Original subtitles

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

the Wyckoff Trading Course.

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

go through this today.

Next session is going to be March 4th.

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

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

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

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

video.

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

moment to total confusion.

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

of total confusion.

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

which I really like.

You said to grind it out.

And this course is so interesting. Okay.

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

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

Well, because...

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

information.

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

so many sublayers under that subject.

Now we switch to the volume and price analysis.

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

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

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

concepts.

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

in the course.

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

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

So we kind of...

Build the foundation again.

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

something that you don't know.

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

of understanding.

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

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

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

process that we want to go through.

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

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

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

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

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

you have to study.

And you have to, you know, study consistently.

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

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

practicing for the Mr.

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

Every day I was in the gym for five hours.

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

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

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

markets. That's our goal.

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

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

understanding again.

And that would definitely make me so happy.

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

there is so much more to learn for certain.

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

light. And this is very important as well.

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

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

environments. I see how different phases unfold.

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

that's the initial feeling.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

options here.

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

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

Finish the course.

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

The alumni rate.

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

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

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

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

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

would be the easiest, cheapest way to do this.

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

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

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

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

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

Today, we will go first through volume phase analysis.

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

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

signatures, whether we identify those in accumulation or distribution.

Next session, session number nine.

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

demand signatures.

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

comments and questions. I want to go through those.

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

demand.

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

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

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

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

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

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

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

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

Again, I totally feel okay with students who

are more advanced students and I feel from them

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

material to the highest level of understanding.

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

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

time with me.

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

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

level of listening, that's fine too.

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

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

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

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

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

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

way.

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

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

just so fascinating to me.

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

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

Okay, let's go to the material.

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

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

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

what are the main supply signatures?

in accumulation and distribution formations.

How do they differ?

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

Supply could decrease in both accumulation and in distribution.

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

like if supply signature occurs under different bias definition?

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

you guys a long time ago.

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

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

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

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

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

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

supply signature and then relate this to the specific structure.

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

the supply signature in the accumulation throughout different phases.

And we'll talk about the two main examples.

of the accumulation -reaccumulation supply signature.

That is example number one and example number two.

These two examples have very specific

characteristic of

supply signature between phases A and C.

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

supply signature.

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

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

or increase of the supply into phase C.

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

that we really look for...

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

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

down from phase A to phase C.

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

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

from phase B into the phase C test.

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

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

supply went down. And this is a bullish sign.

And then from phase B to phase C.

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

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

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

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

selling by weak hands, I'm sorry.

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

buying.

Weak hands are selling because of fear.

It's the second point of fear.

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

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

a considerable supply relative to phase a so phase

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

and that requires some kind of testing

and therefore

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

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

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

somewhat difficult for us to interpret.

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

this.

Supply signature number three has a very interesting increase

of the supply into phase B.

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

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

of reaction.

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

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

was increasing a lot at this spot.

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

persists, then on the next reversal after the automatic rally

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

come back.

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

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

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

definition.

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

We could see that the price might go.

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

phase A, the stock in supply.

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

The first one is that the supply decrease

from B

to phase C

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

phase C.

So why are those two important?

Phase B supply is the highest.

It almost sometimes could be identified as the stopping supply.

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

like selling climax.

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

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

action, would define the automatic rally.

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

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

still quite a lot of sellers in the market.

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

might not be sufficient enough in order for us to

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

more favorable higher low.

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

to what we've seen in Phase B.

So it has to be a somewhat considerable decrease

of the supply.

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

phase A to phase C.

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

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

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

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

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

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

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

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

identify the beginning of the move for this particular stock.

Okay, supply signature scenario number four.

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

supply of increase.

Increase of the supply.

going into phase C.

So let's just think why this would happen.

Why would we have a period of accumulation?

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

climactic type of supply.

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

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

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

Imagine a situation where a composite operator,

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

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

maybe...

unfavorable government ruling against the company has happened.

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

this position by weak hands.

And while this is happening, CO accumulates with the purpose

to have a sustainable business cycle move.

in the stock.

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

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

very sizable position, to control more supply.

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

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

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

supply and demand is increasing.

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

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

we can is coming at a very rapid pace.

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

we usually would see this type of moves as sprints and

rather deep sprints or just a shakeout.

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

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

shakeout, and the major sign of weakness.

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

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

going to be.

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

analysis. We always have to see with the increase in

supply signature.

What does the price do?

All right.

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

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

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

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

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

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

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

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

shakeout. Why?

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

That suggests...

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

action where some of the institutions are taking profits.

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

seeing still a lot of value.

And that usually happens in a lot of leadership stocks.

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

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

upsloping reaccumulation range that starts with the rotational distribution

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

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

and commitment to the downside below support.

So that's what starts the trading range.

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

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

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

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

to the area of the resistance.

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

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

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

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

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

supply is coming in, specifically on this bar.

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

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

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

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

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

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

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

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

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

consistency of the increased supply.

So we are seeing that.

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

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

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

committing below specific levels of the support?

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

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

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

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

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

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

of what we've experienced in phase A.

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

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

before and I really like this rolling over analysis meaning

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

phase B and we are confirming that bias

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

phase C so that way you have more handle on the

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

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

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

signature but even with this small increase of the supply it

tells us the story that whatever selling we have by weekends

it's not very strong

and

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

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

than lower support level.

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

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

big distinction.

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

Those are more advanced concepts.

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

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

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

Then, by itself, increase in the volume signature.

suggest that we could be possibly in phase C.

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

need to have three tests.

Then we need to have a second point of fear.

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

of the supply from B to C.

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

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

And then you could identify phase C also by the

volume signature.

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

increase.

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

So that's our volume equation right there.

Okay.

Comments, questions, let me see.

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

moving average right here.

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

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

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

So that would be like 40 weeks, I believe.

Actually, not two quarters.

63 days.

