pinetree

Great stuff. Thanks. I think part of my problem is that I want to trade all potential setups (rejections of support/resistance etc). However, defining an entry I'm comfortable with that catches them all will probably not be possible. Better to keep it simple and accept that I will miss a few trades.

I'm struggling a bit with entries. I know it comes down to how agressive your style is, but how should one go about developing an entry that one feels comfortable with? If price reach a level that I've observed as potential support I need to be looking for something and not just enter because price is there. I.e entering at support, entering on a breach of a bar high, entering when price have risen a certain distance etc etc?

Thanks for your ideas and opinions. It helps! As for the climax and possible retest, does the technical rally "have to" breach the previous swing high? I know it doesn't have to but was that something that Wyckoff was looking for? Looking at the chart again I do see that volume on Sep 24 and 25 is lower than the climax day but still quite a lot higher than any day in August and September up until the climax. I guess one could say that the struggle between buyers/sellers is still going on and that sellers were not enough washed out during the climax. They still seem to have stock to supply which can halt a rise in price - thus action is at least not as bullish as in the "typical" high volume climax and low volume retest.

I would say I am in the "building the car" stage. To me, this stage forces me to question some of all the material (and with material I also include looking at tons of charts, EOD as that is what I trade) I go over in order to develop a deeper understanding. Sometimes what I read makes complete sense, but other times it makes no sense. I don't want to take a short cut with someone telling me to put on a trade here or here, but I am still (and will probably always be since your never reach complete mastery...) at a stage where I need some 3rd party input to develop a deeper understanding. What is interesting is getting the input that I get from the participants in this forum.

Some of this can also be four here. Next day, June 20th, removes all doubts as to the immediate tendency of the average, for the market opens up a point and a half above the previous night's close and on a greatly increased volume makes a rapid advance nearly to 131,putting the average into new high ground above the previous trading zone. The heavy volume emphasizes the importance of this. (See Par. 2, Footnote Pg. 16. I don’t see the heavy volume on this day? Sure, it is a wide range day, but all it does it taking the average up into resistance (or just slightly above it, but since it is never a specific level one could argue that we are right at resistance) where I would be looking to short if prices turned down. The 24th recovers the loss; the average advances 8 points for the day and 3½ points above the June 22nd high, or to 141, and the volume is the highest thus far, over 5,000,000 shares. We begin to grow wary of the bull side because that volume in comparison with the trading of previous weeks indicates selling by large interests. (That is, a probable buying climax.) We move our stops up within a point or so of the June 23rd low and await developments Why selling by large interests? Why not buying? Why are they expecting a probable buying climax there and then? Is it based purely on the huge volume and the large spread or is there something else to it? I know there are lows from December 1930 at around 136-139. Is that it? Or is it that we are up against resistance from the range from mid April-mid May? The 25th makes a further gain of 2 points in the average, then the price slumps about 6 points, closing a point from the low, on volume of 4,300,000 shares -- large supply overcoming an excited public demand coming in, as usual, on the top of the rise. This is distinctly bearish.