InformedTrades
Register as a Member
    Why join? See our testimonials.

Register Front Page See Today's Posts Site
Map
Free Trading
Courses
Shop
Front Page > InformedTrades University > Home Grown > Stock Market Synergy Pro Coaches | Broker Matrix

 
Thread Tools Search this Thread Display Modes
Old 02-19-2010, 10:12 AM   #1 (permalink)
 
Join Date: Feb 2010
Posts: 26

Thanks Stats
Thanks (Given): 0
Thanks (Received): 6

Climactic Action


The business of accumulating a stock is like any other campaign. It requires planning,
good judgement, effort, concentration, trading skill and money to buy stock in very
large amounts without putting the price up against your own buying.
[Tom Williams (TW)]

The terms "bear" and "bull" are thought to derive from the way in which each animal attacks its opponents. That is, a bull will thrust its horns up into the air, while a bear will swipe down.
[Source: Investopedia]

Nailing market tops and bottoms is impossible, but there are signs that increase the probabilities during relatively shorter timeframes or trends. Add to that the ability to recognize Tests and Traps SM uses to ShakeOut resistance (detailed in later lessons) and the SM Campagn lights up. Notice that single bars are evaluated as clues, multiple bars reveal tactics, but the campaign comes in waves of accumulation and distribution based on the levels of supply and demand. During these waves are the phases of Mark Up or Mark Down which tend to run as Trends.


Trends

A market moves up not necessarily because there is more buying than selling going on, but that there is no substantial bouts of selling [profit taking] to stop the up move. Major buying [demand] has already taken place at a lower price level during the accumulation phase, until substantial selling starts to take place [appears as excessive volume on up bars] the trend of the market will still be up. A bear market takes place not because there is necessarily more selling than buying as the market falls day after day, but because there is insufficient buying [support] from the major players to stop the down move. Selling has already taken place during the distribution phase at a higher price level and until you see buying coming into the market [excessive volume on down bars], the market will remain bearish. There is little or no support in a bear market [buying] so prices fall. Herein lies the reason markets fall much faster than they rise... [TW]

Climax: the peak, the extreme or the end of something and as the point of highest dramatic tension or a major turning point in the action. Some synonyms are: top, pinnacle, height, maximum, consummation, culmination or turn of the tide. What does a climax do? A climax stops a trend either temporarily or permanently depending on the subsequent action. A climax is preceded by some sort of a trend.

Climactic action is hall-marked by wide spreads up on very high volume, but the price does not respond upwards. A good trader will now be looking to short the market or sell calls on any low volume up-move (no demand). [TW]

There are two tactics that are used when a Trend is about to reverse: the Selling Climax and Buying Climax.

An important point here is to know the tactics of Retracements versus Reversals. Retracements have: a lack of volatility; small Spreads; and decreased Volume. Reversals, on the otherhand, have: increased Volatility; large spreads; increasing volume. To see this on a chart simply draw arrows for the stock movement and the volume. In retracements the arrows are in the same direction; in reversals the arrows will be in opposite directions.

The Buying Climax

There are two types of buying climactic action seen in the indices with only one major distinction. After a substantial bull move has already taken place, the market moves even higher on wide spreads up. Good news, excitement, elation abounding. You observe the volume is Ultra-high. This indicates that you may have seen a buying climax. [TW]

If the volume is seen to be exceptionally high, accompanied by narrow spreads into new high ground, you can be assured that this is a ‘buying climax’. It is called a buying climax because to create this phenomenon there has to be a huge demand for buying from the public, fund managers, banks and so on. It is into this buying frenzy, that syndicate traders and market-makers will dump their holdings, to such an extent that higher prices are now impossible. In the last phase of the buying climax, the market will be seen to close in the middle or high of the bar.

Those traders that have been waiting to buy start buying - afraid they will miss out on a bigger move up. Even traders that already have positions, buy more. This gives the SM a chance to unload huge amounts of their holdings in this stock, bought at lower levels, without moving the price down against their own selling. After this Buying Climax they sell the stock short, knowing that there is no support or demand at these high prices. This process guarantees huge profits.