So that would be, yeah, about 63 days.

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

how it got in here.

I think this is from TradeStation.

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

have the volume average.

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

than, let's say, somewhere here.

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

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

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

supply signature and volume signature into C from A.

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

And this one is where the volume signature...

in phase A is going to be the highest.

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

stocks at the point of fear.

So accumulate majority of holdings in

phase A.

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

where supply is going to be the highest and is going

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

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

This is where big institutions are seeing value.

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

conducting in 2008.

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

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

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

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

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

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

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

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

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

failed rally relative to this high of the automatic rally.

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

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

action, but some of them have not sold.

And some of them still are keeping positions.

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

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

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

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

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

to start experiencing some emotional pain.

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

Maybe the price will go from this level up.

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

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

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

early stages of the uptrend.

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

in the trend that is already in existence.

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

find this on the chart.

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

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

A and B. So we have this support cluster.

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

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

could have.

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

bias.

Lower highs, lower lows.

Still definition of a downtrend, conventional technical analysis.

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

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

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

change of character.

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

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

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

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

connect them together, and look how nicely it projects an

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

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

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

volume signature and observing the volume signature so that we would

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

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

sufficient absorption of the supply that has happened?

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

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

will be sustainable.

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

signature, overall diminishing volume signature.

Diminishing supply is telling us that there are fewer

So that's bullish.

Overall diminution volume signature into phase C suggests to us

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

somewhat less active.

Why CO is less active? Well, because

CO is close to full position or to full

position risk that it's

exposed to at this point of time.

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

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

And by itself, it suggests.

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

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

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

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

confirmation for us that this is an uptrend developing.

But as the price goes up, it confirms.

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

be thinking that we should get in into the position.

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

definitely study a lot.

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

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

wrong. Follow -through day.

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

about momentum days.

So those momentum days define buying for us.

And define buying, When the result to the

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

suggests to us that supply is down.

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

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

demand.

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

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

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

smaller demand.

So it tells us that supply is so exhausted.

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

when the price travels the same way.

And that gives us the timing for the price

finally leaving the trading range.

Again, this is very quick on this specific

structure and how...

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

confirm that supply has been exhausted.

But this is something for practical for us to discuss.

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

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

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

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

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

a stop in action by itself.

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

And their argument is very appealing because the volume signature is

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

point of time?

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

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

downside for the reaction that we have.

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

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

that this is a trading range.

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

would be indeed a downsloping structure? Well, take

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

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

the resistance.

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

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

character, secondary tail here.

And then this is just phase B.

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

supply signature.

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

There is a lot of selling.

So weak hands are capitulating here, or ITF,

institutional trend followers, are capitulating here.

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

move up.

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

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

And it's only here on this test.

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

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

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

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

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

you know, somewhat smaller than supply in phase A.

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

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

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

And then if we miss that,

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

structural high or low, but the volume signature increases.

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

that discusses this exact concept.

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

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

as an element of two things.

The price structure, which should be,

in this case, a high or low.

Let's just put it here as successful test.

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

In this case, we see that supply is increasing.

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

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

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

somewhere here.

And it happens on the high or low.

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

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

much freer to the upside.

All right, let's see some comments here.

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

is, notice that this is an S &P.

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

better to use respective ETF?

The volume pattern might be different between the two.

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

ETF and, let's say, futures.

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

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

volume is in generally behaves is going to be the same

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

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

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

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

different capacity, different way of representing that underlying.

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

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

for asking this question because every cycle it comes up.

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

It's just like almost on the same level.

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

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

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

to the downside, and then diminishing result.

to the downside, which looks bullish.

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

and diminishing result.

So there is a synchronicity between effort and the result.

And therefore, it's also bullish.

So bullish in both cases.

but different interpretation.

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

effort signatures.

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

This is that scenario, scenario number four, that

sometimes could produce difficulty for us.

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

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

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

sign of weakness.

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

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

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

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

a valid concern now there is a big difference

between a sign of weakness and a spring or a shakeout

in this case

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

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

horizontal range even in the spring rather than a shakeout.

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

capitulation supply.

Probably just bad news or anything on that particular day.

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

short -term liquidity and value for institutions.

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

leadership distribution.

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

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

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

and then hold on to the supply.

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

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

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

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

more of the distributional characteristics.

And those are going to be wrong.

Why?

Look at the price.

What does the price do?

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

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

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

wrong with this sign of weakness.

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

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

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

doesn't go down.

So our buy should change at that point.

if not before.

All right.

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

distribution.

And again, you know, there was no really a

lot of thinking about

the trading ranges that I wanted to identify here.

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

does make sense to discuss specific scenarios.

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

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

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

signature is going to be crucial.

So let's think about just very common beliefs from

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

redistribution structure.

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

increase of the supply throughout the whole structure, and not

just into phase C, into phase D.

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

increase of the pressure to the downside as effort increases.

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

much better result than anything else.

Those are the characteristics of the change of character.

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

and now is the time.

for the downtrend to unfold.

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

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

supply, so therefore diminishing supply signature.

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

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

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

the downtrend on the lower highs and lower lows.

So that's the most common signature.

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

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

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

signature in the distribution, sometimes signature with lesser supply

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

into phase C.

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

have more of the LPSY in phase C.

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

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

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

we'll call a TP formation.

Please don't forget that TP family would also have

a hypodermic

structure, could have hypodermic.

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

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

everything is going to happen so fast.

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

of the phases rather than just in A or D.

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

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

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

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

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

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

The CEO does not want to wait.

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

And this distribution on the way down

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

given a definition of urgency to this action.

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

institutions at this point.

Now, this urgency to distribute lowers the supply of their

stock significantly.

So, CO is

either out completely or

it has a very low level

of...

supply of shares that is left.

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

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

inactive.

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

Supply should go down, demand should go down.

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

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

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

indecision.

