Wyckoff Phases in Practice

15 ธ.ค. 2022

We all know that market moves in Phases. The four most popular phases are –
1️⃣Accumulation
2️⃣Markup
3️⃣Distribution and
4️⃣Markdown

Mr. Wyckoff analyzed these phases further, esp . Accumulation and Distribution, to understand the price behavior for potential opportunities to trade/invest in the market.

In this tutorial I am going to have a brief discussion about Accumulation-sub-phases of the market with the help of an example that I came across today.

✅Phase A

🚩This phase is preceded by a major downtrend.
🚩Begins with a selling climax ( SC ) - Large down bars with abnormally high volume (see B).
🚩SC is followed by the largest rally in the major downtrend, associated with good buying volume . This Automatic Rally (AR) represents the change in character (ChoC) of the market - buyers taking over.
🚩Market retest the level B with a lower volume (supply) – Secondary Test (see D).

✅Phase B

🚩Usually the longest phase.
🚩Higher volume during rallies (eg. E) and lesser during retracements.
🚩Even if volume is high during retracements, price fails to make new lows.
🚩More secondary tests (see F) held at the support zone (B and D).
🚩Market consolidates testing supply and demand with no particular direction – Consolidation.

✅Phase C

🚩This phase is the smallest but the most important.
🚩Usually ends with a Spring (not in the above case).
🚩You would often see final shakeout of weak buyers in this phase. Price would dip underneath the support zone (B, D and F) and reverse sharply back above support.
🚩Perhaps the best time to enter for those who like to take low risk high probability trades.
🚩In the above case, point G was just another test of support Zone.

✅Phase D

🚩You would see swift action in this phase. Wide up bars (with high volume ) and small down bars (with low volume ) -Sign of Strength.
🚩This also represents the change in character, which now differs from the consolidation phase.
🚩ChoCh - Notice two blue rectangles and the price action in them. The action differs vehemently from the previous phases - wide bars with ease of movement.
🚩Price breaks the resistance zone (in most cases resistance would be the high of automatic rally).
🚩It again retests (after breakout) this resistance which now starts acting as support. This is called the Backup action.
🚩Further (re)accumulation can be seen here in many cases.
🚩This is perhaps the best time for those who like to enter after confirmation (A higher high; break of resistance; price jumping outside the range)

✅Phase E

🚀Accumulation is over and a trend is established - Markup phase

Not all bear markets end up with these accumulation-sub-phases. You may often see V-shaped recoveries just like what we experienced after March 2020 lows. But you will surely find some stocks or markets that moved in line with Wyckoff phases.

Thanks for reading.
Do like and comment.

📣Disclaimer: The views are personal only. Apply your own due diligence before making your investment decisions.

16 ธ.ค. 2022

บันทึก

Another Wyckoff action in play. This one is with a Spring at the bottom.