1
00:00:00,110 --> 00:00:04,750
Analysis of the Context The following
part of the course we are about to begin

2
00:00:04,750 --> 00:00:09,450
addresses the first point of our trading
plan, the analysis of the general

3
00:00:09,450 --> 00:00:10,750
context of the market.

4
00:00:11,290 --> 00:00:15,310
To do this, we will look at the concepts
and ideas that will help us to

5
00:00:15,310 --> 00:00:19,590
determine the trading bias in the medium
and long term as a key element before

6
00:00:19,590 --> 00:00:22,870
proceeding to the analysis of the
situation in the short term.

7
00:00:23,290 --> 00:00:24,290
Let's get started.

8
00:00:24,730 --> 00:00:26,530
What we are not looking for

9
00:00:27,410 --> 00:00:31,930
Market trading is not just about buying
or selling. Quite often, the most

10
00:00:31,930 --> 00:00:36,970
sensible thing to do is to do nothing,
stay on the outside, and not trade.

11
00:00:37,770 --> 00:00:41,990
Before explaining the signals that we
want to see in order to evaluate a

12
00:00:41,990 --> 00:00:46,470
opportunity, it is important to be clear
about what we do not want to see in

13
00:00:46,470 --> 00:00:50,590
order to discard those ideas that don't
offer us enough confidence to risk our

14
00:00:50,590 --> 00:00:51,590
money on.

15
00:00:51,660 --> 00:00:55,720
We tend to overlook this and simply
being clear about a few things could

16
00:00:55,720 --> 00:00:57,380
substantially improve our performance.

17
00:00:58,220 --> 00:01:02,740
We are going to look at some real
examples of situations that should warn

18
00:01:02,740 --> 00:01:03,740
entering the market.

19
00:01:04,440 --> 00:01:09,340
Identify the current position relative
to the last big peak in volume and don't

20
00:01:09,340 --> 00:01:10,340
trade against it.

21
00:01:10,800 --> 00:01:15,720
This is a vital concept that we often
don't take into account, but it can help

22
00:01:15,720 --> 00:01:18,140
us to avoid entering at the wrong end of
the market.

23
00:01:18,890 --> 00:01:22,850
We all know the importance of volume and
what it implicitly tells us about the

24
00:01:22,850 --> 00:01:23,809
chart.

25
00:01:23,810 --> 00:01:25,990
Let's apply a simple rule of
interpretation.

26
00:01:26,510 --> 00:01:31,150
If we are below the price action
associated with a large volume, we are

27
00:01:31,150 --> 00:01:33,790
assume that most of that volume had
bearish intent.

28
00:01:34,610 --> 00:01:39,610
If, on the other hand, we are above it,
we are going to assume that control, at

29
00:01:39,610 --> 00:01:42,330
least in the short term, is on the side
of the buyers.

30
00:01:43,130 --> 00:01:46,170
This simple idea is too powerful to
ignore.

31
00:01:46,800 --> 00:01:50,120
The only doubt is what we consider to be
significant volume.

32
00:01:50,640 --> 00:01:55,520
As we know, everything involving volume
analysis must necessarily be considered

33
00:01:55,520 --> 00:01:59,960
in relative terms, comparing levels with
what has been previously seen.

34
00:02:00,540 --> 00:02:04,440
We shouldn't have to force this issue.
This sign should be something very

35
00:02:04,440 --> 00:02:06,580
visual, as we can see in this example.

36
00:02:06,920 --> 00:02:12,320
So, the rule of thumb here is simple. If
you want to buy an asset, wait at least

37
00:02:12,320 --> 00:02:16,040
until the price positions itself above
the last big peak in volume.

38
00:02:16,970 --> 00:02:21,210
Obviously, this condition is not by
itself enough to assess the purchase.

39
00:02:21,530 --> 00:02:26,210
My recommendation would now be to wait
for the entry trigger to appear on some

40
00:02:26,210 --> 00:02:27,168
trading level.