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

Who's in decision?

Who doesn't know what to do?

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

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

it's inactive.

So in decision, more by who?

Well, I would say more by ITFs.

institutional trend followers why indecision here

well because there is they are still in technically in

an uptrend definition

because

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

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

So the trend is not broken yet.

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

of, let's say, absolute

and relative underperformance,

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

return on the stock is not going to be there.

And the relative performance also could be in jeopardy.

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

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

this size. So ITFs are selling.

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

high, the next low or low.

So and then the structure becomes more with the more visually

detectable bias to the downside.

Everything is so connected.

It's like a living organism.

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

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

That's how the sentiment unfolds through the structure.

Okay.

Let's look at scenario number four.

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

We're still gonna have some urgency to sell.

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

in phase A.

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

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

than in phase A.

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

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

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

produce a more meaningful volume signature.

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

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

like an urgent supply coming in.

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

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

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

signature.

Okay.

All right, great.

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

as an accumulation?

Okay, so this is a good question.

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

be thinking about phase C as an element of

supply increase because the weak hands...

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

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

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

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

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

the distribution.

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

reaction. So we're discussing that.

Okay.

Let's look at some examples.

So this is a redistributional trading range.

JCPenney monthly chart.

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

We have a move out of the deeply oversold condition.

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

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

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

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

the same type of following with the stores that Apple

has created by that time.

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

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

distribution based on the supply signature in this trading range as

we go through different phases look how gradually supply is increasing

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

identification of the supply

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

we see how supply is gradually increasing increasing increasing

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

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

is increasing

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

Bullish or bearish?

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

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

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

and so forth.

So this is the most common.

supply signature.

Here is a TP formation.

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

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

slightly increased here, definitely increased here, definitely increased

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

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

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

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

really fast.

Something is coming up for this stock.

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

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

the way down.

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

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

with selling.

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

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

people, for some institutions.

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

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

just because of value proposition in the leadership stock.

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

distribution by the CEO.

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

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

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

trend followers.

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

low. The uptrend is still in place.

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

And there is some value here.

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

short -term value, short -term liquidity.

And they are getting trapped.

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

happens.

CO is inactive.

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

concepts.

ITF are in.

So they are not biased.

So they're in a position.

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

inactive. And then public weak hands

is in the position as well

on this low right here.

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

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

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

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

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

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

rally.

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

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

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

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

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

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

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

they are without a lot of activity.

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

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

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

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

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

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

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

their positions.

So ITFs fell in.

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

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

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

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

action.

All right.

Go to the next one.

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

So look at this supply signature.

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

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

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

about the commonalities.

that we might have in the accumulation and distribution.

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

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

define the bias in a different way?

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

For a volunteer, please say yes.

So it's the same stock.

Apollo, it's an educational stock.

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

here in 98, 2000.

Here we are in 2004, 2006.

So definitely different market conditions.

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

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

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

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

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

into the next move to the downside right

here.

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

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

are going into the diminution supply signature into phase B.

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

increase, flight local increase.

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

the distribution into phase d so um everything looks very similar

so my question to you here is if everything looks

so similar

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

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

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

accumulation to the distribution?

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

Hi, Philip. How are you doing?

Hello. Great.

How are you?

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

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

same volume signature?

Well, I don't really know.

I have no idea.

Okay.

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

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

different here on these two charts?

What is the main major difference that you see?

Maybe the slope of the uptrend beforehand?

Okay, how about now?

Okay.

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

charts? Guys, don't overthink this.

There's nothing really to think about this.

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

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

direction of the continuation of the trend.

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

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

discuss that sprint situation.

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

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

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

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

Philip, on this example as well.

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

accumulation and then another is a distribution?

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

Okay.

The bar...

So in the graph on top, the bar

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

2 ,000.

Okay. This one, why?

Yeah.

Why not another bar?

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

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

So maybe that.

Okay, but what's that different?

The direction of the candle.

Okay.

Okay,

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

well.

Okay.

Something very fundamental that is being missed right here.

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

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

So think about phase C here, right?

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

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

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

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

as a higher low, right?

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

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

communicate.

This was a reversal bar.

out of the test.

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

And after this screen,

we are waiting for the test.

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

signature.

Instead, what do we have?

We have a commitment below the sprint.

So this commitment right here is where sprint definition fails.

And it becomes a sign of weakness.

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

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

define the bias here.

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

about the change of bias.

And it's still okay.

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

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

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

where we are with our bias definition.

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

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

But that's the main thing.

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

about volume is that when you look at the volume

signature, sometimes you are distracted by the volume itself.

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

And volume does not necessarily a good representation

of what the price could be

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

suggest different things. It could suggest

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

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

That's why volumes could be so confusing.

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

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

single bar.

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

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

volume bar is going to be red.

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

comes.

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

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

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

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

is being confirmed.

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

thought was a potential spring,

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

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

acknowledge this

commitment to the downside as a sign of weakness.

And that's the main difference.

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

signatures and the demand signatures,

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

the price reacts to that emergence of the supply.

So this exercise is all about that.

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

This is a very, very important concept.

All right, great.

Now let's go to the next portion.

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

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

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

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

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

material is here.

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

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

So thank you for sending this, Jose.

Another example from Doug and this one.

has a little bit more elaborate description for each bar.

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

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

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

The volume.

When evaluating volume effort.

So let's make a distinction.

Volume and effort are two different things.

is going to be looked at as the difference between,

let's say, volume number two and volume number

one, right, between two different bars.

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

something like this.

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

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

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

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

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

like a force behind the volume signature.

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

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

happening right now.

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

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

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

today to a certain degree.

We are going to look at...

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

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

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

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

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

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

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

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

reaction might have just, you know, different bars.

But basically, these are the same things.

These are reactions.

They just happen in a different way.

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

the single bar.

Another reaction happens on the series of bars.