(*) We therefore close out our long trading positions and examine our individual charts for stocks which are in a weak technical position so that we can get short on the next bulge. I see how this is bearish as sellers are more eager than buyers, thus pushing price down to close slightly lower. However, how can they be so certain and thus “know” that they should close their long? This might just produce a short and shallow pullback before higher prices. Note the shortening of the upthrusts, that is, the tendency of the high points to arch over, from the 24th to the 27th. Does this really mean anything? June 26th shows a range of about 5 points -- a little narrower. Although the closing is near the top, the volume has fallen off to about 3,100,000 shares and the up-thrusts are shortening. In the net, these indications are bearish. The outlines of a new trading zone have been tentatively established between 137 and 143. They seem to analyze each and every bar to find meaning (and they do!!). I tried this (here) and it doesn’t work for me. I accept that this could all be about mastery, but should one strive to find reason in each and every bar? I’ve tried and all it did for me was getting me into trades that was their simply because I thought so based on my reading of each and every bar. On the 27th, the average bulges over a point, narrows its range to 3½ points and closes with a net gain of about 1½ points on a volume of about 3,800,000 (Saturday's volume doubled). This looks like bidding up to a new high in order to catch shorts, and selling on the way down. We therefore put out some shorts, protecting our commitments with stops 1 3/8 to 2 or 3 points above the high of June 27th. Sure, volume is lower but couldn’t that just mean that all supply had been taken by bulls from 132 up to 144 and there is no supply left up there? Price breaks resistance and close is almost on the high of the day. How can this possibly be bearish and what in this action makes them go short? I can clearly see volume diminishing on the top of the rally and that one can consider this to be lesser demand but from that to actually putting out a short…? Trend is still upwards (or is it?). July 1st, there is a wider spread in the price, nearly 2 points higher closing, but volume shrinks to 1,700,000: bearish It sort of makes sense, but they still read a lot into each and every bar/volume. Couldn’t one also interpret it as prices having retraced from a high point of 144 down to 136 where selling dried up and buyers managed to push prices higher – i.e. bullish? On the 30th there was a small push below the low on the 29th but no new selling came out and sellers seem to be done and price, sitting a support, should move higher? On the 2nd, the market narrows to a 3 point range for the average and the closing is 1½ points lower on reduced volume -- increased dullness, lower close, and less volume indicate less power on the bull side. Why less power on the bull side? Why not: lower volume as price falls. Sellers are done as no more supply is coming out – bullish? On the 3rd, there is another attempt to rally and the average reaches the old 143 supply line at the upper edge of the trading zone, closing about 3 points higher but volume is not measuring up to the standard of previous (late June) rally days. Nothing to be afraid of. (We sell more stocks short on this rally which is the bulge we have been waiting for, placing stops, as before, above the danger point, that is, the high of June 27th.) Once again, this is beautiful but I could never have done this. They put out a short on the exact top of the retracement. I see that volume is a lot lower than on previous rallies, but couldn’t that just be that sellers are done? I tried to do this type of trade in XACT BULL (Here…) but didn’t succeed nearly as well. Is there any obvious difference screaming out to you? I guess one difference could be the buying climax they saw on Sep 24 and that this action (lower volume and spread) makes it a “legitimate” test of the high and thus a good place to enter a short?

