

And if test is successful, you know that there's going to be a continuation.

Why not open another position right here?

But you have to know those things.

You have to be able to see them in real time. So visual recognition skill that

we develop in the practical becomes extremely important.

I'll go even further than this.

Let's look at the current market.

What do you think happened here?

On the way down, volume signature increases.

We know supply is increasing a lot.

But we already know, even in hindsight, that demand was increasing as well.

And even in real time, you see this volume signature?

There is nothing else like this.

So what do you think is happening here? Most likely, demand is increasing as

well. If demand is increasing, on the way down,

This usually would suggest some kind of stopping action at some point. And

that's how this call has been made, that we're going to stop.

Obviously, oversold condition as well.

But the trade that I had here, I shorted

Russell on this bar right here.

And my exit was a little bit premature.

My exit was somewhere here.

was not necessarily waiting for the continuation.

But still, as a hedge strategy to some of the long positions that I have had,

this was a good trade.

So on the way down, we're anticipating that emergence of the demand is gonna

produce a stop in action, which it did.

And then after that, we are gonna have some demand, which is right here.

And you might say that, well, it's not a lot, it's not increasing.

But don't forget, there is also in this course, I'm talking about the

consistency of the volume signature.

What does it mean? It means that during this whole time, for two months,

institutions are consistently

buying.

They don't have to... increase the demand signature a lot, but they have to

consistently. And when they are buying consistently, this is what's going to

produce this type of move.

But the key here is different.

We've talked about how out of this pattern where we see

A lot of supply coming in and then demand overwhelms this supply and

on the way up with the vertical absorption.

And all of the V bottoms are going to have this type of vertical absorption

pattern.

It's going to bring us to the area of the resistance.

Here we are. We don't have to go to the high resistance. We could have one of

the analogs that I've been showing you guys in the Wednesday class was on

and Dow Industrial in the 1974 -75.

Look at those charts again.

This rally could have gone a little bit further.

And I think that if there's going to be some kind of really, really great news

on China and U .S. trade talks, we could still possibly have this type of move.

But last week, You know, I started talking about the emergence of the

It's so subtle.

And you could see this more in other instruments, for instance, in oil and

because those are so correlated right now.

So, you know, that was kind of like my premise last week to think about that we

are...

probably close to the beginning of the reaction.

And then today was such a great bar because it showed finally the

Now we had a bar like this before, right here.

So we still have to see how it's gonna react, but this is the largest spread

that we had on the down bar with an exception of this bar right here.

But after this bar, this is the largest spread. So volatility is coming to the

market. We should be ready.

for some kind of reaction and what else? We said that once the price comes

back after the vertical absorption to the area of the resistance, we are gonna

have some kind of test.

And test could take a different shape.

We could have the test that's gonna suggest that we're gonna stay here like

this. And we're going to have some kind of symmetry with this structure.

That's test number one. We could have a different test. Imagine more unfavorable

catalysts that come our way. So we probably could go even here.

And then out of here, we're going to develop some kind of structure.

And that's why I'm thinking that for 2019, just because of this testing

that we have to go through.

We're probably going to be in the positive, but kind of single -digit

return for 2019.

So for those of you who are institutional money managers, and there

you here in this class, think about your strategies for the rest of the year.

So what are you doing with the profits that you already have? These two months

have been incredible. This is one of the best historical rallies.

that we have had.

So I hear and I see a lot of institutional people, they're thinking

they'd rather lock in this profit that so quickly

came in this two months of the first year. And then after that, just kind of

like be more selective with the opportunities.

And I think this is an appropriate strategy.

Another appropriate strategy here until the...

at least fall would be scale out or hedge for your positions or

against your positions rather.

I'm thinking about the testing that should come this way.

We also, as another possibility I mentioned, if there's going to be some

favorable news and we're going to continue, let's say that we're going to

some kind of reaction and then we're still going to continue, you know, to

upside.

There is another opportunity that we might consolidate at the higher level.

something that I've shown you on the slide and then go up from here.

That's also a possibility.

But I think it's a much lower possibility, and it's also going to

what's going to happen after the first initial reaction.

My preference would be something that we've experienced in 1975.

That is, maybe go...

try and then come back and kind of like go into a trading range.

And then this trading range, what it's gonna do is it's gonna unwind all of the

positions that were created here.

So think about, let's say, ITFs, institutional trend followers.

They're gonna give up here on this trend.

This is gonna be their first capitulation.

So what's going to happen here at this spot?

They're going to sell, so supply is going to increase.

They're not going to buy, so therefore volume is going to increase and the

is going to go down.

And this movement of the price is going to be a reminder of what has

happened on the way down in October, November, December.

And you're going to see in the news, and I think that if we're going to start

reaction here, I think...

Within the next two weeks, three weeks, if we're going to have the reaction,

you're going to see in the news that the bearish trend is still intact

and we are in the bear market.

And this is where the sentiment is going to be mixed because a lot of

institutions just got into the positions. It's not in their habit to

positions right away.

Big CEO type of institutions do not have a two -month or three -month trading

investment horizon.

It's just not in their nature.

I'm working with some institutional clients right now, and the questions

we're discussing is more about, well, once we are in the position, it's really

hard to get out.

So we need to select such positions where we're going to stay for at least

a year.

And we want to have low turnover on our portfolio, meaning that we want to buy

in the position and we don't necessarily want to get out right away.

So the bearish sentiment by the ITFs is going to develop this first initial

change of character and meaningful reaction.

We need to assess what kind of character we're going to have in this reaction.

And then once they are out, And let's say what the COO is going to do. So

ITF is going to sell and then it's going to become inactive.

The COO is just going to hold on to their position and maybe hedge

against market volatility.

And then public.

is coming in in the later portion of the swing right here. So weak hands are

coming in here.

And they're going to be giving up their positions right here as well together

with ITFs. And that's why that is going to produce some kind of rally.

But then, you know, CO is not going to probably present a lot of supply in this

spot. So that's what's going to create this apex.

ITFs are going to stay away because if there is no trend, they don't want to

come in.

and then public is going to be in and out, in and out, and that's going to

produce frustration, and at some point they're going to give up.

So this dullness by the end of this trading range might be just a function

how all of the market participants are going to behave.