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

different ways.

We could look at the absolute

volume signature metric. That's number one.

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

we could look also at the consistency of the

demand and supply.

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

is some selling. That's consistency.

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

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

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

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

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

discuss it more as we go through the exercise.

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

On an upswing, is the intention...

is to suppress the resistance.

Yes.

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

overcome the resistance or to commit below a support.

So this is the intention for a bar

or a price.

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

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

signature increases.

So we are suspecting that COO is selling.

So what is the intention by the COO?

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

to short the position.

Short. hedge, exit, scale out.

So those two intentions, Doug, are completely different.

One is just for the price.

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

or below the support.

This is just price related.

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

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

scale out, or to take some profit.

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

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

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

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

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

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

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

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

intention there is just for the price.

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

What do they want?

Are they selling or are they buying?

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

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

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

approach this work as long as you do something.

And I see here a lot of something.

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

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

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

so much when I receive something like this from you.

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

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

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

All right.

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

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

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

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

creating all of that.

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

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

could guys...

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

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

really good.

Look at the increase of the supply at 14.

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

supply.

And we're kind of seeing that.

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

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

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

happens.

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

And that's why the current market is suggesting.

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

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

They're going to capitulate.

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

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

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

in the history for money managers?

Why? Because...

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

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

December 25th.

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

produces such good returns.

So they're going to take some profit.

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

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

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

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

It suggests that the supply needs to be tested again.

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

magnitude...

could be defined in two ways.

Sometimes magnitude could be of the same proportional reaction.

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

action.

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

much deeper reaction to the lows in December.

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

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

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

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

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

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

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

22 even though produces a decrease in supply from phase

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

number 15 16.

So why would that be happening?

Well, as we know, and as Lee actually

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

could also suggest...

Just a second.

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

increasing the demand.

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

increasing the supply here, suggests what? Suggests retesting.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

the minds of many students.

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

likely somebody is thinking about the same thing.

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

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

this material.

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

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

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

trade into

the overbought areas

above the institutional value zone.

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

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

for the professionals here on this particular chart.

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

just as a reference.

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

the change of character, these two bars.

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

don't want to include that.

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

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

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

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

see how the price recovers really quick.

out of these oversold conditions.

So think about the professionals and

mean reversion trade that they're going to do.

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

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

they're going to sell at the overbought condition.

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

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

and how professionals use that.

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

than a mean reversion trade in the uptrend.

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

right so buying and then selling

and then shorting again on the mean reversion trade and

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

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

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

professionals that this trade no longer works in this environment.

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

is that?

Higher highs, higher lows.

An uptrend.

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

different way.

I think we've talked about this, right?

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

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

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

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

the definition of a longer -term uptrend.

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

-term oversold condition.

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

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

So that's how this mean reversion trading is

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

the... difference in the environment.

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

are they what, strong hands?

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

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

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

So it's only on the change of environment.

this is where they're going to be wrong.

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

really matter.

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

could possibly have.

Think about this simplistic system.

Step number one, define the environment.

Step number two, Define short -term extreme conditions.

Step number three, execute.

There is nothing else to this strategy.

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

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

how simple trading could be.

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

the market works.

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

Okay, so if these professionals have strong hands after the

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

value zone as well as the...

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

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

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

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

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

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

in conducting a mean reversion trade?

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

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

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

strategy is all going to be about big secular

and business cycle moves.

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

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

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

are different types of trading that is available to institutions.

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

the context of the trading range.

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

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

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

How is my portfolio exposed to the market?

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

profit taking.

And they could even have some hedging mechanism, which is the mean reversion

trade by itself.

To me, what was important is just to understand that there are institutions

operate on a very, very high timeframe.

And then there are institutions that are definitely following the context of an

environment.

in both ways, whether it's trending environment or non -trending

Or a trending environment, but you still, the trades are kind of like with,

the uptrend, downtrend, in the mean reversion trade, they are going to be

of isolation trades between the short -term oversold and short -term

overbought conditions.

All right, great.

There was one more question.

Why don't we do this, Lee?

Why don't we leave this for next class? I think we're going through too many

questions today.

And instead, and Lee, by the way, thank you very much for all

this work.

And instead, what we're going to do is let's jump to the exercise. We have

25 minutes or so.

So I want us to do a little bit more. So let's just see where we're going to

stop. Maybe we'll go beyond that. Maybe we'll go beyond 530 today.

I need a volunteer.

And the first thing that we're going to do as we come back to the group

exercises, we're going to look at the trading range from 33 to 37.

And then we're going to discuss it. We want to understand what the bias is

We want to understand.

you know, what phase we're in. We want to understand what might happen next and

so on and so forth.

So volunteer.

Just say yes and I'm going to unmute you.

We should have some music while I'm waiting.

Okay.

Let's go with Rick.

Hey, Rick, how are you doing?

Rick, are you there?

Yes, can you hear me?

Yes, yes.

Some noise, background noise a little bit.

So maybe you could just be a little bit closer to the microphone.

That would be great.

Okay, and then... It's settled.

Uh -huh, okay. And then I think that we stopped at 32, 33.

right, about this area right here, right?

Okay. And so what I want to quickly

repeat is 31 and then 32 and then 33.

So on 31, let's quickly talk about 31.

What is effort doing?

efforts increasing?

Yes, effort is definitely increasing.

This is the highest volume signature, so we'll talk about the effort, you know,

what it means.

So if we would be looking at some analog bars, the bars that are overcoming the

point of the resistance, like this, like this,

like this bar right here, maybe this bar right here with

this resistance here.

So look at all of those bars and look at their volume signatures.

In all of these cases, there is some kind of increase in the volume signature

relative to what we've seen before.

And that's what effort is all about.

Effort, I'm sorry, this one right here.

Effort is more about the difference, right? So we've had a lot of effort.

to the upside at this level right here.

