Wyckoff Accumulation/ Distribution (WAD)- Day Trading NF

primitivetrader

Well-Known Member
#11
3-12-20 NF 1M chart. this is a very complex accumulation (as it happened very fast on 10-15 bars only also not all points of accumulation were there) that happened @ support of the trading range in which price remains for the day. the trading range was the range of 1M candle for the day.
 

primitivetrader

Well-Known Member
#13
3-12-20 NF 5M chart with lots of confusion. this is from my daily practice.
so in hindsight, it was a reaccumulation. there are a couple of great learning points in this chart particularly the spring action late in the trading range, which suggested it was a reaccumulation. very imp chart for me.
 

primitivetrader

Well-Known Member
#15
4-12-20 NF 1M chart. a nice example of all concepts working together. the only reason to trade this short is very small sl
 

primitivetrader

Well-Known Member
#16
Let's bring the heavy stuff now...

A coming couple of posts will focus mainly on accumulation/reaccumulation theory and schematics. after that distribution and redistribution theory and schematics. It is difficult stuff (neither the concepts are easy, nor simple to learn and apply). I am not an expert in it. but good at it and keep learning about it.

my coming posts won't teach you anything as I am not a teacher. at best you may find the posts and theory interesting and may you also start your learning of these concepts.

What I can share is that it works and works well with tight stop loss and very high R: R irrelevant of time frames.
 

primitivetrader

Well-Known Member
#17
Accumulation:

below is the accumulation schematic # 1. all said and done it is just a pattern like any other in technical analysis. It's a broad pattern and PA and volume may not unfold like this all the time. there are endless variations to it. but concepts are the same.


below are the points, which are happening in the above schematic. one by one I will go through them. later on share NF 1M chart of 4-12-20, which had an almost picture-perfect accumulation #1 pattern.

1) change of character (CHoCH)

2) events:

Phase |A|
  1. preliminary support (PS).
  2. stopping action- selling climax (SC).
  3. automatic rally (AR).
  4. secondary test (ST).
Phase |B|
  1. secondary test in phase |B|. they can be multiple.
Phase |C|
  1. spring/shakeout
  2. test of spring
Phase |D|
  1. sign of strength (SOS).
  2. Last point of support (LPS).
  3. jump across the creek (JAC)/break of structure (BOS).
  4. back up action (BUA)/ back up to the edge of the creek.
3) phases boundaries.

the most imp phase is phase |C|. on smaller time frames like 1-2-3-5M, not all the phases may happen and may not visible.

in the coming posts, I will share details about each point.
 

primitivetrader

Well-Known Member
#18
1) change of character (CHoCH) - it's a structural change in PA.

PA moves from contraction to expansion to contraction or we can say from non-trending to trending to non-trending. It's an ongoing cycle.

let's assume PA is in a downtrend and there comes a point where price catapulted and we see some sort of stopping action. most of the time a rally happens from this point which is impulsive in nature with widespread up bars closing near highs or above the middle with rising volume. this up rally should be better than the preceding rally(s) in terms of impulsiveness. this rally initiates a trading range (TR). this is the first CHoCH, where the price stops and moves from the downtrend into the TR.

at some point in time PA after completing the accumulation starts a markup phase, which again is a rally. this second rally should be leaving the TR. also this rally should be better than the first rally (which happened after the stopping action) in terms of impulsiveness (widespread bars closing near the highs, rising volume & weak downside reaction on narrow spread bars with low volume. this rally is the second CHoCH where the price is leaving the TR.

below is the chart showing the CHoCH:-
 

primitivetrader

Well-Known Member
#19
2) events:

Phase |A|
  1. preliminary support (PS).
  2. stopping action- selling climax (SC).
  3. automatic rally (AR).
  4. secondary test (ST).
the above are the most important events in Wyckoff accumulation. they have to occur in this sequence only. if they are not there or one of them is missing the accumulation may be happening but is not readable technically as per this method.