Having said this, who knows how it's going to unfold?

I mean, this is just my preferable scenario, and I could have some

this. And this is kind of like my 2019 call.

But if I see different price action, I might change that. But for now, it's all

based on what?

It's all based on our material here as to how supply is being observed and

what kind of price structure that absorption could form.

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

I see some questions here, but I'm thinking maybe we should go because

almost like quarter to five. Yeah, we might stay late today, maybe like until

six. We'll see.

Ooh, hold on a second. Ease of movement.

This is a good one because as I started working with institutional clients, and

my first institutional client that I had was in 2009.

And this was, you know, and a lot of you are becoming friends, guys. You know,

if you stick around and if you kind of communicate with me and I see your

contributions and we talk, you know, a lot of my students, you know, became

friends, you know, and friends, kind of professional friends, obviously not like

personal friends, but professional friends.

And I was working with this person in 2009, and we're looking here at Home

Depot, but basically the pattern was the same, right? So we had such a big move

to the downside in the markets.

And then the volume signature was like this.

There was a lot of volume into the climactic action, into phase B,

into phase C.

And then...

the volume signature was diminishing throughout the whole structure. And then

once the price started moving up, the overall volume signature, including

demand, was decreasing volume signature. And then we could see maybe in 2010,

2011, 2012, some kind of increased

volatility, which was the increase of the short -term volatility.

So the market chart, and you should remember those charts by heart, you

all of their price and volume signatures.

That's why, you know, you kind of see that.

I know the history because, not because I teach, but because it's important to

know, right?

So the same pattern.

So the question that we have here, and that, you know, that person, that

had, at that point of time in 2009,

10, and 11, was that with the decrease in demand signature, that in the

conventional technical analysis would suggest that there is less buying.

How is it that the price is not going down?

And I've seen this over and over again.

Since 2009 is where I would go to the conference and then technical analysts

going to discuss this no demand confirmation, no volume confirmation.

And therefore, they would be scaling down. They would be underweight in their

positions. And my question to them was, well, the price still goes

up. How could you scale out?

How can you scale down?

So let me raise the same question for you.

Why do you think the price is going up, whereas at

the same time the demand is decreasing, the buying is decreasing?

What do you guys think? Write it down.

All right.

Good.

Great.

Great, great, great, great, great.

Awesome.

Yes, a lot of you are totally correct.

What is happening, you know, let's kind of create this story, right? So what

does CO does at this point? Well, obviously CO is accumulating.

Again, we're talking about, 100 units, right, of supply, as an

example, then ITFs are getting in into this position as well.

And they are consuming, you know, a specific number of units.

Short -term value, again, buying by institutions.

Short -term value, buying by institutions.

So they are absorbing the supply in this area to the point where supply, as some

of you have said, is in strong hands.

Well, one thing that we forget to add to this is by confidence.

And supply is not

being put on the market.

One of the ways to think about this is kind of like a concept of a safe,

right?

So, safe box.

And you can think about this from the

perspective of just, you know, 100 years ago when somebody would buy the stock.

they literally could have the stock certificates in their hands and they

just put it in the safe box and just keep it there.

So CO is not providing supply.

It has absorbed the supply, put it in the safe box, and it doesn't provide

supply to the market.

So therefore, when there is no supply, the only way... that the price could

potentially behave is to go up, even on the

diminishing demand signature.

And the demand signature is going to diminish, decrease, just because there

is no need for the CEO to buy more.

ITF is already in the position.

All of the strong hands are operating within the context of the uptrend.

The only in and out and emergence of the supply is going to be some profit

taking and some weak hands being at the wrong time selling.

That's the only supply that is available on the way up.

Well, let's look at this in a slightly different way. So today's session,

today's lecture is all about

alternative ways of how we look at this, right? So supply is decreasing here.

Okay, so let's look at this from using another analogy.

And this analogy I call an ice cream analogy, an ice cream story.

So,

Imagine that you and I, we are an ice cream vendor.

And our total supply of ice creams that

we have equals 10 ice cream

cones.

10 ice creams.

So we are selling, our goal is to sell, and our goal is to sell in the most

advantageous way.

Imagine that we have different, you know, acts, right? So act number one,

our supply still equals 10, and

then demand comes in.

And let's say that the demand is going to be,

Seven people.

And these seven people is going to act as a CO and it's going to act as

ITFs.

And they're going to buy seven ice creams from us

at the price of $1.

Let's say one ice cream, $1.

So what is it going to do to the supply?

So in act number one, supply is going to go down.

Is this correct?

And supply is going to equal now three.

So we had ten, we sold seven, and we sold at one dollar price.

At the same time, we know that demand has increased, right?

Demand was zero before the seven people came to us.

And now that they're here, the demand drastically went up. It went up seven

units.

So we sold in Act 1 a lot of supply.

And a lot of that supply at this low value and a lot of liquidity, please

that both is there.

The value is at $1. The liquidity is huge.

10 units, the highest liquidity possible.

So now what happens in the act number two?

Well, someone else comes and we're gonna start

with supply equal in three and the price is gonna be at still $1,

right? We're starting at $1. Now we'll imagine that the demand comes in

Only at two. So two people come to us and

we still have more supply than, you know, let's say the two ice creams that

want to buy.

But there is something very interesting that's going on with the supply here.

Look at how much supply is left.

There is less of the supply in Act 2 than in Act 1.

Instead of 10, now we have supply at three.

So if we're thinking, if we are going to sell to two people, we're going to be

left only with one ice cream.

Do you think that we could raise the price and then these two people are

going to buy it?

Well, most likely, yes.

why would they be buying? What's the psychology behind them buying?

I mean, like they know at the higher price, they know that there is still,

know, some supply available.

Why would they buy in at $1?

Or let's say at $2. No, instead of one, we're going to move the price to $2.

Well, because only three ice creams are left.

And they know that if they're not going to buy it at this point, then they might

actually not get it at all. So they are willing to buy at $2 price, and we could

increase the price.

So you kind of could see this from the chart as well.

They were buying a lot here. They bought seven units here in this area.

CO plus ITFs.

That diminished supply a lot.

And supply right now in strong hands.

Now Act 2, this is Act 1.

