1 00:00:00,240 --> 00:00:02,000 Climatic volume at the breakout. 2 00:00:02,400 --> 00:00:06,480 The appearance of climatic volume is an important enough action in itself to 3 00:00:06,480 --> 00:00:10,540 make us take note and reassess at the precise moment the implications that it 4 00:00:10,540 --> 00:00:12,600 could have on the future reaction of the price. 5 00:00:13,360 --> 00:00:16,620 As we know, it is impossible to guess what the market will do. 6 00:00:16,880 --> 00:00:19,540 We cannot know in advance what the reaction will be. 7 00:00:19,820 --> 00:00:24,200 However, we can control what we will do depending on said price reaction. 8 00:00:24,960 --> 00:00:27,860 The only thing we have control over is our actions. 9 00:00:28,320 --> 00:00:31,900 So it is best to be clear about what we are going to do in each of the potential 10 00:00:31,900 --> 00:00:33,900 situations that may occur in the market. 11 00:00:34,160 --> 00:00:37,680 We are going to approach the situation from three different points of view, 12 00:00:37,800 --> 00:00:42,480 depending on where we see the climatic volume, before, during, or after a 13 00:00:42,480 --> 00:00:43,720 breakout event of the structure. 14 00:00:44,480 --> 00:00:48,360 It is crucial that we understand the differences that underlie each of the 15 00:00:48,360 --> 00:00:51,940 scenarios, because this will be the basis for defining what we will do. 16 00:00:52,910 --> 00:00:57,630 The basic idea is that if we have already seen climatic volume prior to 17 00:00:57,630 --> 00:01:02,030 breakout and it's in our favor, this is a positive sign that adds strength to 18 00:01:02,030 --> 00:01:03,470 our scenario in that direction. 19 00:01:04,310 --> 00:01:08,550 If the climatic volume appears just at the moment of the breakout, this isn't 20 00:01:08,550 --> 00:01:09,710 necessarily a bad sign. 21 00:01:10,070 --> 00:01:14,650 It may be an absorption prior to moving in that direction, so we will have to 22 00:01:14,650 --> 00:01:16,030 wait and see how price reacts. 23 00:01:16,830 --> 00:01:21,960 Finally, if we see climatic volume after the breakout is complete, we should set 24 00:01:21,960 --> 00:01:26,900 aside the continuation scenario, at least momentarily, until we see more of 25 00:01:26,900 --> 00:01:28,160 subsequent price action. 26 00:01:28,960 --> 00:01:33,240 Let's look at each of these situations in more detail. If at any point in the 27 00:01:33,240 --> 00:01:37,500 structure we see that climatic or relatively high volume has previously 28 00:01:37,500 --> 00:01:41,820 and that it is below the current price, this definitely has bullish 29 00:01:41,820 --> 00:01:45,900 implications, at least in the short term, until something happens that 30 00:01:45,900 --> 00:01:47,240 the valuations of the agents. 31 00:01:47,440 --> 00:01:50,260 And we should start searching for opportunities to buy. 32 00:01:50,700 --> 00:01:54,980 based on the premise that we are supported by that volume that is below 33 00:01:54,980 --> 00:01:57,120 which is able to establish bearish control. 34 00:01:57,900 --> 00:02:01,880 The reasoning is simple. If high volume has appeared and the price has 35 00:02:01,880 --> 00:02:06,420 subsequently risen, we can assume that the short -term control is bullish as 36 00:02:06,420 --> 00:02:09,800 long as the market continues to be positioned above said volume. 37 00:02:10,380 --> 00:02:14,360 The volume is supporting the current bullish move and as long as it doesn't 38 00:02:14,360 --> 00:02:18,510 diminish and or some type of event occurs to counter this action, the most 39 00:02:18,510 --> 00:02:21,770 likely scenario is that the market will continue to go higher. 40 00:02:22,490 --> 00:02:26,990 In this example chart, we see two relatively important volumes which 41 00:02:26,990 --> 00:02:27,990 taken into account. 