41
00:02:27,170 --> 00:02:31,190
But although it may not be a sufficient
condition, it is certainly an

42
00:02:31,190 --> 00:02:36,390
indispensable one. The price could go up
or not, but in principle, we already

43
00:02:36,390 --> 00:02:38,690
have another very important sign in our
favor.

44
00:02:39,190 --> 00:02:43,030
Another circumstance that we must avoid
is positioning ourselves against

45
00:02:43,030 --> 00:02:45,970
hypodermic behaviors that travel some
distance.

46
00:02:46,570 --> 00:02:50,510
They are easily identifiable due to the
V -shape they leave on the chart.

47
00:02:51,210 --> 00:02:56,630
These actions identify a large condition
of market excess and therefore reveal

48
00:02:56,630 --> 00:03:01,410
overbought or oversold events that we
must avoid, especially if after their

49
00:03:01,410 --> 00:03:04,070
appearance the market continues to
develop in the same manner.

50
00:03:04,750 --> 00:03:09,370
As we can see in the example, as well as
the peak in volume, which also adds

51
00:03:09,370 --> 00:03:13,800
strength to the bearish context, What is
relevant is that the market has reached

52
00:03:13,800 --> 00:03:18,480
levels where most of the participants
agree is excessive, after which it has

53
00:03:18,480 --> 00:03:19,820
started to fall without stopping.

54
00:03:20,420 --> 00:03:24,840
The key is that we do not know how far
the bearish momentum might continue.

55
00:03:25,400 --> 00:03:30,040
The fundamental valuation of the price
may have changed significantly, and this

56
00:03:30,040 --> 00:03:32,180
context may last indefinitely.

57
00:03:32,860 --> 00:03:37,060
Since we cannot know, it is best to stay
out of this type of market at least

58
00:03:37,060 --> 00:03:39,840
until we see some price action that goes
against this behavior.

59
00:03:40,400 --> 00:03:42,880
which might make us change our view of
its current condition.

60
00:03:43,200 --> 00:03:47,660
In other words, at the very least, we
should expect to see another V -turn

61
00:03:47,660 --> 00:03:50,480
the same implications or an accumulation
structure.

62
00:03:51,240 --> 00:03:54,460
I'm not saying that after we see this,
we should enter the market to buy.

63
00:03:55,040 --> 00:03:59,120
Simply that it is the minimum essential
condition that we should wait to see

64
00:03:59,120 --> 00:04:03,060
before we look for more signs that
provide us with a favorable trading

65
00:04:03,710 --> 00:04:07,970
The following example is about being
clear about the roadmap that is most

66
00:04:07,970 --> 00:04:10,750
to develop based on the last crucial
trading action.

67
00:04:11,330 --> 00:04:15,910
In this case, if we see that the most
recent event is a breakout in the

68
00:04:15,910 --> 00:04:21,029
direction to ours, we should not trade
against it. If we want to buy, we should

69
00:04:21,029 --> 00:04:24,110
avoid doing so if we have previously
seen an upthrust.

70
00:04:24,450 --> 00:04:29,050
Likewise, if we are looking for an
opportunity to sell, we should avoid

71
00:04:29,050 --> 00:04:30,430
if we have just seen a spring.

72
00:04:31,370 --> 00:04:35,150
The why has to do with the roadmap each
behavior is likely to follow.

73
00:04:35,730 --> 00:04:40,030
After seeing a potential upthrust, the
price will most likely turn downwards

74
00:04:40,030 --> 00:04:44,850
until it visits at least a sufficiently
important equilibrium or liquidity zone.

75
00:04:45,730 --> 00:04:50,210
The example on the slide is particularly
interesting because we may even be

76
00:04:50,210 --> 00:04:52,070
about to see an accumulation structure.