And that's the effort of the demand that's coming in and trying to

produce a new commitment in the direction of the bias.

And whether it fails or whether it doesn't fail, it doesn't really matter.

just want to measure how effort changes.

So now look at...

how effort has changed here.

This is the difference in effort.

So we definitely see that the effort has increased tremendously.

What is the result? Yes.

Rick, what is the result? Is the result increasing as well?

Bar number 31?

Yes, I would say it is.

Yeah. We see that it's spread.

This is the largest up spread that we have seen so far.

So the spread is increasing.

The close is in the upper part of that spread.

And we are committing heavily above the resistance level of bar number

30.

So it's definitely increasing the result as well.

Bullish or bearish?

Bullish. Bullish.

I'm glad that you said bullish because obviously I'm showing you what happens

next. But short term, we are still bullish at this point. Now, even though

are bullish, what is the hesitation that we have about bar number 31?

I think that

Huge increase in effort?

Yeah.

The volume is so big, we know that demand is increasing, but what

supply is doing?

Supply looks like it might be diminishing.

Okay, so let's look at the supply from a different perspective.

Let's look at the supply on these bars.

And this is the bar signature.

And then where do you think supply came before this bar?

Obviously, it came probably on some kind of reaction on the previous bar, right?

Oh, yeah, supply.

Yeah, where's the... 31 opposed to 30?

Yeah, so where's the evidence that... Oh, some kind of news or something.

Yeah, so look at the Barnabas 30.

Yeah, just the spread and the volume increase.

We see that Barnabas 30 has a supply tail.

So supply tail is going to be the difference between the high and the

we see that it goes below the one half of the spread. So we know there was some

selling on the intraday basis right there.

So we don't have to go that far away to see the presence of supply on

nearby bars.

So think about the supply that we have had on bar number 30. It's still a

bullish bar.

because from close to close, we're still positive here.

But then some supply came here at the end of the session.

So out of this volume signature, we're probably seeing some demand, some

maybe something like this, maybe like 50 -50, maybe demand is slightly better,

so maybe like 60 -40, right?

So demand and supply.

Now, look at the next bar, bar number 31, and look at the high volume

Is it all demand?

No.

No, obviously not.

Okay, so if it's not all demand, then could you think about

the levels of the supply that we might have on this bar, especially knowing

comes next?

We know that there is some kind of stop in action that is happening.

Yes, we are.

I'm sorry, Rick. I know that's coming.

Okay, so then the next question, is supply increasing on bar number

31?

Yes. Yes, so we know that supply is increasing.

Could we visualize this increase of the supply on this big bar? I mean, where

would you put the supply? I mean, demand is definitely dominating this bar.

So demand may be like, what, 80 % and supply maybe 20 %?

Something like that? Would we say that? So let's just say maybe supply is just

debt right here.

Well, actually, let's do the demand first.

Let's just say that maybe demand is all of this.

This is all demand.

And then supply is just this.

So relative to the previous bar, where we see supply

is like this point right here. Let me take another color.

Like supply is only this.

Now supply is this.

Demand still dominates supply so much.

But is supply increasing relative to what we've seen on the previous bar?

No. Look at the level of the supply on bar number 30 and compare it to the

of the supply on bar number 31.

Oh, just relative.

Yeah, the supply is increasing.

Yeah. And that's the whole point, guys. Yeah. And that's why the volume

signature that we look at is so confusing because we don't understand.

the relationship, the proportion between demand and supply.

I'm going to show you some of the tools later on when we're going to go into

more advanced studies and specifically in practical.

We studied the market profile that helps us to identify supply and demand a

little bit better. We also studied the up and down net volume signature a

bit. It requires specific tools, but you could definitely do that.

as well.

So, and it shows the picture more of like this than the volume signature.

So, that's why, you know, a lot of the traders just don't recognize that on

type of bar, supply is increasing.

I mean, relative to demand, it's definitely lower.

Demand still dominates. But that increase of the supply suggests some

that is happening already on this bar.

institutions are selling into the strength of weak hands on this bar. And

suggests that they're going to still keep selling if the price goes high

it creates more and more overbought condition, overvalue for them for this

particular stock. So they will be selling.

Okay. Well, Rick, what happens on bar number 32 then?

What is happening with effort?

Effort is decreasing.

Decreasing. Effort to the opposite.

Decreasing. And then the result?

And the result is decreasing.

Okay. Bullish or bearish?

Bearish. Bearish. Short -term bearish.

Absolutely. Because we see that the effort to push the price up is lower.

What does it mean? This means that the demand is going down. So on the previous

bar, if we had demand signatures, all of this, so now maybe on this next bar,

and we see some selling at the beginning of the session right here, so maybe

demand now is...

something like this so even though this bar looks uh foolish

we have seen deterioration of the demand on this bar and by the way supply is

not necessarily growing on this bar it could be the same it could be slightly

lower than on bar number 31 but because demand starts to deteriorate that's

where the price is is kind of like not capable of producing the same type of

results as on bar number 31.

Okay, so we're seeing on bar number 31, supply is coming in. On bar number 32,

demand is diminishing.

Okay, so bar number 33.

Okay, bar number 33, what happens there?

Let's talk about the effort.

to the upside and the result to the upside.

What is happening with the effort?

Slightly higher effort to push the price up, right?

Yes. Or maybe the same.

And then what about the result?

The result is down.

Yeah. We are not doing anything.

with the progress to the upside.

So therefore, the result is going down. So on the same effort, instead of a

better close, that is above the close of 32, the close

of 33 is to the downside.

So a negative result.

So bullish or bearish?

Bearish. Absolutely bearish.

And now we're seeing that...

there is a synchronicity between the attempts on

the increased supply signature to go down, and for the first time, it

goes down.

So that synchronicity suggests the timing for the beginning of the move to

the downside.