As I go over a lot of the Wyckoff material (pdf:s) posted on this forum as well as in books (such as “Charting the stock market”, Livermore’s writings, some of Gann (The truth of the stock tape), etc) it seems to me that “they” (Wyckoff and/or people applying Wyckoff principles) analyze each and every bar to find meaning. And they find meaning!! I’ve tried this (here) and it hasn’t worked for me so far. All it has done for me so far is getting in and out of trades where I shouldn’t just because I “think” there is a trade there based on my perception of price/volume action. I accept that this could all be about mastery, but should one really strive to find reason in each and every bar? The discussions in the various threads makes more sense to me where the they seem to focus more on buying and selling waves, strength/weakness and how price behaves at support and resistance. I’ve read and re-read the material several times and it makes sense when I read it, but I feel that it would be very difficult applying this in real time (EOD). As an example, below are my thoughts on the Wyckoff analysis 1930-1931. Some of it was posted here. I'll do this post in 2 as there will be too much text otherwise. September 21st, the average loses 4 points more, making a low of 94, but recovers 5 points by closing time and this makes it close above the previous day. The volume is 4,400,000 -- again unusually high and almost equal to the day before. This action, combined with the 8 point spread in prices for the day and the slightly higher closing leads us to cover our shorts with a view to putting them out again on a further rally; or, we may prefer to sit tight and depend on our recently reduced stops to keep our trades alive if the expected rally should fail to develop material proportions This to me seems like reading a lot into a specific bar. Sure, action looks climatic, but how can they be so “certain” that they actually close out their short trade? I cannot see any support area close to the climax. On the 22nd, the volume drops off to about 2,000,000 shares; the close is slightly lower and the range has narrowed. The net result of these three sessions is to leave the market practically unchanged at the third day's close. Downward progress seems to have been checked and the small volume on the dip back from the high of the 21st, on Sept. 22nd, implies a lifting of selling pressure. After such a great decline within three weeks, this is an indication of more rally. Again, market is not at support (at least not what can be seen on the chart) and it seems to me that they are reading a lot into the action of each and every bar during the last three days? After such a great decline within three weeks, this is an indication of more rally. This comes on the 23rd, and gives us an opportunity to sell short again while the market is still strong or when we see the rally is failing. Such an indication is given by the way it rallies on the 23rd. On this day, the average recovers to nearly 107, closing at 105½, but the volume falls off to under 3,000,000 shares and we therefore suspect that it is merely due to shorts who all tried to cover at once. Such a rally is too effervescent. It is not likely to last because it removes buying power which formerly existed, and leaves the market without support between the high point of the rally and the previous low. We are not up against resistance (other than at the midpoint of the small consolidation from Sep 14-17 but arguing that this is resistance on a daily where one would be confident to open a short is pushing it to me, or am I wrong here?) and neither is volume especially low looking back further than September 18th. Spread is wide and volume seem rather high to me – i.e. buyers are aggressive enough to push price quite a bit although sellers are supplying them with stock. Volume decreases to under 1,500,000 on the 26th and 28th, but in view of the market's recent bearish action this looks more like a swing to a dead center preceding new weakness, than diminishing force of supply What bearish action do they mean here? Price did form some sort of climax and came back on lower volume and spread to test that climax. Sure, if you are entering longs on a breach of a day’s high to go long you wouldn’t have taken a long trade (as that breach never happens), but I don’t see how to draw a conclusion from the action that it is bearish before they know which way it breaks? Does it matter if the climax happened at support or not? Instead of looking bearish, I would be leaning slightly bullish, waiting for a test of the climax, and then enter a long. However, knowing that the climax didn’t occur at a support I would be cautious. Is this a “strange” way of interpreting action here?