42 00:02:28,450 --> 00:02:33,390 The second is more relevant than the first due to its location, because it 43 00:02:33,390 --> 00:02:37,390 appears in a potential spring area and could give rise to an upward imbalance. 44 00:02:38,210 --> 00:02:42,590 The key here is that everything above the high of both candlesticks, basically 45 00:02:42,590 --> 00:02:46,390 everything within the orange box I have drawn, should be taken into 46 00:02:46,390 --> 00:02:48,650 consideration when looking for a buying opportunity. 47 00:02:49,430 --> 00:02:53,910 We would be supported, among other things, by the aforementioned volumes, 48 00:02:53,910 --> 00:02:57,890 would be below and therefore would allow us to assume that they are in favor of 49 00:02:57,890 --> 00:02:58,890 the upward imbalance. 50 00:02:59,410 --> 00:03:03,770 Let's imagine now that we are right at the moment of the bullish breakout. The 51 00:03:03,770 --> 00:03:07,910 price is entering a critical zone, where presumably the expectation is that 52 00:03:07,910 --> 00:03:10,690 there are a large number of limit orders pending execution. 53 00:03:11,850 --> 00:03:16,130 I always recommend doing some type of management at this point for this very 54 00:03:16,130 --> 00:03:21,450 reason. Take profit or protect the position, because we do not know the 55 00:03:21,450 --> 00:03:24,890 that the interaction between supply and demand that will happen there might 56 00:03:24,890 --> 00:03:25,890 have. 57 00:03:25,990 --> 00:03:31,230 We are at the critical point, real or false breakout, and at that point we see 58 00:03:31,230 --> 00:03:34,210 the appearance of a large volume peak. What is happening? 59 00:03:34,830 --> 00:03:38,730 Unfortunately, we are not fortune tellers and we will have to let the 60 00:03:38,730 --> 00:03:40,930 react before drawing our initial conclusions. 61 00:03:41,710 --> 00:03:45,950 The only objective thing we know is that a great deal of participation has been 62 00:03:45,950 --> 00:03:50,990 generated. Lots of buyers and sellers, or a few, but with major trading power, 63 00:03:51,210 --> 00:03:53,470 have executed orders with different intentions. 64 00:03:54,090 --> 00:03:58,710 The opening of positions under the premise of a breakout strategy, closing 65 00:03:58,710 --> 00:04:03,150 long positions in order to take profits, and closing of short positions due to 66 00:04:03,150 --> 00:04:04,450 the triggering of stop losses. 67 00:04:04,930 --> 00:04:08,890 We don't really know what's happening. That's the problem with order matching. 68 00:04:09,640 --> 00:04:12,440 So what implications does all this interaction have? 69 00:04:12,960 --> 00:04:17,899 Is it a bullish or bearish sign? We cannot know, at least in the first 70 00:04:18,500 --> 00:04:20,300 We must let the price react. 71 00:04:20,820 --> 00:04:25,500 Remember, each market action must be confirmed or disproved by the subsequent 72 00:04:25,500 --> 00:04:26,500 price action. 73 00:04:26,920 --> 00:04:30,480 At this point, in real time, both scenarios are equally valid. 74 00:04:30,800 --> 00:04:35,300 It could have bullish connotations if we assume that the volume we see is in an 75 00:04:35,300 --> 00:04:36,300 absorption volume. 76 00:04:36,650 --> 00:04:40,290 following the premise that buyers have had to demonstrate their strength and 77 00:04:40,290 --> 00:04:44,430 commitment by absorbing all the sell orders that were pending execution with 78 00:04:44,430 --> 00:04:46,630 sole purpose of pushing the price even higher. 79 00:04:47,290 --> 00:04:51,290 It is a price that buyers must pay at the aggregate level if they want to go 80 00:04:51,290 --> 00:04:52,290 down that route. 