All right. So we're kind of seeing how it changed.

comes so ever gradually.

Again, let's go through this.

Increase of the supply on 31, invincible to amateuristic eyes.

There's a lot of background noise.

You're probably close to the microphone with some of the things that you do

there. Then on 32, there is a decrease in the demand signature.

And then on 33, we are trying to continue to the upside, and we're seeing

supply is starting to come in. And then we see also the result to

the downside.

That suggests a synchronicity between the effort and the result.

And that suggests a timing for us for the beginning of the move.

Okay, great.

33 will be labeled as how, Rick?

Buying climax.

Buying climax. Okay. So then where is our next Wyckoff point?

Where is our change of character or automatic reaction?

I call the automatic reaction at 35.

Okay. Okay, so...

This reaction.

Secondary.

Okay, secondary test, somewhere in between, right?

Right. Okay. And then phase A.

Phase A, okay.

So look at the change of character, guys.

This is the distance that we traveled to the downside.

Is this, Rick, is this the largest reaction since we had the low at 1516?

Yes. Yeah. Something else, kind of slightly under,

this is definitely the largest distance.

So downswing increase that we see.

Okay, so that suggests, change of character suggests what?

Trading range.

trading range, a change of environment.

Okay, so now once we're in the trading range, we want to identify a bias.

Okay, let's keep this in mind.

And how would we define the boundaries of this trading range?

The high of 33 and the low of 35.

Okay, great.

So we defined the resistance and the support, and we are saying that the

should, majority of the time, consolidate between those two points.

Okay, and we are putting here a phase A.

All right, let's talk about the buys. Let's talk about the buys from the point

of view of the supply. We just started this today.

So what can we say about the supply in phase A?

there was a supply increase in payday.

Yeah, and we could even take these two bars here as well, this one and this

because we know that there is an increase of the supply at 31.

We know that supply is still somewhat high at 32, just because the

volume signature is high.

Okay, and then look at the bars after that.

What is the difference? I mean, like, this is the first time when I see here

one, two, three, four, five bars in a row where there is a selling. Have we

this before?

No.

Maybe here.

First time on this chart. This was just three days.

But look at also the volume signature, right?

I mean, this is a different type of supply that comes. This comes at the end

the move into the climactic action, and then it produces the move to the upside.

This supply is different. This comes after we already had some kind of

to the upside, so the context is different, and it's

much, much harder. It's probably like...

times two and a half, and it's less one and a half times more than the

supply that came at the end of the down move here to point number six.

Okay, so what would that suggest?

I mean, there's a big difference in supply signature.

It looks like there's a lot of... institutional selling and weekend

Okay. Institutional selling, for sure. Who would be presenting the market with

so much supply on these seven bars if we take 31 and 32 into the same

area? Yeah. Only institutions would be selling like this because this selling

is heavy.

That's number one. And secondly, it's consistent.

So think about these two words. Heavy selling.

Heavy defines the institutional presence.

And then consistency of how they sell. For seven days in a row, they sell,

sell, sell, sell, sell.

Does this look more like an accumulation or more like a distribution in the way

how they sell?

An accumulation.

A reaccumulation?

Okay, so we're talking about institutional selling. We're talking

selling. We're talking about consistency of selling. So not only they're selling

a lot, they are consistently selling throughout seven days there.

We're probably talking more about the distribution rate, right?

Oops. So I want to repeat this so that we would get this correctly.

Look at the volume signature.

In this area, this is the volume signature that has both

the highest volume spike and that has the most consistent selling that we have

seen on this chart.

We have selling here.

at number 14.

This is just one bar selling.

Remember, we've talked about this today. What's the difference between

consistency of selling and then just one bar selling?

Well, this is it.

This is how it looks.

At 14, we are being sold. 13 as well. So you can say two bars.

And then after that, there is

diminishing selling in this whole formation.

At 31, 32, 33, 34, this looks different.

This looks so much more selling that comes into the market than at number 13,

14.

So we should be thinking that maybe this is the distribution that is unfolding

just because phase A looks so different.

than phase A at number 13, number 14.

So at this point of time, even though we are kind of like speculating, we are

trying to deduct whether this is a distribution or reaccumulation, we are

that this is our assumption.

And this assumption either needs to fail or we need to confirm it.

And why is this an assumption? Well, because there are some other traits that

are still not distributional traits.

Rick, what do you think is not being shown to us here? If this were a

distribution, what do you think is not being shown to us?

I mean, what we would like to see maybe in phase A for the distribution.

We've discussed.

volume so much how about the price what would the price preferably do

um

maybe a little bit more yeah wants to

go down right now yeah so would be more aggressive to the downside we still

don't see that right because uh and i think that there is a comment here from

militia um Look at the distance between

14 and 15.

Compare that to 33 and 35.

Kind of looks the same, if not even smaller, slightly smaller.

So we still don't have the result to the downside on this consistency of

selling and on high, heavy selling.

So therefore, we are...

We are expecting a better picture as

a confirmation of the bias to the downside.

So far, it's not there.

But it definitely catches our eye that there is so

much distribution of volume that has come in it.

Okay. So now that we have an assumption on the bias, let's see if we could

confirm it. You mentioned a couple of things. You mentioned that the strong

hands are selling.

They're selling from 31 to 35.

And then weak hands are buying.

basically on the same bars. And we could see this through the tails

of all of those bars. If we would build an intraday picture of this, think

about this, bar number 31, this is the close.

Then the next bar, there is a slight gap up.

Most likely there is some kind of selling just because we had the selling

the close of bar number 31.

So we're selling first, then going higher, closing positively.

This is 32 close.

Then we are slightly gapping down.

And again,

most likely with the gap down, the first momentum is to the downside, something

like this. Then we go up, and then we are being sold and closing below the

previous day. So this is 33 close.