Price have penetrated resistance but to me (might be me overanalyzing this again...) sellers have once again showed up (increased activity at resistance) throwing stocks at bullls. This has caused price to retrace back to resistance (even below depending on how you define it but that is up to me not the market). On friday price once again rose (and fell back) but this time on lower activity. No interest in pushing price higher here and now. I am still comfortable going short on a break back into the range. I am however not comfortable going long as the chart looks to me like I could end up being whipsawed. Plan: I will short if price breaks below fridays low. Stop 1 point above high. If price reach mid point of last range I will lower stop to BE. If price reach support I will close position. If price break friday's high I will stand back and wait for a pullback to support. Would you say I'm still overanalyzing and trying to interpret to much into the action instead of just buying now at support?

As for making it more specific, are you thinking about price target etc. I.e. if I get into the trade and price go here I will do this or this if this happens? The selling climax had occured and I had actually done a few trades within the range at time I posted the chart. Looking over them now in hindsight, some of them makes no sense to me. Just a short run through of my trades on this chart: A: Went long as volume was extreme but buyers manged to push prices to close in the middle of the bar for several days. Final poke down (oct 27) was on less volume than previous bars and close in middle. B: Went flat as prices put in an ”extreme” up day without accompanying volume surge against an area that could work as resistance. C1: Started scaling in on the pull back. Idea here was to buy the retest of the climax at A. Not being sure how to get in at the right time I scaled into this position with a stop below A. C2, C3: More scaling in. C4, C5: At the time a continued scaling in as I considered theese to be pullbacks on low volume. Looking back at this now this reasoning makes no sense to me. I think that I, at the time, was afraid of missing a potential break out to the upside and prices came back to the middle of the range where I thought it would find support. D: Went flat at very narrow range up bar on low volume against resistance as prices were refusing to break out to the upside. E: Went long here as price fell on low volume back to an area where buyers had previously been supporting the price. In hindsight, this was the best possible entry I could have throught the whole range, but it was probably more luck than skill entering here (as you later see how I managed this trade….). Price was not really down to a support but more an area in which buyers started pushing price up agressively in the beginning of March. F: Went flat as I considered prices making very litte progress on still large volume. (Overanalyzing I guess….?) G1: Went short on break of trendline as the final push up to G1 was on lower volume than the push up to F. I thought buyers were not willing to chase prices higher and that sellers would take over. As you see, the trade started out great as range and acticity increased to the downside. I considered this to be a confirmation of my previous analysis (but again overanalyzing probably...?).:crap: G2: Added to short as prices rose on decreasing activity from previous swing low. Price didn’t continue down but instead settled into a range and developed into a hinge on decreasing volume. H: Stopped out as price broke to the upside. I and J: The trades as discussed in previous posts. The circles are probably good areas to enter (tests of support or break outs). It is clear from looking back that I was trying to be smart and overanalyzing it around F and G, I and J. Analyzing my own trades I seem to like entering into trades against the trend (like at G and I when range and volume expands to the downside and sellers then back off so that buyers can push price back towards last swing high although on lower range and activity….). That took me out of a trade that could have made my year from E. All the trading around at C also makes no sense looking back at it. C2 is probably the only reasonable entry. I think, going back to what you say about learing something about my real time mindset, I think I am afraid of missing a move. I.e. I don’t let price show its card at resistance/support. Instead I’m trying to enter into trades in the middle of ranges.

The setup is not so much an issue as a misunderstanding of the nature of trend and consolidation. If price is in a trading range, "bearish" and "bullish" are inappropriate. One sells resistance and buys support. Pinetree didn't buy support at "D" because he was "bearish", but sentiment was irrelevant. If he had bought then, he would now be in a position to take advantage of whatever breakout occurs. If there is instead a reversal, then he can get out of his long and enter a short. That's how trading ranges are played. Makes complete sense when you write it, but I guess one must first define a reversal? Does it include activity or is it just based on price action? Is it breaking previous bar’s high/low? I know time interval does not matter (and thus whether it breaks a day’s/hour’s/10min bar high/low) since it is an ongoing process, but one have to define it in order to see it, correct? Today prices traded above resistance but closed back below it. Activity was almost as high as y’day but sellers halted the advance from “D”. Activity is now higher than anytime previous in the top of the range. Buyers are more eager to push prices upwards and sellers are now selling up here instead of down at the bottom of the range. How should I (or should I even?) interpret this – I don’t know, but now that we are at a point which has previously been resistance, it should matter? This is probably down to specific setup, but if prices fall back into the range tomorrow, one could argue that resistance held and a short position will be put on - we are still in the range and thus selling resistance and buying support. If price continue up, I will wait for a pullback to previous resistance and then enter a long. This however leads me to the next issue, and once again a definition of a move, what is a move back into the trading range and what is a pullback to support? I will enter into a short if prices break below today’s low with a stop above today’s high. If prices continue up, I will enter into a long if a pullback occurs on what looks like lower volume and lower range. If a pullback doesn’t occur I will most likely miss any move higher which is a downside to this plan. Does this make sense? Wjrusnak, I do trade other stocks, etf etc, although I thought I spend more time on one particular to really get a feel for the buying/selling pressure, waves etc - knowledge that I could then apply to other issues. However, this might have led me to overanalyzing it and forcing trades where there are none...