Now Act 2 is that supply that is left is less.

Here's your Act 2.

There is still some supply left, but it's not as much.

But because of that diminishing supply, the price should go up.

And we could raise the price to $2.

So let's say that they bought it.

So what is it in the Act 3 that we're seeing here? So our

supply is at one unit of ice cream.

We're going to talk about the price a little bit later on.

And then let's discuss two scenarios here where demand is

just one person and where

demand, so demand goes down.

and where demand increases.

Let's say maybe three people.

So under the first assumption where demand is decreasing, and we kind of see

this here, right?

You know, act number three.

We see how demand is decreasing.

Supply is at the low, not being presented.

you know, to the market at all.

So the question in here, let's say if one person comes, it's kind of like in

number two.

We only have one ice cream left.

And we know that if this person does not buy this ice cream, well, maybe someone

else will buy it. Most likely someone else will buy it.

Can we increase the price for this person to buy this ice cream? We

can. So we could go and we could say instead of $2, you're going to pay us

Do you want it or not?

If you don't want it, step away.

Someone else is going to buy it.

When people feel this urgency, they're going to buy it.

So therefore, the price is going to go up higher.

Scenario number two under act number three.

Now imagine that instead of one person on the last ice cream, We have three

takers. Three people come at the same time.

There is some kind of emerging demand.

Maybe somebody heard that the ice cream that we make is so good.

So they want to come and, you know, to purchase this ice cream, the last

remaining ice cream. So my question to all of you guys, what do you think is

going to happen with the price when we're going to have three people?

trying to buy one ice cream write it down

what's going to happen with the price in

act number three when we have only one ice cream left and

three people are coming to take this okay let's let's see what you guys are

saying they beat it up Absolutely.

Price jump. Third to the last bar.

Go up to $5 to $10.

Price goes hypodermic, climactic action. It's like buying climax.

Yes, yes, yes, and yes again to everything what you're saying.

I'm so pleased that you guys have seen this concept, you know, and I'm using an

ice cream here. I'm using those.

analogies you know the stories that Bob Evans created you know when he was

working for SMI after Wyckoff died you know the story of

of the ice right

breaking of the ice where this diver the boy who was diving

for the shelves cannot come back at some point to the surface

And, you know, he drowns. Very sad story. I don't know why Pope Evans, you

maybe just, you know, to make a big point.

So that was one.

One eye drill, you know, the apex formation and how that resolves also a

And maybe I'm forgetting some other stories. But, you know, this is my story

about this particular concept. So hopefully it just resonates. But

that you said here.

is correct.

The price will go up. And not only that, it will go up substantially and much

faster. And look at how it travels up at this point.

So freely.

There is no supply that is capable of influencing the

price to the downside in a meaningful way.

Because all of the supply is in the strong hands, in the hands of the CEO

institutional trend followers.

And therefore, whoever comes here, we could dictate any price because

this becomes an auction.

And at the auction, you know yourselves how that goes.

The highest bidder wins.

And that's what happens at this point of time.

And yes, you are totally correct.

There could be a hypodermic action, you know, with price just accelerating to

the upside.

There will be a buy -in climax. That's true.

And the price could go and we could charge more. We could charge instead of,

we started here with $2, instead of $2 or even $3, we could charge $5

for the last item that we have for the last unit.

And that's how the price starts to accelerate closer to more of a

behavior, right? So three people are going to exhibit a speculative behavior

because three of them would want that item and only one can get it.

Speculation on the way up, auction situation, price will go up and

How neat is that?

You like this?

You like this analogy? Does that help you to understand how the price moves

when the demand is just going down?

So whenever you see this type of picture, the price is going up and

going down and somebody is going to tell you, oh my gosh, you know, there is a

divergence between the volume signature and what the price is doing. This is

true.

But the interpretation could be different.

So be careful about that.

Well, if you think that this is all done, you're kind of wrong about that.

Now imagine that we have Act No.

4.

What do you think happens in Act No. 4?

Where are we going with this?

Yeah, you're correct, Joe.

Yeah, now Ash as well.

So Joe is saying, CO gives away supply.

Now Ash is saying, CO comes in with this hit supply or her supply, or I usually

say it for the CO.

Yeah, exactly.

So we are in the buy -in climax here.

So what's going to happen?

We're going to have zero supply on our hands.

And we're going to have a total revenue of $7.

What do we have to add? Two plus four, 11.

And then five. So we made $16. That's our

total incoming net revenue for this product.

So we are the producer.

And who is the producer, by the way, in the stock market?

What do you guys think?

Companies, right?

So companies provide the product, which is shares.

So a company providing

shares.

Okay, so what do you think?

Now we're going to discuss this from the position of the CO. So let's put the CO

hat on and let's talk about the CO. So CO has,

let's just say that in the first act, CO

is buying, let's say, four units.

The trend followers are going to buy three units.

So CO comes in with four units.

And the cost for the CO was on average $1.

So now the price is at $5.

And the COO decides to sell. Well, first of all, let's just kind of like see

what kind of profit COO is going to have. So P &L for the COO is going to be

plus 4 times 4 plus 16.

And please note that the COO buys at the time when nobody wants their ice cream.

There is a lot of ice cream, but the COO values the product.

And it also sees the value.

of the product in the price, and also the value of the product in the

that is available, because they want to buy something meaningful as a position.

Okay, so that's what COO has done.

And COO is usually gonna distribute this, obviously not just on the buying

climax. COO is gonna do distribution.

So this is a distribution.

buy CO, and CO is going to do it on the way up to the buying climax,

on the way down to a change of character, and then even throughout this

other trading range, right, this whole trading range. So it could be in phases

B, C, and D, depending on how large the position is.

What are the ITFs going to do?

ITFs are also going to sell, but they're going to sell at a slightly different

price.

ITFs are going to be concerned about the break of the trend.

They're also going to be concerned about absolute performance

and also

relative performance.

So they're going to sell on a change of

character throughout the trading range and then in phase D on the other change

of character. So change of character phase A and on the way out, change of

character in phase D. So this is going to be early

ITFs and then late.

ITFs are going to sell on the way down.

And because of the nature of how they function, think about the definition.

Trend followers.

So they need to find the trend when it emerges. So they are not going to

necessarily act as contrarians and buy at the bottom.