Then think about the next bar, 33 .5.

So a slight gap down, attempt to go up,

continuation to the downside, and attempt to be bought.

Then the next gap down, and slightly maybe misrepresenting this.

Okay, so the next one gap down.

With the gap down, probably first move to the downside.

Attempt to go up.

And then such a big sell into the close.

So this is 34.

And then 35 opens up kind of at the same level.

maybe it goes down first, maybe it goes up first. I don't know exactly here.

The overnight action does not give me a lot of indication on the momentum. I

probably would be thinking maybe just trying to go up again,

going down, something like this, maybe in a slightly different picture.

But you could see, even from this, this is our...

kind of like best guess on the intraday structure so what do we see here we see

how there is selling selling selling selling

a lot of selling here a lot of selling here so those

are institutional selling and then as you said the weekends are buying so

they are buying

They are buying on the way up. There is some value here.

Then they are biased somewhere here as well at the same level.

And then they are biased again at the same level. So three attempts to buy

here, and then here.

All of them are failing just because the price after this kind of consolidates

and goes down.

And then weak hands are probably trying to get back in right here.

So that's the intraday picture. That's the strong and weak hands, how they're

interacting at this spot.

And please notice, once we're done with this, this is the exchange of shares

that happens in phase A.

Then what happens afterwards?

I mean like going into this area right here. Nothing, right?

Because SEAL might have sold and becomes inactive.

Weak hands bought and they are inactive as well.

And mean reversion trade here is basically

off the lows.

And it's not an extremely deeply oversold condition, so they might be

for a much better condition here to activate this trade.

So we are going into the period of inactivity.

And we're seeing this in this area right here between 35 and

35 .5.

Oh, a mistake here.

35 from 36.

Volume signature goes down.

Okay, so the next thing that should happen is for us

to understand, you know, how the trading range is going to unfold.

So I'm going to leave you for a second just to think about this, and I'm going

to step out for a second for just one minute.

I want you to think about what happens at 36 and 37.

Who's doing what and what it means for the trading range and how it should be

unfolding at this point of time. And I'll be back in a minute. Thank you,

Let's do it.

All right, guys, I'm back.

Thank you for that. I just had to get that package. All right. So

what are we seeing here, Rick, with 36,

bar number 36?

Got a pretty large volume.

and uh very pretty good spread okay so effort is doing what

effort is increasing increasing and it's increasing

substantially right so it's increasing over this bar over this bar this bar

bar any up bars since 33 this is the largest spread this is the largest

so both results

and effort increase. Bullish or bearish?

Bullish. Bullish. Definitely bullish. Short -term bullish.

Now, what was the intention behind this bar, by the way?

Probably to overcome the

high

Is there between the two 35 bars?

Yeah, the two 35 bars. Unbelievable.

Yeah, right there.

Yeah, did it do that?

No. No.

Say again?

No,

it just touched it, but it didn't. It closed below it. Yeah, the close is

here. The close is below that level of intermediate resistance,

the level of commitment that we wanted to see from this bar. Just think about

the effort.

It's one of the highest efforts on the chart, historically.

And that was the intent, to overcome this resistance by an

intention by the price, not by the CEO, not by the CEO, but nobody.

It's just we're saying that the price, the intention of the price was to commit

about this level and it didn't.

So even though we have a bullish interpretation on the

result and effort, we have a negative interpretation on the intention, which

puts us in a doubtful situation that this is going to be a good rally.

Okay, well then bar number 37 comes.

So that's number 36.

So 37 comes, and what do we see there?

What is happening with effort?

Effort is decreasing.

Decreasing, substantially.

And then what is happening with the result to the upside?

And the result is decreasing.

Substantially. So decreasing effort, Decreasing result, bullish or bearish?

Bearish. Bearish.

Okay, so short -term bearish.

Now, let's think about what is happening here on

bar number 31.

Let's kind of build those analogs. And 32, and bar number 36, and 37.

Do they look the same to you, Rick?

And you have to compare the structure of the spread, the closes, and then

look at the volume signature.

Think about in the context of what the price is trying to do there. In both

cases, tries to commit to the upside, right?

Yes. So in the first case, we do commit to the upside. In the second case, we

don't commit to the upside.

But price structure -wise, volume -wise, it looks somewhat the same. We have

bar number one that has this momentum characteristic, and it happens on the

increased volume signature.

Bar number two shows diminishing qualities of this effort

to push the price higher, and the volume starts to diminish as well.

So the same price and volume structure.

the same signatures. The only problem here is that in the second case, we are

not committing above the resistance.

In the first case, there is a clear commitment above the area of the

and it's a substantial commitment to the upside.

In the second case, we are really not committing above the resistance that

we need to. There is no clear path for us.

So Rick, what do you think this means?

It looks bearish.

It looks bearish.

Because the effort to the upside between these two analogs is

definitely diminishing.

The intention is not being fulfilled

in the second case.

And we're seeing that And that just basically tells us that the result to

upside is also diminution.

So, diminution effort with no result.

Bullish or bearish?

Bearish. Bearish.

Now, one more point and then we'll make our final conclusion.

So, this one's short -term bearish. Well, actually, not just short -term.

know, for this whole structure, this is bearish because of these two attempts to

go up.

Now, Let's think about selling itself.

So we said that they sold on 31, they sold on 32, they sold on 33, they sold

34, and on 35.

All of this has been selling by institutions.

What do you think they are doing here at 36 and 37?

They're inactive.

They were inactive between 35 and 36. Then the volume signature has increased.

So they are not inactive anymore.

They're doing something. So we're trying to define 36.

What is it that they are doing?

Think about the intention.

The price needed to commute the box, but it didn't. So therefore... They're

selling. Yeah, they're selling again. But they're selling less.

So... This is the situation where they sold initially and then they don't have

to sell as much in the second case to produce the result

of failure.