77
00:04:52,790 --> 00:04:57,050
If we look carefully at the chart, the
price has first come from a false

78
00:04:57,050 --> 00:04:58,530
breakout at the lower lows.

79
00:04:58,910 --> 00:05:03,090
and then a significant sign of strength
that has sent it all the way to the

80
00:05:03,090 --> 00:05:04,090
previous highs.

81
00:05:04,150 --> 00:05:05,370
But what happens then?

82
00:05:05,650 --> 00:05:10,110
Well, the market reverses violently and
falls below the previous highs, re

83
00:05:10,110 --> 00:05:11,130
-entering the range again.

84
00:05:11,690 --> 00:05:13,270
This is the current context.

85
00:05:14,010 --> 00:05:17,530
Control of the market might have changed
hands and succumbed to the downward

86
00:05:17,530 --> 00:05:20,290
pressure before developing into a
distribution scheme.

87
00:05:20,990 --> 00:05:24,990
We don't know what's going to happen
next, but this is a possibility we

88
00:05:24,990 --> 00:05:25,990
keep in mind.

89
00:05:26,510 --> 00:05:30,210
You could even evaluate the possibility
of entering the market with a short

90
00:05:30,210 --> 00:05:32,470
position. This is more debatable.

91
00:05:32,730 --> 00:05:36,790
But what you should avoid, at least, is
buying after observing the situation.

92
00:05:37,570 --> 00:05:41,270
You may not be able to take advantage of
the subsequent market action if the

93
00:05:41,270 --> 00:05:44,090
distribution scheme is then confirmed
and the price falls.

94
00:05:44,310 --> 00:05:47,990
But at least you won't take a loss from
being on the wrong side of the market.

95
00:05:48,210 --> 00:05:50,310
This is a very valuable concept.

96
00:05:51,250 --> 00:05:54,810
You will have to work on developing a
flexible mindset to observe this

97
00:05:54,810 --> 00:05:56,090
information in real time.

98
00:05:56,510 --> 00:05:59,110
demonstrate it here, and make the best
decisions.

99
00:05:59,990 --> 00:06:03,970
What would we have to see in this
particular situation to reactivate the

100
00:06:03,970 --> 00:06:08,270
scenario? Well, at least we would have
to see the price recover the last zone

101
00:06:08,270 --> 00:06:11,690
sideways movement and develop into a
potential accumulation structure.

102
00:06:12,350 --> 00:06:16,090
This would be an example of the least we
should expect to see from the market.

103
00:06:16,690 --> 00:06:20,810
This would be a really positive
situation, aside from the potential

104
00:06:20,810 --> 00:06:22,190
that may be lying in wait.

105
00:06:22,790 --> 00:06:27,060
If an accumulation develops there, An
additional sign that would add more

106
00:06:27,060 --> 00:06:30,980
to the scenario would be failure to
develop the bearish movement that we

107
00:06:30,980 --> 00:06:34,980
expect, based on the bearish roadmap
established by the potential upthrust.

108
00:06:35,600 --> 00:06:38,840
This is crucial and something we should
always keep in mind.

109
00:06:39,180 --> 00:06:44,020
Depending on the case and the particular
situation, what the market does is just

110
00:06:44,020 --> 00:06:46,040
as important as what it fails to do.

111
00:06:46,440 --> 00:06:50,640
In this context, the fact that the price
did not develop the bearish movement

112
00:06:50,640 --> 00:06:54,260
that we expected is a sign that suggests
a lot of underlying strength.

113
00:06:54,780 --> 00:06:58,860
an indication that the market continues
to be truly skewed toward a bearish

114
00:06:58,860 --> 00:07:03,200
movement and that the false breakout
action that we have just seen did not

115
00:07:03,200 --> 00:07:04,960
the effect suggested by the theory.

