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Wyckoff Trading Method
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Wyckoff Trading Method

  #291 (permalink)
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David_R View Post
SJ,

Its not a stock. Its the Crude Oil futures. In TOS the symbol is /CL for the continuous contract.

D

I see that in the Yahoo quotes the ticker is CLN11.NYM.

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  #292 (permalink)
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Pryme,

thanks for the mark-up. It makes sense as you described, but isn't the wide spread down bar on high volume weakness? In real time would we expect to see the next bar push lower if it was going to head lower? Many times I've seen that same type of chart patterns where you have the upthrust type bar where volume is high and it closes fairly low, but it takes time to work itself out before it drops. This time it didn't drop and I'm wondering how to be able to make that distinction. Shold we see heavy supply or follow through very early if it is indeed going to happen?

D



Hi David


the wide spread down bar on high volume in itself is a sign of weakness , but due to the background we have
where we have clear signs of strenght .. this one bar doesent change the whole picture .. so for it to change the
puicture of strenght .. we at least need to see a follow thru .. wich didnt happen..

also the lack of knowledge within a trading range is big .. as we have SOS and SOW .. .. we should take background into consideration aswell as the action on creek and ice ....

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  #293 (permalink)
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StockJock View Post
Nice analysis, PrymeTyme. I'm trying to understand how tests are done, so I marked up your chart as I see two tests. Please help me with this.

If I understand Test #1, it tests for supply.
If there is supply, the next bar would be a down bar or if there is no supply, the next bar would be an up bar.

As I understand Test #2, it tests for demand.
If there is demand, the next bar would be an up bar or if there is no demand, the next bar would be a down bar.

Is this why there are two tests? The reason why I ask this is that your analysis seems to be using VSA; whereas, I've tried to use Wyckoff. I would like to understand both. The way you chose your support and resistance is different than mine too.

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Edit: Thanks for you participation, PrymeTyme. I am interested in VSA, but maybe we can discuss this in a thread for VSA. If we can stick with the original Wyckoff method, this would help this thread.


Hi SJ


well fisrt off .. iam a wyckoffian .. and vsa is just a sort of rip off form wyckoff .. where there are used other tersm to describe some action .. also they tempt to go for bar to bar analysis .. where actually not every bar tells a significant story or at least adds to the story...


wyckoff is more about identifieng a process .. where we need background , bars wich add to the story and location .. where this action happened.. to make a conclusion.. and its not easy sometimes.. but other times its just jumps out .. and thats where we should trade .. remember if in doubt stay out ...


also retests of breakouts or climatic or stopping action is also wyckoffian logic...

Test 1

well . after the stopping action we have a reaction of five bars to the downside .. with small spreads and low volume . so this reaction is towards the SOS .. we can draw the conclusion that there is no interrest to teh down side... also notice that the work of five bars .. is taken out by one bar to the upside..


Test 2

this is an interresting bar .. its a wide spread donw bar on high volume . wich first rallied back to the upthrust
and closed on its low .. on high volume .. well there is still supply sitting there .. so it can be considered as SOW
and raise a red flag .. so know we need to watch how the story unfolds.. as we get no follow trhu iam still biased to the SOS .. as the wide spread upbar has to be taken out to consider the market weakl .. thats why a marked the low of the bar .. is this is taken out on high volume to the down side .. we have a weak market ...


on the other hand .. if the highs of the UT and the wide spread down bar is taken out .. we have our story of strenght confirmed .. and wait for a retest of creek .. to go long...

cheers

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  #294 (permalink)
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PrymeTyme View Post
the wide spread down bar on high volume in itself is a sign of weakness

Even knowing that every Wednesday candle at 10:30 will be a high volume bar, with a high spread, (except for holidays) do you still think you can assign special meaning to this bar based on its spread and volume? Does it really show weakness, from your perspective?

In one of Wyckoff's writings where he analyzes the NY Times Average 50 stocks from 1930-31, he takes into account volume anomalies; for example, he uses a mental "multiplier" for half trading days on Saturday to increase the "actual" volume from what is reported, and also notes special holiday volume.

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PrymeTyme View Post
well fisrt off .. iam a wyckoffian .. and vsa is just a sort of rip off form wyckoff .. where there are used other tersm to describe some action .. also they tempt to go for bar to bar analysis .. where actually not every bar tells a significant story or at least adds to the story...

PrymeTyme,

There are several off shoots of Wyckoff's method and each of them have their own valid prespective. Some how Wyckoff and his students were sucessful traders before VSA was developed. Could you help me by indicating where in Wyckoff's publications where he discusses bar by bar action. I admit I may have missed it and possibly you direct me the the publication and the page number. A quote from the book would be helpful.

Until then, the basic Wyckoff approach is his 5 step method.

Quoting 
Step 1:
Identify the trend and the position within that trend of the general market.
Step 2:
Select those stocks that are in harmony with the market, in a bull market stronger, in a bear market weaker, using the idea of relative strength.
Step 3:
Select those stocks that have built a cause for a potential move in keeping with our goals. Use point and figure charts to determine how far the stock is likely to move.
Step 4:
Determine the stock’s readiness to move and then analyze the vertical and figure charts with the help of the Nine Buying and Selling Tests.
Step 5:
Time your commitments with a turn in the general market using the three laws that govern all market behavior.