They're going to buy on the way up as they're seeing that conditions are

changing. And every time they're going to do that. On the way out, they're

to do the same thing. They're going to sell on the way down when the trend

changes, when they no longer have absolute and relative performance, when

is a break of a trend based on their methodology.

P &L is going to be slightly different.

Think about the price, right? If the CEO usually would like to sell into the

excitement, selling into excitement of weak hands.

And again, where does this happen? Excitement, right? Buying climax plus

upthrust of the distribution.

Those are the two points of excitement that we studied for weekend.

And this is where CO is going to sell into.

CO wants to sell into this strength because the size is so big.

If it sells on the way down, that influences the price much more than when

sells on the way up.

Okay, but the idea of the price for them is going to be slightly different.

So think about the change of character in phase A. It might not be $5 anymore.

It might be $4.

Then think about throughout this whole trading range. Also, probably on average

$4, maybe $3 .50. And then on the change of character in phase B, they might

even sell maybe at $3.

So let's just put it this way.

P &L for ITFs. We had initial three units here.

of ice cream.

So we are gonna sell, let's say one unit at $4, one

times four, plus two units of three.

So that's four and six, $10.

Slightly different P &L than for the CRO.

And I think that's kind of logical.

Why? Because trend followers are gonna come in later on. They're gonna take

from 50 to 80 % of the trend. That's their goal. And that's our goal.

We are trend followers.

Trend is an edge for us. It creates an opportunity for us if we follow the

correctly. And if it's a sustainable trend, we could make a lot of money just

staying in this trend.

So we are more of the trend followers rather than the CEO.

And then obviously, look at what the weak hands are doing.

So weak hands are going to be buying at

two points of excitement.

That's going to be on the climactic run

and on the upthrust.

They also will be buying at any type of short -term value for them

in the distribution, meaning that this is going to be at the support level,

after the reaction, once they have seen such a big move up.

So they will sell or they will distribute

distribution by weekends.

They're going to distribute when?

not in the distribution, not on the change of character in phase D, not even

necessarily on the first break to the downside. They're going to usually sell

a group, not individually, but as a group in the moment of a general

capitulation. And obviously, again, I'm going to repeat that by weak hands, I

don't mean just public.

There are institutions that are going to be in that position and they're going

to be weak hands.

So therefore,

they will be selling in phase E of a

downtrend on

general capitulation.

A lot of general capitulations are going to happen on which type

of events?

Climactic action.

So with this ice cream story, we went through the whole price cycle.

Obviously, we could talk about the P &L here as well.

So let's just say that, you know, all of this supply goes to

weak hands, right? So all of the, let's say, 10 units

gradually through the climactic run

in the uptrend.

through the distribution formation, and then on the way down, the supply from

strong hands is going to migrate to weak hands.

And by the time the selling climax unfolds, we're going to have a reverse

picture. Because as the weak hands are participating in the late stages of

the uptrend, then in the distributional structure and in the beginning of the

downtrend,

they cannot sustain the losses and emotionally kind of react to the

a good way. So they're going to capitulate and sell everything.

And that usually is going to produce, you know, that type of loss. So they're

going to, let's say, buy, let's say, let's do this.

Let's say how much the CEO is selling here, how many units. So CEO has four.

So four at price five.

So this is buying four times five.

Then from ITFs, we're going to have three and four dollars. So

one at four

plus two at three.

So this is the cost here, right? So $20, $4, and $6. So $30.

This is not the P &L. This is cost.

$30 weak hands are spending on this position, whereas initially Theo

had spent only $4.

Huge difference.

Really big.

But that's unfortunately how it happened.

And then on the way down, they start selling maybe like at two places, right?

Maybe they are selling like at $2, and then they are selling maybe even

below $1. Let's say just $1.

So they are going to sell, let's say, five units at two and five units at one.

So their revenue from that.

So net revenue is going to be, okay, so two and one, so five plus

10, 12.

So their P &L, and I'm so sorry that I'm writing it like this, is going to be

what?

18 bucks minus $18.

What do you think is going to happen at the selling climax?

As weak hands are generally capitulating.

And they're just saying, like, get me out at any cost, even at $2 and $1.

The CEO is going to see it as a value of liquidity and is going to go and buy.

And the price circle is going to repeat over and over and over again.

A really sad picture, if you would think about weak hands as public hands,

somebody who doesn't know what's going on.

and then they're just being caught up in this process.

And the way how I view this process now on kind of like very emotional level,

it's just sad.

It's sad to see people repeat this behavior over and over, and then they

reinforce it every time.

So the key of this course and just education on trading in general,

if it's a good education, is to change this behavior, to change this way in

minds of how you guys operate, how we all operate. And we've all been in this

situation. So I have been in this situation many times.

I've been on the wrong side. I've been weak hands many times. You have to be

weak hands in order for you to become strong hands.

And the first step for weak hands to become strong hands is all in the

awareness. So you have to bring this knowledge.

And then you have to build the skill to recognize the situations as they unfold

in real time. You have to understand how your self is going to be in the way

of this profitability because usually your self is going to protect you from

incurring a loss.

And again, the nature created this emotional algorithm for us to protect

right? For us to survive as pieces and multiply and grow.

Well, it doesn't work in trading this way. We've got to be more at least as

trend followers.

We don't necessarily have to be contrarian in our views as the CEO.

But we have to be trend followers as institutional trend followers.

We could be contrarian with our analysis.

I like that a lot.

But then our analysis would show us when exactly the timing of when we should be

coming in into this.

Wow, that took a while.

I was not expecting this. But sometimes, you know, the class can carry me away

like this.

Okay.

What up?

Okay. All right.

So I don't see necessarily any comments.

This is the way I was explaining this in the previous cycle, so I thought I

would just have this.

Still have to create probably a proper slide, but I just like drawing. I just

like explaining it like this.

Okay, let's talk about maybe, let's do this.

Let's not go into this study.

Let's switch really quickly right away to the exercise, and we'll spend the

30 minutes going through the exercise.

Okay, so as usual, I just want to point this out again.

I want you to watch the video of this exercise again and make notes and email

those to me. So continue doing this work.