The Buying Climax (BC) is the climax ending an uptrend. The buying gradually builds up & builds up and finally comes in with a rush until it exhausts itself on the BC. The BC has increased volume and a widening spread as it moves up. Following a BC one of two things can occur, either a Automatic Rally (AR) or a lateral move. This in turn is followed by one of two things: either a continuation of the uptrend or a Secondary Test (ST). If the supply is to weak to drive the stock down or demand to strong to allow it to go down instead of having the AR the stock will have the lateral move. Usually however, it will have some form of an AR. That AR may have increased volume, heavy volume or no volume. It may have wide price spread, or relatively narrow price spread.


The Selling Climax

The news will definitely be 'bad' This, together with the pain of previous falls will panic the herd into selling. This will give SM the opportunity to place substantial amounts of money into the market at bargain prices. Ultra wide spreads down, with exceptionally high volume, usually closing on or near the highs of the day. If the price action does not close on the highs but on the lows and the next day is up closing on the high, this can be regarded as similar action. Add more bullishness if the news is really bad. [TW]

The classic characteristics of a selling climax:
  • Abnormally large volume
  • Wide spreads
  • An acceleration of the downtrend

In the chart below there is a Test for supply (2nd bar in red box), then only light volume and a Spring Trap. This was the go-ahead for the rally to begin.


Back to Wyckoff: "Abnormally large and swift volume expansion marks a turning point."





Spot the tests and traps; Buy and Sell Climaxes in these videos:

Sam Seiden webinar on Supply and Demand

From ITU:
Bear Traps
How to Spot Market Tops
Trend Reversals
High Base Breakouts

Some interesting, almost VSA, Candlestick videos:
Candlestick Sentiment
Harami Candle Patterns


Rally: A short term advance in the price of any securities or class of securities. When rallies, or uptrends are stronger than the reactions, Demand is stronger than Supply. You will be able to judge the Supply & Demand on basis of the Price action, Volume and Time. There is a widened spread and an increasing volume on the rallies. On the reaction there will be decreased volume and a comparatively narrow spread compared to the rally, indicating less selling on the reaction then there was buying on the upside. In an up-trend you should not have prolonged price weakness or massive dumping of stocks on the reactions.

Automatic rally (AR): Following the Selling Climax one of two things may happen: an AR or a lateral move. This is then followed again by one or two things either a Secondary Test (ST) of the Selling Climax or a continuation of the down move. To understand this we must go back to what happens on the Selling Climax: The Selling Climax is caused by panicky liquidation, panicky selling. The price is driven down to far and this creates a vacuum and as soon as the down move has been stopped the stock should begin to rally. We call this the AR because it occurs automatically. Generally the AR lasts for only a few days to about a week. The rally may be weak or strong. It may be however, so weak and the supply press on the market so strongly that instead of being able to rally well the price simply moves sideways for a couple of days, or perhaps for as much as a couple of weeks and a lateral move will then continue the downtrend. If there is a simple lateral move the stock is far more likely to continue the downtrend then if there is a good rally.

Reaction: A short term decline in the price of any securities or class of securities. When reactions, or downtrends are stronger than the rallies, Supply is stronger than Demand. You will be able to judge this on the basis of the Price action, the Time and the Volume. Volume should remain good, strong, on the downside, the rallies however should be relatively weak indicating a lack of Demand. There should not be wide spread or increased volume or sustained increased volume and it might take quite a bit of time on the rallies. The main point is that you have a unbalanced condition in the Supply and Demand with Supply good on the downside and a lack of Demand, weak Demand on the rally.

Automatic Reaction: Following the Buying Climax is the Automatic Reaction: As with the Automatic Rally, the time factor here is generally measured in days. The extent of the reaction depends on how completely the demand is exhausted and how extensive the first wave of short selling is. The Automatic Reaction will also be limited by renewed buying buy those who see the reaction as a way of acquiring stock at bargain prices, and by the fact that the reaction does not have any significant preparation in advance to sustain it.