Thanks dB! This helps a lot. I’m not sure, but it might be that I’m trying to read too much into the volume and range for each and every bar. I know it all boils down to buying and selling waves and their relation to each other. However, going over tons of Wyckoff material (posted on this blog, in books and other resources) it seems to me that although the waves are important, it is possible to find “meaning” or an explanation to the ongoing battle in almost each and every bar depending on its range, volume and “place”? From the analysis in my previous post, would you say I’m trying to draw too many conclusions from the behavior (especially volume/activity)? As I understand you, you would focus more on price action alone in this chart, i.e. trend and consolidation (and then buy/sell break outs, retracements and ranges depending on one’s personal style). Is that correct and if so, why? My reasoning was this: When prices broke out at “A” it looked like the established trend would continue just like it had been going since March. However, there seems to have been a change in behavior and as you say sellers are entering the market to halt the advance. The whole thing looked somewhat climatic. As I interpret it sellers keep throwing more stock at buyers all the way to “B” where they stop doing this. Range expands when prices fall. I interpreted this action as bearish or at least as a warning sign that the uptrend might be in danger. From “B” to “C” activity clearly decreases and range contracts. The period in the middle of September shows very low activity, small range and indecision. There are 11 days closing in the range 123-125. Here I interpreted this as buyers not willing to chase prices. Why? I don’t know. Maybe they are exhausted from supporting prices at “B” or from pushing prices from 65 in March to 125 in September. I entered a short at “C” due to the above interpretation of the behavior. Activity increased and sellers started (once again) pushing prices lower. Range and volume expanded to the downside and I interpreted this as a further confirmation of my interpretation of the previous behavior (i.e. bearish). Volume didn’t seem climatic to me as prices reached support at “D” so I held on to my short. At “D” sellers backed off and prices rose. Volume decreased and range contracted as the supply disappeared. Buyers could push price higher, but were not very eager to do so and they didn’t have to be since there was no supply. I was still viewing this as bearish behavior and was preparing to add to my shorts if prices were to halt and reverse back down around the midpoint of the range. However, prices kept rising all the way back to the top of the range (and I was stopped out where I initiated the trade). Yesterday, buyers were aggressive pushing prices higher on expanding range and activity. Sellers were trying to repeat what they previously did at “A” and “C”, but buyers were clearly stronger and managed to push through resistance. Suddenly it seems that the whole range has been bullish (as you wrote, buyers seem to have been supporting prices around “B” and “D” and were just waiting for a good time to push through resistance at “A”-“C”). On the other hand yesterday could almost be considered to be somewhat climatic, couldn’t it? Now, buyers have pushed prices through resistance and this chart no longer looks bearish to me – unless sellers emerge and push prices back into the range. However, there is no reason for me to expect that at this point. Sellers entered at around 125 and managed to halt the advance. Buyers were willing to support prices at around 115 and managed to take all supply that sellers were offering in the range. Does it matter that sellers entered at around 125? Would it make a difference if buyers were just not willing push prices higher (i.e. there would be no volume breaking out to A)? Am I trying to read too much into the behavior inside the range? Does the volume matter here? As I understand, Wyckoff didn’t like entering into trades as price breaks resistance/support, but it is really hard not to with the behavior of this chart. Is it possible to anticipate here that prices would break out to the upside? Not buying the B/O here means I have to wait for a retracement (if one comes and depending on how it behaves), but I guess that all back to one’s personal trading style and not really Wyckoff related…