And that kind of gives us an idea that also about the demand. If they don't

to sell so much, then this suggests that demand is becoming poor.

Demand is decreasing.

So with this, Look at the next bar.

The next bar, let's call this 38.

Let's not call it 35.

So the next bar, bar number 38, the spread is

increasing.

Yes, the close is very favorable to the downside as well, and yet the volume

signature is going down, and we're committing below the loss.

bar number 37, and we're committing below one half of bar number 36.

So this is the commitment to the downside.

So with this commitment to the downside, and with the poor demand,

commitment to the downside on decreasing volume signature,

This is an ease of movement.

This is what Drake said, ease of movement.

And this ease of movement suggests that we're kind of done with selling.

That's number one.

Done with selling, at least for now.

And then secondly is that demand is poor, and that suggests that demand is

weak hands.

And that demand signature also suggests some kind of timing, that it might

happen now. It doesn't have to happen later.

So at least at the minimum, we would be thinking that this ease of movement

should produce maybe a lower low here.

And if it's going to produce a lower low, then could we be

either in like extended trading range like this?

or could we just go down here?

So we'll just have to see what's going to come next, you know, how we could

confirm all of this. By the way, could we think of this trading range as like a

concluded trading range for us? What do you think, Rick?

Or should we have more duration to the range?

Looks like there's going to be a little more duration.

But think about this. They sold here, right? So selling was increasing a lot,

and then selling is going down, and yet the result to the downside is

increasing, suggesting an ease of movement, ease of movement by itself,

suggesting that demand is low, and therefore the timing of maybe now.

All right, well, why not just...

look at this what has happened next so let's just see and then we could just

comment on that okay so that that's what happens next and

we see how the downtrend develops from 37 to 40.

um if we are thinking that the trading range needs to develop here

we might miss this trade but you cannot miss the exit

on the trade that we were in, right? So if we were thinking that we were biased

here and then we were biased again here, here, somewhere here,

then we are definitely sellers on this bar.

This is our capitulation bar.

This is the latest bar that we could possibly identify where we're gonna say

that that's it.

The trend is done. There is a break of the trend.

And we are out.

Now, we should be out much earlier. This is the last

exit for us.

And we're kind of back engineering this.

Our first exit should be in the area of 31, 32, 33.

And this is what we're going to call

our Wyckoff exit because we're going to discuss other exits as well.

So our Wyckoff exit. Then the next exit is going to be after the change of

character on the way up into the secondary test.

So we want to exit some way here. This is our second exit.

Our third exit is going to be on the reversal.

of the last attempt to go up, number three, and this is our number four exit.

So as you could see, this is how we would be scaling out, out of the

We don't necessarily need to close the position right away. We could wait out

and see, you know, what kind of change of character we're going to see, and

we've seen that the change of character here is not that decisive in terms of

the result.

we could be thinking there might be a reaccumulation here. The only clue is in

the volume signature, at least at that point.

And then as we go into 37, then we're seeing how there is another

failure, and at least this failure suggests a lower low.

So a big question, a tactical question for us, if we're going to have a lower

low than 35,

what's going to be done with the trend.

And most likely, it's going to be broken.

So if the trend breaks, what kind of reaction we're going to have to the

of the trend?

Most likely, we're going to have some kind of further capitulation that's

to lead to an established downtrend.

So we want to get out somewhere here and the latest here.

All right. All right, guys. Rick, thank you so much.

Okay, thank you.

Good job. And just let me quickly look at some comments.

Are supply signature schematics that we studied earlier applicable to

reaccumulation? Yes.

Yes, absolutely.

Okay, so homework.

Homework is going to be to...

Look into this area, analyze it, and then come to the next class with the

analysis of all of these points up to 57.

You have to analyze each bar, you have to analyze each swing, and you have to

give me a conclusion as to what kind of next move we could expect from here.

That's assignment number one. Assignment number two is always...

Watch this recording again, specifically with the exercise.

And this is exactly what I want. I want that exercise to go into your notes.

And send those to me. Email those to me.

All right.

I think that's it for today. Let's see what else.

Eric is saying, what about the upsloping channel?

You did draw the 34 seems like an upthrust in the distribution.

Okay, so we're talking about this?

Yeah, so it's not necessarily an upthrust of the distribution, right?

it's actually a stop in action.

So this is more a stop in action that defines an overbought, overthrowing

condition and therefore suggests that this is a buying climax as a stop in

action.

What we didn't talk about with RIG is when we look at this trading range, look

at these two rallies and think about the definition of a first

point of excitement.

and then a second point of excitement.

And usually the second point of excitement is going to come where?

It's going to come in phase C, either on upthrust of the distribution or on an

attempt to upthrust.

So you could see that there was an attempt here at 36 .37 to commit above.

to produce an upthrust, and yet it failed.

And the failure of the upthrust, which basically leads us to the conclusion,

that we see the whole thing, that this was phase C, and this becomes

a low or high LPSY, last point of supply.

And then we're a little bit puzzled as to how...

to label this whole thing. So as we've noticed, there were quite a few attempts

to go up here. So here are your secondary tests.

So this could be your phase A, phase B, phase C, then phase

D, right here, sign of weakness, LPSY.

And then off we go into phase E, the downtrend.

All right, so that would be the labeling.

In terms of the slope, we would be putting the slope actually down like

here, and then we would be looking at this sign of weakness and LPSY here, and

look at how it comes exactly to this point.

So it would be more of the down slope here rather than an up slope.

All right, guys, good class.

Again, I'm glad that...

We are moving alone both with the material on the volume. We have all

lectures, type of hours, and then we

exercise. We go into our drill exercise, and we are trying to

repeat the same process over and over and over again.

So next class, do your homework, and let's see what's going to happen next.

All right, guys, thank you so much, and have a happy week.

Thank you guys. Bye -bye.