Secondary Test: Immediately follows the Automatic Reaction. There should be less selling than on the Selling Climax. Evidenced by the decreased price weakness, the narrowing of the Spread and especially by the Decreased Volume. At that point the down move has been stopped. The stock may go through redistribution, accumulation, or a trading range in which nothing of importance is going on. There may be repeated secondary tests depending upon the ability of the professionals to absorb the supply and the continued existence of that supply.



StockMarketSynergy is offline   Reply With Quote
 
Old 03-15-2010, 04:04 AM   #2 (permalink)
 
Join Date: May 2009
Posts: 24

Thanks Stats
Thanks (Given): 0
Thanks (Received): 0

Hi, referring to "To see this on a chart simply draw arrows for the stock movement and the volume. In retracements the arrows are in the same direction; in reversals the arrows will be in opposite directions."

I have attached a chart below. Did I draw it correctly?

wuming79 is offline   Reply With Quote
 
Old 03-15-2010, 09:52 AM   #3 (permalink)
 
Magic's Avatar
 
Join Date: Jun 2008
Location: USofA
Posts: 970

Thanks Stats
Thanks (Given): 0
Thanks (Received): 13
Send a message via Skype™ to Magic

Quote:
Originally Posted by wuming79 View Post
Hi, referring to "To see this on a chart simply draw arrows for the stock movement and the volume. In retracements the arrows are in the same direction; in reversals the arrows will be in opposite directions."

I have attached a chart below. Did I draw it correctly?
Yes. I've also included another chart showing the climaxes.
__________________
My Blog: Stock Market Magic
SDA Course: Stock Market SYNERGY
Magic is offline   Reply With Quote
 
Old 03-15-2010, 09:16 PM   #4 (permalink)
 
Join Date: May 2009
Posts: 24

Thanks Stats
Thanks (Given): 0
Thanks (Received): 0

Quote:
Originally Posted by Magic View Post
Yes. I've also included another chart showing the climaxes.
Hi Magic. I find that the volume lines can change direction suddenly with no warnings. Example the 3rd retracement I drew, before the long spike in volume happen, it can give the impression that it's a reversal instead. Are there other things that will reinforce whether it is a retracement or reversal?
wuming79 is offline   Reply With Quote
 
Old 03-16-2010, 01:38 AM   #5 (permalink)
Unregistered
 
Posts: n/a

Thanks Stats
Thanks (Given):
Thanks (Received):

Look at the background


Quote:
Originally Posted by wuming79 View Post
Hi Magic. I find that the volume lines can change direction suddenly with no warnings. Example the 3rd retracement I drew, before the long spike in volume happen, it can give the impression that it's a reversal instead. Are there other things that will reinforce whether it is a retracement or reversal?
If i were to just look at the third down leg it is weak. However, looking at the back ground, there was no serious distribution. A market cannot go down much without the absorbtion of demand which can only be accomplished thru distribution and over some time. There was some short and small distribution but it cannot have sustained a sell off. That last reverse uptrust gave it away. Volume also peaked then.

Forexer
  Reply With Quote
Old 03-16-2010, 11:31 AM   #6 (permalink)
 
Magic's Avatar
 
Join Date: Jun 2008
Location: USofA
Posts: 970

Thanks Stats
Thanks (Given): 0
Thanks (Received): 13
Send a message via Skype™ to Magic

Quote:
Originally Posted by wuming79 View Post
Hi Magic. I find that the volume lines can change direction suddenly with no warnings. Example the 3rd retracement I drew, before the long spike in volume happen, it can give the impression that it's a reversal instead. Are there other things that will reinforce whether it is a retracement or reversal?
Indeed there is. one tell is news events. That spike must have been news related for so much panic. You must keepup with the news - not necessarily to trade off it. Political and world-wide economic events can lead to trading disaster. The /ES is volitile and it's underlying - S&P 500 - is the master chart of all charts and will reflect world, as well as, US news.

I plan on adding something on Sentiment. This will hopefully provide a rich resource of background information when trading. I just don't know when I'll get around to completing it. It will include the sentiment factors already on my blog: cot, vix, futures curves, interests yields, etc.