This chart shows an ETF (XACTBULL 1.5x gearing) on the Swedish OMXS30 Index. I would appreciate some input on the ongoing consolidation as I’m having a bit of a hard time interpreting the volume behavior inside it. To go back from the beginning: 1.During phase 1 Xact rose with increasing activity and range expansion to the upside. Buyers were aggressive and wanted to participate and thus drove prices higher out from a good base that had formed since early October. Accumulation must have been going on inside this base. Prices never looked back. 2.During phase 2 Xact consolidated with activity initially still high but slowly tapering off during the consolidation. I’m not sure what to make of the spike down (volume huge and range expansion to the downside) on around 15 May, but it looks like a selling climax of some sort as prices quickly recovered. 3.During phase 3 prices left the consolidation (which was probably then a re-absorption) and volume built slowly as prices rose. Activity was clearly lower during this phase than during phase 1. Still, prices rose and there seems to have been very few sellers as buyers could push prices up without much effort and without prices looking back. 4.When price breaks out of consolidation phase 4 there seems to be a change in behavior. The breakout occurs on huge volume and the range expands. However, at A, buyers back away and prices fall back into the consolidation again. The breakout looks like a climax? 5.Activity and range now starts to expand to the downside into B. 6.From B up to C activity diminishes and bars seem to get shorter and shorter. Buyers don’t seem interested to chase prices higher at this point. Neither thus sellers show up at C. 7.In the wave from C to D sellers seems to enter and push prices lower on increased volume and range. Price finds support at old lows on decent activity. At D buyers seems willing to enter once again and stop the sellers from pushing prices even lower. 8.From D and up until now buyers once again back off and decide not to chase prices higher. Activity diminishes and range contracts. I am not sure how to interpret the volume behavior inside the range. Activity and range clearly increases to the downside in the lower half of the range. Is this the “composite man” supporting the ETF while distributing stocks to the “public” after a decent run (from 65 to 120 in 6 months…). Or is it the “composite man” accumulating from the “public” when they panic and sell as soon as prices start pushing downward. From D and up until today prices have rose further than I thought they would (since I’ve been interpreting the change in behavior as a sign of weakness), and today prices are up to the top of the range once again. If distribution is going on here I guess Wyckoff would suggest going short here with a stop just above the old highs? I guess that IF prices break to the downside a lot of that stock that has been accumulated around 112 will be thrown back at the market and cause a further decline. However, if I’m not able to interpret the behavior inside the range I will not see that until after prices break lower, which is too late to establish a position. It would be great if someone could comment on this cause I’m having a hard time interpreting this behavior.

I found this post on "Re: Trading The Wyckoff Way" interesting and have nominated it accordingly for "Topic Of The Month July, 2009"

Another chart that I find to be interesting is the UYG chart. Looking at the chart one can see that each successive down leg is shorter than the previous one. Volume has been consistent in increasing as the index breaks to new lows. However, looking at the last break to new lows, the volume/activity didn't pick up. My interpretation of this is that for each down leg, buyers have stepped into the market (and thus the increased activity as the index reaches new lows). For each leg down buyers have been more aggressive (must have been so since the distance that sellers manage to push price decreases...) However, at the last push down activity didn't seem to increase. Thus, sellers might have exhausted themselves as activity is low and spread is narrow. Buyers now have their chance to take control and push prices higher. I would greatly appreciate if someone would take time to comment.

Thanks Head2k. Sounds reasonable to me. From that particular chart it is probably to early to read too much into it. If prices would break to the upside one could possibly look back and say that it has a decent base to run away from.

Posted is a chart over a ETF on the Swedish OMXS30 Index. I'm trying to understand the movements within the recent range and I have a hard time interpreting the way volume/trading intensity is behaving realtive to price. The market has, like most other markets, seen a rapid decline where selling preassure has been larger than buying preassure from late august to october. In october the market found a potential Preliminary Support @ around 70 and a possible Selling Climax of some sort occured @ around 65. A rally followed and the top of that rally (automatic rally?) marked the high of the trading range that has since developed. In the trading range that has since developed the volume/intensity is clearly larger at the bottom/lower half of the range than it is in the top/upper half of the range as marked by red / blue rectangles. I am not sure how to interpret this volume/intensity behavior. There seems to be more interest in the market in the lower half of the range where the volume/intensity increases and vice versa. Range on each individual bar also seems to be higher in the lower half of the trading range than in the upper half where the individual bar range seems to be smaller. What I'm trying to understand is of course if this action in some way indicates whether there is a greater likelyhodd of accumulation or re-distribution going on within the range. As I interpret it (pls correct me since this is what I am uncertain about) the is a greater likelyhood that accumulation is going on. Buyers are not yet ready to push the stock through the top of the range (jumping the creek) and therefore buying preassure diminishes as the stock reaches the top of the range. Selling preassure is also low up there. Sellers on the other hand are working hard to push the stock through the bottom of the range (as can be seen by the increased intensity in the lower half of the trading range) but buyers have (so far) stepped up to absorb the increased selling. Pls comment on above thoughts and posted chart.