81 00:04:52,350 --> 00:04:56,830 But it could also be a major increase in supply, aggressive selling with the 82 00:04:56,830 --> 00:04:58,390 intention of pushing the price down. 83 00:04:59,090 --> 00:05:02,950 This uncertainty is what makes these trading zones critical points where 84 00:05:02,950 --> 00:05:05,030 proactive position management is crucial. 85 00:05:05,660 --> 00:05:10,120 If, after observing the volume, the price reacts by not maintaining the 86 00:05:10,120 --> 00:05:14,200 and quickly re -entering the range, this is confirmation that the implications 87 00:05:14,200 --> 00:05:15,980 of this volume were bearish. 88 00:05:16,260 --> 00:05:20,640 That this high volume of trading mostly involved traders taking short positions, 89 00:05:20,760 --> 00:05:23,700 and it has even continued to push the price down. 90 00:05:24,000 --> 00:05:28,460 And we already know the context and roadmap that this kind of behavior 91 00:05:28,460 --> 00:05:29,419 to us. 92 00:05:29,420 --> 00:05:34,100 But if instead, the price manages to stay above the trading zone and shows 93 00:05:34,100 --> 00:05:38,700 of acceptance at these new price levels, this suggests that this price discovery 94 00:05:38,700 --> 00:05:42,840 is being accepted and the most likely outcome at that point is the development 95 00:05:42,840 --> 00:05:43,900 of a bullish continuation. 96 00:05:44,920 --> 00:05:49,080 The price may even develop a minor upthrust at that point, as shown in the 97 00:05:49,080 --> 00:05:53,860 example. My recommendation here is not to be alarmed and continue prioritizing 98 00:05:53,860 --> 00:05:54,860 the context. 99 00:05:54,880 --> 00:05:58,520 As long as the price doesn't leave the trading zone, we should continue to 100 00:05:58,520 --> 00:06:00,820 expect the development of a potential accumulation. 101 00:06:01,640 --> 00:06:06,080 The key takeaway here is that if you see relatively high volume in that zone, 102 00:06:06,300 --> 00:06:08,680 this isn't necessarily a good or bad thing. 103 00:06:09,040 --> 00:06:12,120 It doesn't have to be a bullish or bearish sign by default. 104 00:06:12,700 --> 00:06:16,260 Everything will depend on what happens subsequently with the price reaction. 105 00:06:16,920 --> 00:06:19,460 The volume offers an explanation for both scenarios. 106 00:06:19,780 --> 00:06:22,340 Don't be scared by this action. It's normal. 107 00:06:23,280 --> 00:06:27,100 If I'm in a long position, I'm not necessarily worried about seeing 108 00:06:27,100 --> 00:06:31,340 higher volume at this point, especially if the price subsequently continues to 109 00:06:31,340 --> 00:06:35,380 behave in a way that may suggest a breakout, evidenced by price action and 110 00:06:35,380 --> 00:06:39,100 volume, which denote a lack of interest in this potential test movement. 111 00:06:39,700 --> 00:06:44,440 Finally, we are going to analyze the connotations of a volume peak after the 112 00:06:44,440 --> 00:06:48,480 price has broken out of the most critical trading zone and managed to 113 00:06:48,480 --> 00:06:49,480 few more points. 114 00:06:50,080 --> 00:06:54,120 Imagine that we are in what presumably could be the end of the bullish impulse 115 00:06:54,120 --> 00:06:58,840 movement, and just at that point there appears to be a very high volume or 116 00:06:58,840 --> 00:07:01,700 relatively high compared to what has been observed previously. 117 00:07:02,880 --> 00:07:07,780 Based on the premise that markets move in waves, and as we are aware that the 118 00:07:07,780 --> 00:07:11,240 price has just developed some upward momentum and traveled a certain 119 00:07:11,500 --> 00:07:16,060 it would not be unreasonable to think that a bearish turn in the market could 120 00:07:16,060 --> 00:07:17,520 generated right at this point. 