116
00:07:05,620 --> 00:07:09,260
It may have developed this way because
many traders have closed their position

117
00:07:09,260 --> 00:07:14,100
there taking profit, but it has also not
generated enough interest from bears to

118
00:07:14,100 --> 00:07:18,480
enter the market aggressively, and
therefore, buyers have remained in

119
00:07:18,480 --> 00:07:19,480
the situation.

120
00:07:19,760 --> 00:07:23,340
Some traders could continue to see this
situation as too risky.

121
00:07:23,790 --> 00:07:26,590
since we are still below the high of the
potential upthrust.

122
00:07:26,830 --> 00:07:31,010
In this case, we could continue to look
at possible scenarios and take a

123
00:07:31,010 --> 00:07:34,850
conservative view, where we only assess
the possibility of activating the

124
00:07:34,850 --> 00:07:38,910
bullish scenario again in the event that
the price effectively positions itself

125
00:07:38,910 --> 00:07:40,190
above the previous high.

126
00:07:41,010 --> 00:07:45,370
This is a much more positive situation
for us in terms of confidence, since we

127
00:07:45,370 --> 00:07:49,690
have practically everything in our
favor, a large accumulation below, a

128
00:07:49,690 --> 00:07:53,860
structural failure since the bullish
false breakout was not sustained,

129
00:07:53,860 --> 00:07:58,400
reaccumulation in favor, and enough
bullish intent to take the price above

130
00:07:58,400 --> 00:07:59,400
previous high.

131
00:07:59,760 --> 00:08:04,640
Having so many signals in our favor
offers us a trade with less risk. On the

132
00:08:04,640 --> 00:08:07,700
other hand, it also entails a diminished
potential profit.

133
00:08:08,020 --> 00:08:13,280
In any case, it is undoubtedly a very
attractive situation for us. This other

134
00:08:13,280 --> 00:08:17,060
example illustrates the need to bear in
mind a fundamental principle of the

135
00:08:17,060 --> 00:08:18,540
markets and technical analysis.

136
00:08:19,280 --> 00:08:23,160
That is that the price is more likely to
continue moving in the same direction

137
00:08:23,160 --> 00:08:26,840
in which it has been moving, so you
shouldn't try to anticipate the market

138
00:08:26,840 --> 00:08:27,840
reversal.

139
00:08:28,140 --> 00:08:32,600
If we see a distribution and the
development of a bearish trend, in

140
00:08:32,600 --> 00:08:36,059
the most sensible thing to do is to
trade in the same direction.

141
00:08:36,679 --> 00:08:41,200
I say in principle because the trend
movement may be exhausted, the effect of

142
00:08:41,200 --> 00:08:44,920
the cause has run its course and it is
in an interesting position to turn

143
00:08:44,920 --> 00:08:47,740
upwards. But again, we can't be sure of
this.

144
00:08:48,220 --> 00:08:52,660
The Wyckoff method is a reactive
approach, and we should only act after

145
00:08:52,660 --> 00:08:53,660
certain behaviors.

146
00:08:54,320 --> 00:08:58,940
It may be very tempting to buy because
the price seems to have fallen too far,

147
00:08:59,100 --> 00:09:03,900
but there isn't a great deal of logic to
this, since the market can continue to

148
00:09:03,900 --> 00:09:05,300
fall for as long as it wants.

149
00:09:05,720 --> 00:09:09,900
Be very careful when making decisions
because you think the price has moved

150
00:09:09,900 --> 00:09:14,940
far. Too far or too little are terms
that should not be applied when

151
00:09:14,940 --> 00:09:16,180
the behavior of the market.

152
00:09:16,680 --> 00:09:21,660
Too far or too little is relative. In
this situation, although the price could

153
00:09:21,660 --> 00:09:26,180
develop a fast pattern and turn upwards,
when the imbalance downwards is so

154
00:09:26,180 --> 00:09:30,340
evident, it gives us much more
confidence to see the development of a

155
00:09:30,340 --> 00:09:33,280
accumulation structure before deciding
whether to buy.