How does your discussion fit into the Nine Buying and the Nine Selling Tests? Can you provide a point and figure chart? Methods developed after Wyckoff may state that these things are not necessary, but isn't that negating what Wyckoff teaches? How can someone omit portions of what he taught and still say they are trading the Wyckoff method?

The point and figure chart also needs to show the horizontal and vertical counts. Wyckoff clearly states how support and resistance lines are to be drawn showing overbought and oversold conditions not only in ranges, but also in bullish and bearish trends.

Wyckoff teaches how to validate a trade with sector and market trends. VSA has its roots in the Wyckoff method, but it not the Wyckoff method. Please provide the quoted sections of resource materials that define your "Wyckoff" chart. As will I.

Quotation from Wyckoff's "Stock Market Science and Technique", Unit 1, Lesson 2, Defining Trends, page 19.


Quoting 
Defining a trading range requires two points to construct the trend channel and a third point to confirm the trend. The nature of the two points involved in setting up the trend channel depends on the type of trend that comes before it. The next exhibit (Exhibit 6) helps illustrate this.

The drawing at the top of the page begins with a down trend channel. Note that as the stock approaches its low at point "A" there is an acceleration in the rate of decline and the development of an oversold condition. The development of an oversold condition is not essential. It is pictured in this case to make the point more obvious. The other observation, that of the rate of decline accelerating is essential. It is this action that helps stop the decline. When it does, in this case at point A, it is possible to construct half of the trading range.

The bottom of the trading range is the support line or the support level. It becomes evident by drawing a horizontal line through the low point of the decline. The top of the trading range is the resistance line or resistance level. It is constructed parallel to the support level through a point at the top of the rally immediately following the point used to define the support level. These two points result in the lines that define the horizontal trend channel, but at this point the trend is still only a potential. What is needed is one more move; in this case, a reaction back down to or toward the support level, If the support holds, the trend is confirmed.

A trading range may also develop following an up move. It is still composed of a support level, resistance level and a confirming action, but the sequence of events is somewhat different. The drawing at the bottom of this exhibit shows this alternate method in which a trading range can be crested.

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  #296 (permalink)
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Wyckoff Analysis By the Steps: Step 1

Wyckoff Analysis -- By the Steps

Example: MGM, 6 Month Period, Daily Chart.

Step 1: Identify the trend and the position within that trend of the general market.

Quotation from Wyckoff's "Stock Market Science and Technique", Unit 1, Lesson 2, Defining Trends, page 19. Same as in post #295

MGM is listed in the RUSSEL 1000 Index

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Here is the MGM, 6 Month, Daily Chart

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Comparison Chart: MGM (bars) vs. RUSSEL 1000 (cyan line)

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Comparison Chart: MGM (bars) vs. Wyckoff Wave (cyan line)

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RUSSEL 1000 6 Month Daily Chart

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Wyckoff Wave 6 Month Daily Chart

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During mid-February 2011 through the beginning of May 2011 both MGM and its indicies were in a ranging trend and they are currently in a bearish trend.

Quotation from Wyckoff's "Stock Market Science and Technique", Unit 1, Lesson 2, Defining Trends, page 21.


Quoting 
....the down trend is pictured in the next exhibit (Exhibit 4). This type of trend is defined by a supply line and an oversold line. The supply line is constructed across points at the top of two consecutive rallies where the second top is at a somewhat lower level than the first. This line shows the path of least resistance in the downward direction. For a stock in decline, it provides a ceiling above the action. As long as the particular issue being traded remains below this ceiling, positions on the short side are justified. Once it is broken, however, those positions become more questionable.

... In order for the trend to be valid, the rallies used must be of similar significance. In the illustration, no pair of points except for the one that is used satisfies this important criteria.

The oversold line is designed to warn the investor when a decline is becoming excessive. It is constructed through a point at the bottom of the reaction between the two rallies used to define the supply line. It is drawn parallel to the supply line. When the market, or a stock, crosses below this line, it is said to be in an oversold position. The response to this is some type of corrective action, which is generally a rally. Many times, the establishing of an oversold position is a signal to close out short positions.

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Last edited by StockJock; June 9th, 2011 at 04:36 PM.
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StockJock View Post
I see that in the Yahoo quotes the ticker is CLN11.NYM.

CLN1 is a specific contract month. I don't recall which month N is, but of course they don't make it November.

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video for June 9

A look at crude and a quick on at gold.

title should say video #7.

d



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TF Daily

I showed a TF chart a few post back in the thread. Since then we have broken the ICE, but at another support area and oversold in the trend channel. If there is a rally and the volume is light it could test the ice and fall off again.

D

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6E Daily


6E (Euro) Not looking too strong at the moment. It may sell off a bit. Not 100% sure, but we will see.


D

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