1) preliminary support (PS)- this is the first attempt to stop the price from going down in a downtrend. in other words it is some kind of minor climatic action. at times it comes like a tapered reaction swing (more horizontal than a vertical correction) in the downtrend with lots of volume happening, suggesting buying coming in.
substantial buying begins to provide pronounced support after a prolonged down move. volume and the price spreads widen and signal that the down move may be ending in the near future.

2) stopping action (SC)- widespread bar(s) closing in the middle, with ultra high volume and the angel of assent is steep. there is lots of supply but this supply is not of quality. it's a panicky offloading of the stocks, thinking that a much deeper downside is near the corner. on EOD at times there will be some negative news related to the company or industry or economy or some other negative event. PA at times will get oversold in the trend channel or on technical indicators.
there is an exception to the widespread bar, which is a very narrow spread bar with UH volume as SC.. this is known as "bag holding" as per VSA. a very potent signal of SC. it indicates capping of price and absorbing the supply coming in on this bar. the low of the SC bar helps to demarcate the lower level of accumulation TR.

3) automatic rally (AR)- once most of the supply is absorbed on SC, PA without any significant supply will move up impulsively. this happens because of short covering along with contrarian buying by traders/investors. the high of the AT helps define the resistance level at the top of the TR.

4) secondary test (ST)- this is the reaction from the high of AR. it comes to SC (may go below SC, may stop above the low of SC or at the low of SC). ST is basically testing the area of the SC for supply and demand balance. if a bottom is to be confirmed that on ST significant supply should not come and volume and spread on the ST should both decrease as price approaches the SC support level(s). ST of supply may occur multiple times as the TR unfolds. if on ST supply is high it then needs to be again tested to check the supply.

below is the chart of 1M NF -7-12-20 showing these events in phase |A|. it is a difficult example as the price did not stop after ST and moved way below SC low. but the market and PA most of the time do not unfold as per textbook.

 

primitivetrader

Well-Known Member
#20
2) events:

Phase |B|
  1. secondary test in phase |B|- this ST is of SC as well as ST happened in phase |A|. multiple tests can happen in this phase. and ST may go below the support level of SC. here lots of random price action may happen and volume may also spike for unreadable reasons.
Phase |C| - this is the phase where the real action begins. if you can identify it correctly one can go backward also to find SC and AR.
  1. spring/shakeout- this is the test of the whole range. it occurs when the price drops below the support level but then (often immediately) return to the TR. these events usually occur late in the TR (last stages of the TR). if you see this, be prepared price may start the markup phase. it is basically a definitive test of available supply before a markup campaign begins. if the amount of supply on the break of support is light (low volume) the way is clear for sustained advances. heavy supply here often precedes a renewed decline. moderate supply (volume) usually means that there will be more testing for supply and that this may be the time to proceed with caution. a spring or shakeout also provides additional supply from weak holders at low prices.
  2. test of spring- market keeps on testing if there is heavy supply on spring/shakeout. a healthy test will be a minor correction with low volume may happen on 1 bar also. successful test(s) of spring/shakeout makes a higher low on lower volume.
Phase |D|
  1. sign of strength (SOS)- SOS can be a rally or a bar (focus on rally part). it starts at the lows of phase |C|. markup the prices through the whole TR. in SOS rally price commits above the resistance created by the highs of phases |A+B|. it is followed by price ability to sustain the above resistance. and then testing the resistance (now support) for supply (BUA). this is the final sign of CHoCH in phase |D|. preferably the SOS rally should be accompanied by widespread bars closing near the highs on increasing volume with shallow correction(s) on low volume. But it is not a must.
  2. Last point of support (LPS)- as we approach the right edge of the TRand LPS represents the low f an important reaction of a pullback, price does not fall below this level again during the TR. (despite the adjective "last", there can be multiple LPS(s).
  3. jump across the creek (JAC)/break of structure (BOS)- this is mostly SOS rally which cleared the resistance created by the phase |A+B|. there can be multiple creeks also. but the most important one is the resistance created by the high of AR.
  4. back up action (BUA)/ back up to the edge of the creek- once price JAC it test's the JAC for supply with some reaction or correction this is known as BUA.
this completes the basic accumulation after a downtrend.

8-12-20 NF 1M chart showing above events and phases as per my understanding.
 

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