And this is definitely going to be something that's going to help you out a

Okay, now I also put here a solution slide number one.

Solution does not necessarily mean for me here in this exercise that I'm going

to show you all of the bars.

Maybe in the future cycles, you know, I'll... Ask my teaching assistants to do

that, and we'll create that for you guys.

But for now, this is just a solution slide in terms of the labeling, phases,

so on and so forth, bias.

So just have a look at this.

And here we go. This is where we have stopped.

So I'm going to give you 20 seconds to orient.

yourself here that's number one and secondly in this 20 seconds i want

to say yes uh a volunteer and then we're going to go through this um and

hopefully we're going to finish at least this portion for today all right guys

uh you know 20 20 30 seconds and say yes if you want to volunteer

All right.

Let's go to Adam.

Hi, Adam.

Hey, how are you?

Good. How are you doing, Adam?

I'm doing great tonight.

Can you hear me okay? Yes, absolutely. Good audio.

I hope there is like a dog barking outside, so I hope you guys cannot hear

dog. Okay, let's start with 41

and 40.

We had a distribution.

We've talked about it, right? So really quickly, I'm just going to do this

really quickly.

Supply has come in first on bar number 31.

This is where the CEO is selling.

So remember that ice cream story? We wanted to see where the CEO is going to

sell. The CEO is going to sell on the excitement of weekends in the auction

of situation where there is a lot of speculation on the way up.

Why do they need to sell on the way up with all of these strengths? Well,

because there should be so much liquidity to unload their position at

value that this is the first initial point where they're going to sell.

The second point of selling is going to be all in phase A, and this is going to

be on the change of character.

they still have some price value and they still have excitement of weak hands

because the weak hands are going to see 35 as the short -term oversold value

proposition to them after the big leadership run up. So they're going to

value here and finally they're going to do technically something correct but

analytically totally off.

And this is where the selling is going to be unfolding for the CEO.

And we see that, that the consistency of selling is so different than anything

what we've seen before.

If there is some selling on the way up and on the way down at 13, 14, 18, and

19, this selling comes and goes.

Whatever selling we have between 31 and 35,

There is a consistency of selling. So they are selling on the way up. They are

selling on the way down. And that defines for us a potential bias, which

the downside.

We need a confirmation of that bias. Where does it come?

Well, it comes in the 36, 37, 38 area, where we see that supply increases

and produces the diminishing result to the upside.

that suggests a bearish bias or a confirmation of this bearish bias.

And it acts also as a potential attempt to upthrust, and it fails.

Also, we note that the supply signature goes down, and still that produces a

much better result to the downside or much lesser result to the upside. That

suggests timing for us.

Bar number 38 has an ease of movement.

ease of movement is going to be associated with diminishing volume

increasing price movement with the commitment to the downside.

And that's what we see.

And then going through this whole downtrend, we're seeing the continuation

the commitment to the downside.

And this could act as a major sign of weakness for us. Bar number 39 below,

number 39.

And then we have a small attempt to go up.

we always know that LPSY, last point of supply, would come to the point of the

resistance that acted before as the support.

And then we're going to have a reversal.

This would provide us another point of entry after bar number 38.

So point of entry number two, point of entry number one, and point

of entry number three. We could also enter somewhere here. So three and a

three.

Okay, and then we are in downtrend up to bar number 40 and 41.

And Adam, this is where we want to start our discussion.

So what is 40 and 41 in Wycroft terms?

So we have a selling climax.

And why is this a selling climax?

You have higher volume.

What else?

You also have that long tail.

And so you have some stopping action.

So you know that the CO is probably

coming in there to buy.

And so you've got – that big tail tells me that there's a lot of buying going on

there. Absolutely.

And if we look way back across to bars 5, 7, 10, we can also see that it held

that resistance break.

This one right here.

Yeah, like right in there. Yeah, it falls into this area here. And by the

also a really good comment here, Adam.

Also think about this area right here. This whole area between 13 and 24 acts

a support.

So we're kind of falling into a slightly oversold condition of this area. And

that creates obviously, you know, short -term oversold condition. It tracks, you

know, shows value.

And, you know, we have a lot of liquidity here.

Really good, Adam. One more item that I would add here on the price side. So we

see an acceleration to the downside.

So this acts as the selling climax run, climactic run.

It also could be interpreted as, you know, a potential stop in action at 40

41. I like interpretation of details.

Let's talk about the volume signature.

Specifically, I want to talk about bar number 40.

which is this one right here.

So this is the first bar where we see some kind of demand coming in. So let's

write the volume signature.

The volume is definitely increasing.

What is happening with the supply?

Supply is going up, but demand is going up more.

Okay, demand is going up. And I think that you are actually correct in this.

And the reason why I think that you're correct is because I'm looking at the

previous bar, and it's much purer supply on this bar than

on bar number 40. So let's label this as 39

.5.

Why is that? Well, because the volume signature is...

Pretty high right here, and yet the movement is kind of pure to the

There is some demand that's coming in here at the beginning of the session.

So not as pure as we think, but still much purer supply than at 40. At 40,

there is a lot of demand that pushes the price like this to the upside.

So we could say that the demand at 40 relative to the demand at 39 .5

is doing what?

It's going up. Going up.

So and that tells us that there is more buying that

is happening at 40.

So that's why I'm thinking that maybe supply even either stays the same or

increases just marginally. And I could see how Adam could be correct here and

demand is not just increasing, but could increase slightly more than the supply.

Having said this, we're still going to indicate that supply still slightly

dominates the demand at this point just because of the close.

Yeah. And then we see also the domination of the supply on the next

which is gray bar right here.

So if we would look at the intraday, Adam, and I'm going to quiz you a little

bit more here because I know what you do. So let's definitely, you know, get

into nitty gritty of things.

Let's do this, 39 .5.

This is our close at 39 .5.

So what do we do at the open, and what is the intraday picture of bar number

It looks like we came down pretty far.

Where do we open?

We open.

Bar 40.

Yeah, we actually opened up slightly.

Maybe I was slightly.

I was thinking like the same level.

So this is open bar number 40. Just a fraction, then we drop, and then we come

back up and close where we were there, where it shows.

Yeah, so we're closing somewhat below the open, and that's why it becomes a

bar.

So this is the close.

