PrymeTime's diagram was created by David Weis. I'm still not sure I understand the difference between a sping and a shakeout but I will look at it a little more. I know in the SMI course there are some number of springs each identified by a different number but I think this just complicates matters. Maybe I'm thick.
Agreed. @DbPhoenix is very well-revered and has been a heavy contributor on several boards for eons. If I recall, he also wrote either the beginnings of or a full book. It was a few years ago when I last saw anything about it, so dunno what ended up happening with that.
Edit: After a tiny bit of Googling, it appears dbp definitely completed the book and it can be had for just $30. There is also a 23-page preview dbp makes freely available (see attached).
Luck is what happens when preparation meets opportunity. ~ Seneca
Last edited by omni72; February 17th, 2013 at 12:15 AM.
Reason: updated info on dbp's ebook
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The difference is based on context or where it occurs in relation to the previous price action. A spring occurs only when a previous area of support is broken and then price 'springs' back above support. That triggers stops of the longs and brings in new shorts who need to exit at a loss when price rises.
A shakeout is a more general bar, which will often be seen near the end of a swing down as a bar with high volume, closing near the high. A shakeout can be considered as a violent test of supply.
Well, I'm not exactly with you. I just happened to check in. But I'm afraid my presence here would be more disruptive than helpful since so little of this discussion has anything to do with Wyckoff (there are, for example, no "springs" in Wyckoff's course) but rather with the many adaptations of Wyckoff which have been circulated over the years, most if not all of which don't agree with each other, which serves only to make difficult and confusing what is anything but.
As for the "shakeout", this is clearly explained in Wyckoff's course, though perhaps not in the various adaptations.
A Terminal Shake-out is a rapid or precipitous downward movement, occurring at or near the end of a period of preparation for an advance. In the case of deliberate manipulation, the purpose of the terminal shake-out is to scare holders of stock into selling out; to catch stops which may have been placed on long positions below the previous line of supports in the accumulation zone, in other words, mop up as much cheap stock as possible; and to encourage short selling around the bottom on the part of the public. After the bag has thus been held for the weak holders and amateur shorts, the strings are pulled to lock in these shorts and to shut out the sold out bulls. This may be done either by a gradual or by a rapid recovery in the price.
It makes no practical difference whether a shake-out is due to manipulation or panicky selling on the part of distressed longs. In either case, the selling that forces the sharp downward acceleration of the price movement is due to supply of poor quality. And the ensuing recovery is caused by the superior quality of the demand which is taking advantage of frightened sellers.
An ordinary shake-out has substantially the same characteristics as the terminal shake-out. The principal difference is that the word "terminal" is used to distinguish a sharp downward thrust which occurs after extensive preparation for a rise and the similar phenomenon which appears at other points in the price movement as, for instance, an exaggerated selling climax (Sect. 7M, Pg. 53, Dec. 16th). A minor selling climax terminating a reaction, such as shown at "U" on the chart, Sect. 9M, Pg. 9, likewise is in the nature of a shake-out.
Note that shakeouts generally take place in accumulation zones. Since there is no accumulation -- or distribution -- in futures, interpreting what appear to be shakeouts is somewhat more tricky. This is not to suggest that those with the money to move markets do not push price down in certain circumstances in order to rattle longs. The goal of this effort, though, is not the same as that of the shakeout since nothing is gained by prompting longs to sell their contracts as there is no float, i.e., no finite quantity of contracts to be had.
In short, if one is to understand the dynamics of the shakeout and the thrust, he must first understand accumulation and distribution, and, for that, I again suggest that he study Wyckoff's original course. Which happens to be free. The course also provides the added benefit of chart examples.
I should also point out that what one calls any of this is not nearly as important as understanding what buyers and sellers are trying to do. If one can get past the jargon and the bars and so forth and focus on the respective goals of buyers and sellers, he will understand exactly what it is he's looking at and exactly what he should do about it, if anything. What he calls it won't even enter into the equation. And there won't be any reason whatsoever for confusion, nor to pay somebody to show the trader what to do.
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