Happy studying...
__________________
My Blog: Stock Market Magic
SDA Course: Stock Market SYNERGY
Magic is offline   Reply With Quote
 
Old 03-16-2010, 08:54 PM   #7 (permalink)
 
Join Date: May 2009
Posts: 24

Thanks Stats
Thanks (Given): 0
Thanks (Received): 0

Quote:
Originally Posted by Magic View Post
Indeed there is. one tell is news events. That spike must have been news related for so much panic. You must keepup with the news - not necessarily to trade of it. Political and world-wide economic events can lead to trading disaster. The /ES is volitile and it's underlying - S&P 500 - is the master chart of all charts and will reflect world, as well as, US news.

I plan on adding something on Sentiment. This will hopefully provide a rich resource of background information when trading. I just don't know when I'll get around to completing it. It will include the sentiment factors already on my blog: cot, vix, futures curves, interests yields, etc.

Happy studying...
So before the news, on the down move, one could have got caught in the "reversal" because volume and moving down while price is moving up until the spike in volume turned the whole table around and made the move become a retracement instead?

Is it possible to study world news, major indices correlations, sentiment studies altogether just before trade begins? I was wondering how do I squeeze everything together into 1.5 hrs before US market open as I am working in the day (in Asia).. Is there any article on how to allocate our time on each segment and what we should focus on toform the opinion to trade?
wuming79 is offline   Reply With Quote
 
Old 03-16-2010, 09:25 PM   #8 (permalink)
 
Magic's Avatar
 
Join Date: Jun 2008
Location: USofA
Posts: 970

Thanks Stats
Thanks (Given): 0
Thanks (Received): 13
Send a message via Skype™ to Magic

Quote:
Originally Posted by wuming79 View Post
So before the news, on the down move, one could have got caught in the "reversal" because volume and moving down while price is moving up until the spike in volume turned the whole table around and made the move become a retracement instead?
Yes. News is one of the fundamental factors in VSA. SM has money, but not enough to push the markets on a whim. They must use crowd psychology to get the crowd to help hang themselves and they use news events as the triggers much of the time. That is, they create confusion then make major moves when news can help trigger the reaction they want.

Quote:
Is it possible to study world news, major indices correlations, sentiment studies altogether just before trade begins? I was wondering how do I squeeze everything together into 1.5 hrs before US market open as I am working in the day (in Asia).. Is there any article on how to allocate our time on each segment and what we should focus on toform the opinion to trade?
Much of this is like weekend homework. The cot reports are a week late getting out so once a week is good enough. A quick check on the vix and futures curves can tell a lot about the general direction for long term prospects. And listen to the news (mostly as a contrarian indicator) for anything that could affect your trading. It will be a game of catch-up for a while, later you'll find it much less time consuming and your filtering process will get attuned to the nuances: in your chart reading you'll begin to see how SM plans for then uses news events.
__________________
My Blog: Stock Market Magic
SDA Course: Stock Market SYNERGY
Magic is offline   Reply With Quote
 
Thanks thanked for this post
  




Tags
accumulation distribution, bull bear traps, price action, price spread, smart money, support and resistance, up-thrust, volume spread analysis, wyckoff method, spikes

Help InformedTrades grow. Click +1 if you enjoyed this thread.

Register to Comment
Thread Tools Search this Thread
Search this Thread:

Advanced Site Search
Display Modes

Posting Rules
You may not post new threads
You may post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are Off



All times are GMT -5. The time now is 11:59 PM.


Creative Commons License
InformedTrades is dedicated to empowering traders with knowledge. Learn more about our mission statement and our content licensing.

Powered by vBulletin® Version 3.8.5
Copyright ©2000 - 2014, Jelsoft Enterprises Ltd.
Search Engine Optimization by vBSEO 3.3.2
vBulletin Optimisation by vB Optimise (Reduced on this page: MySQL 5.66%).
vBCommerce I v2.0.0 Gold ©2010, PixelFX Studios
vBCredits v1.4 Copyright ©2007 - 2008, PixelFX Studios