Then the next bar.

And gray means, yes, we're opening at the same level. So we're opening at the

same level. What do you think happens next?

It's a good question.

Probably the same pattern.

It looks like there was a lot of selling pressure coming in and then buyers

showed back up and pushed the price right back up.

Well, first of all, from the previous day, the momentum, Going into the close

to the upside, right?

Right. And then these two indicate the same close. The gray means that the

is the same.

So this means that this is an open, and we are opening with a slight gap.

So actually not here, but somewhere here.

Let's say somewhere here. Oh, right, right. Open.

Open, number 41.

Then the momentum probably carries us up again.

to the high of 40 and then we go down okay and we go down slightly below the

low of the previous day and then we go up and close at the same uh level as bar

number 40. so this is close 41.

so looking at this intraday picture we see two waves to the downside and

that still suggests that supply is still present

Supply is still present on both. But at the same time,

demand is increasing.

Demand is increasing. And on the second day, bar number 41, demand is increasing

more.

Kind of have a much better increase in the demand. And probably supply, even

though it's present, supply might be diminishing, right? So going from this

picture to this one.

most likely there is a diminishing supply signature and probably increase

demand signature.

And these two bars act so differently than any of the bars in the down

The bars to the upside that we have had or reactions to the upside that we have

had are kind of muted. There is nothing big in those reactions or those up bars.

And we're seeing how...

On the way up, there is so much strength.

So by itself, Adam, would you say that there is a change of character happening

on these two bars?

I would, definitely.

Those two bars, to me, would confirm that that's pretty strong stopping

for prices to move a lot lower.

And especially with bar 41 on decreased volume, you had...

The same result, but with decreased volume.

So that tells me that that supply is being absorbed and prices will probably

move higher at some point.

Yeah, and there is some kind of – I like that notion that you said.

It moves easier to the upside. So there is an ease of movement on –

the demand that we have here. And I think that it could increase here. It

also decrease, although 40 seems to have more supply than, let's say, 41.

So that's how the intraday unfolds here.

I'm curious, Adam, if you would be a buyer here.

I would.

You would?

I would.

It depends on the client.

It depends on the account. It depends on their risk profile.

You have to disclose what you do now because you're just an investment

Yeah, I'm an investment advisor. I have an RIA firm.

But it would only be in certain accounts. It wouldn't be like a

It might be like new money coming in.

I've got clients that will sit on cash for a few months waiting for something

like this.

And I'm not as exact as, say, your institutional money managers.

half their allocation in here and get confirmation a little bit later. And,

know, maybe like on bar 50, that would be in 51. But again, this what coffee

stuff for me anyway, this is why I appreciate the course. It's all new to

mean, I've really changed a lot of my thinking.

And I think, you know, you know, being a trend follower is probably what I've

done. I see a lot. I see a lot of flaws in that. And so anyway.

OK, great. But I want.

you guys to pay attention to what Adam is saying.

He's saying that I have the size from clients that I need to invest.

And sometimes, you know, I'm going to wait for an opportunity.

And that opportunity is going to be defined by the specific price volume

Maybe, you know, some other factors. In this case, at 4041, there might be some

position.

being established.

Why? Well, because, again, Adam, as an

institutional type of trader, institutional type of investor, is going

for those liquidity spots and oversold spots.

And that's exactly the oversold spot that we see here.

Now, putting on the Wycoffian hat, we are thinking that, as Adam has said,

is a selling climax.

So what should happen next?

We know that the next structural thing that's going to happen is some kind of

change of character that is going to be so different from what we've seen before

since 37.

So up to 42, Adam, we have that change of character.

And let's just give out the characteristic for the change of

So change of character from 41 to 42.

Why would we call this a change of character? Just to repeat this.

Well, we have an automatic reaction up to 42, but that's different than the

previous downswing. So swing 13 to 14 is completely different than what we've

experienced from 12 to 13. So we know that something has changed fundamentally

there.

Okay, but technically, when we look at 41 to 42, you mentioned that the

has increased, right? So the up distance for the swing has increased. What else

do we see here that is so different?

41 to 42.

And then compare it to everything what we had from 37 to 40.

Well, I mean... What about the demand signature?

Oh, yes, of course.

Increased or decreased?

It's been decreasing the whole time, yeah.

It's increasing here.

Yeah, the demand signature is increasing. Demand is increasing.

The distance of the rally has increased.

What about the upspread?

Yeah, I mean it's... And look at the upspread that we've had on the way down.

There was only one instance, right? This.

And then instead we're having this and this.

And this type of rally.

So much more, right?

Okay, so the spread has increased. And those are the characteristics of the

change of character.

So now that we have defined that the change of character has happened, that

usually means what for us?

We've moved into a trading range. Yes. So we move into a change of environment,

a trading range from a downtrend. We're moving into the consolidation. Our first

thought is going to be that...

the trading range is going to be defined by the low of the selling climax and

the high of the automatic rally.

So at that point of time, this is what we're looking at. We're looking at the

horizontal structure after the selling climax, automatic rally, and then

structurally, what point do we await next to occur in phase A?

We want to see the secondary test of the selling climax.

Exactly. So we are testing.

So locally, the test, the selling climax, is it a successful test?

Yes. Why?

Bar 44 is higher.

Yeah, it's a higher low. Higher low. And then what about the volume signature?

Definitely decreasing.

Yeah. So those are the two requirements that we want to have for any type of

test.

We want a structural confirmation, and we want also volume confirmation.

And when we have both together with any type of the reversal, and we're

reversing bar number 43 here, that acts as a confirmation of the path and

suggests that we're going to go up.

Now let's go into tricky stuff.

Okay, so 44 is a – yeah, I like it.

44 is a secondary test.

And it happens not

necessarily at the level of the support.

It happens maybe like close to one half of the range.

And we said that, yeah, supply definitely went lower.

What kind of deduction could we make?

out of the secondary test.

What could the price do next based on how the test behaves?

I mean, just the good news is we can see the chart, but because we tested so

much higher, one would think that price would move higher, at least to the top

of the trading range.

Yes. That's the whole logic there.

And that could create a very short -term trade for any type of swing trader,

somebody who's thinking, okay, now we're going into phase B.