121 00:07:18,350 --> 00:07:22,650 Although it would be perfectly logical to expect this kind of movement based on 122 00:07:22,650 --> 00:07:26,790 the context provided by the principles of the Wyckoff method, for which we 123 00:07:26,790 --> 00:07:31,230 expect a bearish movement to develop the test after the bullish breakout, the 124 00:07:31,230 --> 00:07:35,730 fact that we can see high volume right at the high could be a negative sign for 125 00:07:35,730 --> 00:07:39,950 bullish interests, especially if subsequently this downward movement that 126 00:07:39,950 --> 00:07:41,790 have just mentioned does indeed occur. 127 00:07:43,570 --> 00:07:47,090 Following the previous logic about the current position of the price with 128 00:07:47,090 --> 00:07:51,090 respect to the moment the volume appears in this case, we would be below said 129 00:07:51,090 --> 00:07:55,870 volume. Therefore, we would establish the hypothesis that as long as the 130 00:07:55,870 --> 00:08:00,230 continues to be positioned below it, the control in the short term is bearish. 131 00:08:00,530 --> 00:08:04,410 The bearish movement that we would be seeing would be the effect and the high 132 00:08:04,410 --> 00:08:05,410 volume of the cause. 133 00:08:06,210 --> 00:08:10,830 This is definitely not the ideal situation that we want to see at a 134 00:08:10,830 --> 00:08:12,530 it could make us have our doubts. 135 00:08:12,990 --> 00:08:17,170 In any case, everything would continue to depend on seeing how this potential 136 00:08:17,170 --> 00:08:19,710 test develops after a breakout from the trading zone. 137 00:08:20,290 --> 00:08:24,590 The key in this situation is to see whether the price re -enters the range 138 00:08:24,590 --> 00:08:29,390 not. And this example is particularly interesting because the price was even 139 00:08:29,390 --> 00:08:33,669 sustained above the trading zone and managed to avoid re -entering the range 140 00:08:33,669 --> 00:08:34,669 several occasions. 141 00:08:34,710 --> 00:08:38,630 But after seeing the final outcome, we have to assume that this volume had 142 00:08:38,630 --> 00:08:41,150 enough capacity to unbalance the market downwards. 143 00:08:42,320 --> 00:08:47,200 Whenever we are below a climatic volume, we must assume that the control in the 144 00:08:47,200 --> 00:08:51,240 short term is in that direction, and only start looking for trades in the 145 00:08:51,240 --> 00:08:54,600 opposite direction when the market turns to the other side of that volume. 146 00:08:54,980 --> 00:08:59,240 In this example, I would personally only reactivate the bullish scenario if the 147 00:08:59,240 --> 00:09:03,100 market were to position itself above the high of the candlestick generated by 148 00:09:03,100 --> 00:09:04,100 the climatic volume. 149 00:09:04,840 --> 00:09:08,300 That would be the point at which we can logically assume that volume is 150 00:09:08,300 --> 00:09:09,800 supporting the current bullish movement. 151 00:09:10,360 --> 00:09:14,900 a very interesting module offering us more inputs, which will enable us to 152 00:09:14,900 --> 00:09:17,000 define where the price is most likely to go. 153 00:09:17,580 --> 00:09:22,320 Obviously, the concept is equally valid for both potential accumulation and 154 00:09:22,320 --> 00:09:23,440 distribution structures. 155 00:09:24,200 --> 00:09:28,140 It is key to keep in mind that the volume provides us with very important 156 00:09:28,140 --> 00:09:31,500 information about where the large trader activity is taking place. 157 00:09:31,780 --> 00:09:36,240 When high volume appears, we must first ask ourselves why it has appeared 158 00:09:36,240 --> 00:09:37,560 precisely at that point. 159 00:09:38,000 --> 00:09:40,420 Why is the big money interested in that zone? 160 00:09:40,620 --> 00:09:45,860 And secondly, we need to assess how the price reacts subsequently, as this will 161 00:09:45,860 --> 00:09:49,140 often clear up all our doubts about what to expect next.