Because of the strength that we have at 44 on the secondary test, supply

is so low, and that movement starts at one half of the trading range. So not

only are we probably going to touch the resistance at 42, we might actually

overcome it.

And phase B, when we overcome the resistance at M, then how would we label

action when the price is up?

Up thrust.

Up thrust, yeah. And we still don't know at this point is this a bullish trading

range or is this a bearish trading range. The only thing that we could

about the structure because of the up thrust, this is going to be a higher

So with the higher high and the higher low on the test, We're thinking that

maybe we're going to have some kind of upsloping structure.

So we should be thinking about the upsloping structure.

Okay, well, this is very interesting. We're expecting an upthrust.

Let's imagine that we have opened a position somewhere here, Adam, right

and our stop loss is here.

Based on our logic that we should overcome the resistance.

How would we get out of this position? Imagine that we are very short -term

oriented traders. We are looking at the daily intraday, and our time horizon for

this trade is from a day to maybe like five days.

Yes, I'm having to think differently now.

Well, if you're thinking you're going to move to the top of the trading range,

We said above the resistance.

Yeah, above, yeah. Then I think maybe your resistance would be your stop loss

get out, I guess. I don't know.

We could definitely use the stop loss, right? So we could say like, okay, we

could use the stop loss like this and then get out somewhere here.

But if we want to be a little bit more precise, we know that we're going to

overcome the resistance. We know that it's going to create an upthrust.

what would be the conditions of the pricing volume for the opera that would

us that i'm done there is no more move to the upside that you can expect get

yeah um think about what should

happen on the up thrust right so we had some kind of bullish sentiment here

going into the up thrust then what should occur

Yeah, you have stopping action, so you see the tail. You actually have two

on 46 and 48.

You also have an increase in volume.

So to me, something doesn't look right there because you failed to basically

hold the upthrust, if you will, or you failed to move higher.

Yeah, absolutely, all of that, but it has to be a little bit more technical,

right? So you mentioned the volume increase.

You mentioned the tails.

Let's go.

through the volume signature first.

And we're going to be comparing, let's say, bar number 46 with 45.

So let's do this. This is bar number 46.

And the effort for bar number 46 relative to the effort at bar number 45.

Yeah, much greater.

Yeah, much greater.

Okay, so increased. And then what is the result?

to the upside of bar number 46 in comparison to bar number 45?

It's greater.

I mean, 46 to 45, but let's do more on this. Let's do it more

detailed. So let's talk about the upspread. What happens with the

Between bar 45 and 46, the upspread is less.

Okay, what about close relative to the spread?

Which one is better, 46 or 45?

45. 45 is better, so you were talking about the tail. Look at how the price

closes closer to one half of this spread, so dimension characteristic

What about close to close?

Yeah, 45 is definitely better. It's better because from the previous close,

we're traveling this much. From the close of 45 to the close of 46, that

distance goes down. So we have a lot of the characteristics that are showing

some deterioration of price.

And then we said that the effort has increased.

On the increased effort, we have a deterioration of the price.

Bullish or bearish?

Bearish. Bearish. One thing that we did not talk about here is the intention.

What was the intention here?

Intention was to stay above the resistance.

Which could be defined how?

I guess the top of – well, like the top of 42.

Top of the tail of 42 or possibly 45 there, yeah. Both.

Both would be okay.

Because we want to define more of kind of like a local resistance right here.

the local is going to be the previous bar, the high of the previous bar, and

then the high of the 42.

So did we fulfill that intention? Did we commit above these levels of the

resistance? We did. We did.

Okay,

so here's a tricky question.

With the increased effort to the upside and with the diminishing results based

on the spread and the close, we're seeing that the short -term picture is

to be bearish. We are anticipating some kind of reaction to the downside.

Yet we have had a commitment at bar number 46 above the level of the

resistance. So think about the bearish bias here.

that will produce some kind of reaction as the long -term bias.

And think about the opposite to what has happened with the result, with the

intention that there was a commitment, as a short -term result.

So based on the short -term result, which is still positive, which is yes,

we expect some kind of attempt to continue to the upside?

So intention, yes. Short -term result is bullish.

Yeah.

And this suggests some kind of retest.

Where is this retest?

48.

So this is that situation, guys, where a ball like 46 is going to look

bullish.

but will be interpreted in two ways.

More of the longer term picture is going to suggest that supply is coming in and

we're going to have a stop in action, as Adam said, and we should be expecting a

reaction. So all of your trading decisions should be based on this

Having said this, your timing is going to be based on the synchronicity of the

effort and the result.

And therefore, when we look at the intention, the intention was to commit

upside, and the 46 bar did exactly that. It committed to the upside.

So that suggests that short term, there is some kind of strength still left in

the tank. And we are probably going to have another attempt to retest, and 48

exactly that.

Okay, so now we know that when supply comes, it should produce some kind

of... Change of behavior, change of character. Do we see that change of

character somewhere after 46?

Yeah, I mean, 49 is a pretty big bar.

And it commits below the support, so it's on the way out. Is there a change

character within the trading range?

Yeah, I mean, that's the biggest down bar.

That's a fairly bearish engulfing bar.

It's almost as big as some of the down bars on the way down.

Label this bar 49 for me within the structure of the trading range. This is

trading range. There is a trading range between 46 and 49.

So 49 is going to be labeled as how?

So volume goes up.

Label that for me in Wyckoff terms.

Oh, you mean like, oh, sorry.

You're referring to like a secondary test?

Yeah, any type of Wyckoff event. So what is 49 for us?

And I don't mean for the whole formation. I mean for the trading range

46 and 49.

Well, I guess that would be phase B, part of phase B.

I mean, it would be... We're looking at this, right?

Yes. So we're looking at... 46 being what? We're stopping the price from

further up.

Right. How would we label it in Wyckoff terms?

Well, 46 would be your upthrust action.

Yeah. Hold on a second. I'm just kind of like probably giving you the

wrong impression of what we want to do here. So we're not discussing this,

selling Linux automatic reactions.

We are more, and this is an upthrust, but in the upthrust, we have a trading

range, right? So, for instance, if I would look at the intraday picture here,

would say that, okay, so we have the close at 46, then we have a slight open.

We're probably trying to go up, going down, closing, then opening down

again somewhere here, going up, retesting at 48.

coming down, opening up again at the same level, attempt to go up and then

So this is our trading range right here.

We are trying to label this action right here. How would we label this action?

Oh, last point of supply.

Yes. Okay. Sorry. I just didn't understand what you were saying. Yeah, I

follow. I wasn't following you.

So major sign of strength, a change of character.

on the way out on the major sign of strength.

And then this is a change of character on the way out.

This here, change of character.

Where is the change of character on the way in?

Probably somewhere on the way in somewhere here in phase A, right?

So we have two changes of character.

This is a change of character and then this is a change of character.

This is a change of character and then this is a change of character.

This is going to be important.

Because when we're going to look into this trading range, I'm going to ask you

the same question as to how do you guys see this trading range?

You know, where are the changes of character in that smaller trading range?

And one of the things that I want you guys to start practicing as we go, you

how we quickly go and switch into the intraday picture.

We are trying to extract this intraday information without going to the

level. What we want to do is we want to extract this information from the high,

low, close, and open. So whenever you practice looking at the chart, in your

mind, practice the way of how intraday swings might potentially unfold.

You might not be exactly right, but you will be extremely close to that.

Okay, so now that we are in the larger formation here, let's come back to the

larger formation here.

You taught us to identify change of characters and, like, phase A and phase

So I'm just having to change my mindset again. So I'm tracking with you.

Okay.

All right.

So upthrust. We said an upthrust at 44, 46.

By the way, let's quickly do 48 because this is an important bar.

So effort at 48 relative to the effort at 46, because these are the two

analog bars.

The intention behind 48 is to commit above the resistance level at 46. So

is happening with the effort?

Effort drops. Effort is less.

Okay. And then we have at 48 the result to the upside.

relative to the result to the upside at 46. How would we interpret that?

Less.

Yeah, look at the close below.

Look at the spread, the same size, but yet the close is lower.

The intention was to commit. So if bar number 46 had intention to commit and it

did commit above the local level of the resistance, bar 48 cannot do this.

And that's what defines the timing for us.

Finally, we see some synchronicity between effort and the result.

And when the synchronicity appears, that defines the timing for us

to come in and to say that this is probably the beginning of the move to

downside. And we do.

Okay, great. So if we've experienced an up thrust, and we still don't know the

bias of this whole formation, then the next move to the

downside into the area of the support is going to be labeled in Phase B as how?

How would we label it?

It would be a secondary test.

Yeah, a secondary test in Phase B.

I was thinking like a second point of fear as well, but that would be, you

that would be phase C, but yeah. Too early, right? Yeah. We have to have,

we have to have multiple tests. Multiple tests, right. Going into phase C. So

phase C is going to be that, you know, test number three, and we just

experienced test number one, test number two.

Okay, now let's look at this from a different perspective. We said that

we have high highs and high lows,

we're going to be thinking if there are some kind of upsloping structure.

And a lot of you guys in your homework have done this. So I'm actually very

pleased as to how we conducted all of this.

Okay, so phase A, phase B, upthrust, secondary test. Now

it makes sense because all of these points are on the same line.

All of these points at the resistance are on the same line. And now let's

really quickly, if this is phase B in 50 and 51, what can we say

about this area right here? What is happening as a process here?

You're coming up to the point of resistance, but you're also having

so it's some sort of an apex -type formation or a rising wedge.

Okay. Well, I could see that maybe supply has increased a little bit.

over the previous reaction.

And then the price goes up. So we are probably thinking that there is some

of absorption here that is going on. And we could see that from

the bars and volume analysis.

So at 51, there is another attempt, the last attempt to go down. So in this

smaller trigonation, this probably could be defined as phase C.

So here's this volume. The volume increases.

So what do you think is happening with supply?

Supply's going up.

And what is happening with the demand?

It's probably going down just a hair.

But this is still an up bar, right? Yeah, you're right.

It's still going up, too. You're right.

Supply comes at the end and at the beginning.

So we have the open.

an attempt to go down first, then a really big rally, which is a very good

because it overcomes the point of the resistance for the first time, tries to

commit on the intraday level, and then we're still coming back.

But we're closing.

So here's this demand that is increasing.

Some supply, some supply.

But probably demand still dominates the supply just based on the close, based on

the intray.

And then supply is relative to the previous bar, maybe

stays the same, maybe slightly increases or slightly decreases.

And it doesn't really matter that much because we know that supply still comes

in because of this tail. And it tries to take it down. It tries to take it down

to the low 50.

And it cannot do this.

So as we go up on the next two bars, we could see how absorption is

happening on the way up.

It's one of the elements of the vertical absorption, right? So look at the

volume signature, how high it is relative to, let's say, 51. And yet the

is up and holding at the level of the resistance, which was before.

producing some kind of difficulty for the price to overcome.

So the first bar after 51 has the close at that resistance level.

And this is a small feather. We'll talk about this more next time, about the

characteristics of the feather.

All of this area is just basically an absorption of supply, and that's just a

movement to the upside.

And let's stop here.

And we're probably going to pick up, there are a lot of things that we need

discuss here in this area.

But we'll start there. What I'm going to do for you guys is I'm going to unveil

what's going to happen next.

Because I want you, as a part of your homework, to think about what should

happen next.

Here we go.

So that's the next move. It actually went down. So in the next class, we're

going to start with 52.

And then we're going to go through this whole thing.

And from 52 to 58, we're going to determine as to why the

bias has changed to bearish bias.

And what does it mean for the overall long -term structure?

Adam, really good. Thank you. And thank you for some of the insights into how

you operate.

It's always interesting to me to talk to institutional guys and, you know,

figure out their behaviors as to how do they actually conduct their analysis and

trading so thank you good all right okay guys this is the homework

uh so just uh determine what's gonna happen next watch the video again make

notes um and please go through that initial material especially you know

ice cream stories

You know, all of the volume case studies, those are important because

study is going to have something special, specific to a specific

specific scenario, and you have to dig in and to know exactly what's going on

those situations.

And the more you learn about them, the more comfortable you're going to feel

when it actually unfolds. All right, good class.

Thank you all, and I'll see you in the week.

Thank you, guys, and bye -bye.