A Wyckoff Student Notebook

I had been charting WDC also, and found it difficult to identify the PSY and the BC; or that is, the change of character. My best guess is what is shown below. I'm not convinced WDC is distribution yet because I don't think the SOW ADA shows had enough volume, volume that stands out on the chart (out-standing volume) to justify a SOW. Also, looking at the past month it seems like the dips have been on decreasing volume and all those dips are on lower volume than that fall into the spring. Is supply drying up? I think we need to see how it tests the top of that high-volume bar that fell into the spring (lite-green line at 84.79) and those other bars from a couple weeks ago (just below the lite-green line).
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For the benefit of any newbs, it came into this trading range (TR) from an uptrend, so demand does not need to prove itself. On the other hand supply would need to prove itself to reverse the trend. A sign of weakness would show that the CM is no longer supporting the trading range and therefore it was distribution. But so far I'm not sure we've seen the composite man (CM) give it up to the public (he is still supporting the TR)....he may be re-accumulating.

CM = the aggregate of all the big players and insiders who have the ability to contain price in a TR because of their ability to concentrate capital. The public can't do that; the public's capital is fragmented. When the public holds most of the float the price is at the whim of the wind which is the condition ADA alluded to, that is, one can expect increased volatility when nearing the end of a distribution TR because the public ownership is growing. The CM on the other hand has a campaign plan. He does his work in the TRs. He accumulates in TRs, the public marks it up, and then the CM distributes in a TR. If he is accumulating he is trying to get control of the float in order to shrink the supply available to the public for trading.......if the supply of stock (the float) goes down and the CM is done accumulating, then he will allow the price to go up, and it will go up with just a little demand from the public (supply and demand principle).

Daily vertical chart:

 

It appears like BAC is ready again.

Weekly:


Daily:


50-cent-box by 3-box-reversal Point & Figure:

 

I invented it, ; not. I'm not sure if Wyckoff did it first but Hank Pruden and Bruce Fraser did/do.

 

Yep, I don't disagree with any of that. To summarize, there's a possibility this most recent gap down could turn into a sign of weakness (SOW) which is needed for the bear case. On the other hand today's downgrade by Morgan Stanley based "on an expectation that prices of NAND flash chips are peaking" sounds like words of the weasel to me and I can't help but suspect the ulterior motive here. Again, we need to see how it comes into and around that 84.79-line. If we get a key reversal here, (edit: a terminal shake-out) that'd be pretty dang bullish and a great entry....or not if it breaks hard.

Daily, 10 or so minutes before noon cst:

 

Some favorite Richard Wyckoff words circa 1931 or perhaps earlier:

A stock carries the earmarks of its chief sponsors. Its action usually
indicates the character, methods and ability of those who operate heaviest in it.
(Sect. 14M, Pg. 12, Pars. 2-4 and Pg. 13, Pars. 1-3).

Like individuals, stocks have certain characteristics with which one becomes
more and more familiar as he studies intensively their past and current
movements. The market is made by the minds of men, and all the fluctuations in
the market and in all the various stocks should be studied as if they were the
result of one man's operations.

Let us call him the Composite Man, who, in theory, sits behind the scenes
and manipulates the stocks to your disadvantage if you do not understand the
game as he plays it; and to your great profit if you do understand it.

Not all of the manipulators’ moves can be detected. Not all of the moves
are made by manipulators. In fact it does not matter to the tape reader or the
chart reader whether the moves are real or artificial; that is, the result of actual
buying and selling by the public and bona fide investors or artificial buying and
selling by large operators. Most of the important, moves in the market are
prepared, executed and concluded, and it is my business to show you how a large
number of these trading and investment opportunities may be spotted in time to
take advantage of them.

The preparation of an important move in the market takes a considerable
time. A large operator or investor acting singly cannot often, in a single day's
session, buy 25,000 to 100,000 shares of stock without putting the price up too
much. Instead, he takes days, weeks or months in which to accumulate
his line in one or many stocks. He prefers to do this while the market is weak,
dull, inactive and depressed. To the extent that they are able, he, and the other
interests with whom he works, bring about the very conditions which are most
favorable for accumulation of stocks at low prices. (Pg. 9, between A & M.)

When he is ready to go forward with his campaign he waits for a
favorable market and then proceeds to mark the price up, gradually or rapidly,
as the situation warrants. (Pg. 9, from N to Y and Pg. 10, from BB to FF.)

If he knows of some favorable announcement that will appear in thirty or
sixty days, his operations will be timed so that the rise will culminate about that
time. You have often noticed that a stock will sell at the highest price for many
months on the very day when a stock dividend, or some very bullish news,
appears in print. This is not mere accident. The whole move is manufactured. (*)
Its purpose is to make money for inside interests — those who are operating in
the stock in a large way. And this can only be done by fooling the public, or by
inducing the public to fool themselves.

When an operator wishes to attract buying from the public he advertises
his stock on the tape by making many transactions, great activity, and by trading
in a large number of shares. This creates what is termed a "broad market"
(exemplified on large scale by the Chart, Sect. 7M, Pg. 33, Feb. 10th to Mar. 2nd
and Sect. 9M, Pg. 10, between FF and NN; and on small scale by Buying Climaxes;
Jan. 9th, Sect. 7M, Pg. 33). Great activity and breadth induces trading in
large quantities by big operators on the floor and outside. Such a market enables
the manipulator to unload a large line of stock. When he wishes to accumulate a
line, he raids the market for that stock, makes it look very weak, and gives it the
appearance of heavy liquidation by sending in selling orders through a great
number of brokers (illustrated on large scale by Sect. 7M, Pg. 33, Dec. 16 & 17;
and Sect. 9M, Pg. 9, D to G. Sect. 9U, Pg. 9, at M and at U exemplify the idea in
the case of smaller scale maneuvers).

You say all this is unethical, if not unscrupulous. You say it is a cruel and
crooked game. Very well. Electricity can be very cruel, but you can take
advantage of it; you can make it work for your benefit. Just so with the stock
market and the Composite Man. Play the game as he plays it. I am telling you the
rules. I am giving you the inside view.

The large operator does not, as a rule, go into a campaign unless he sees
in prospect a movement of from 10 to 50 points. Livermore once told me he
never touched anything unless there were at least 10 points in it according to his
calculations.
_______________________________________________________________
* Some people might object to this statement on the ground that regulation
of the stock market has eliminated pool operations.
Even though pool operations and old-fashioned manipulation are banned
by law, for our purpose in studying, understanding and correctly interpreting
market action, we must consider any operation a "manufactured" movement
wherein the buying or the selling is sufficiently concerted and coming from
interests better informed than the public as to produce the same effects as pure
manipulation.

 

I remember when I was in Junior High (7th, 8th, 9th grades) back in the early 70s, me and a buddy used to track the daily fluctuations of Alice Chalmers in the daily paper. They made tractors and farm equipment of course but also heavy machinery for industry. They've long been consolidated into Navistar. From the newspaper you'd get the open, high, low, close, and volume. Nothing has changed except that the ease of charting that data is incredible now. I could never have imagined charting intraday charts back then, wow. In those days you had to chart by hand or buy charts from a charting service, like Value Line or the Wyckoff Institute or visit your brokerage office often. I remember all the old guys in the reference section of the public library pouring through the Value Line charts and valuation data trying to find their next race horse I guess. If you plotted yourself and were watching a paddock of stocks you'd keep track of them using point & figure charts because plotting vertical charts like we are more familiar with now took a lot more time and was only done for your current holdings and top picks. But even then they were plotting moving averages and oscillators and drawing patterns and all sorts of mechanical non-sense and believing that if they could only ingest enough fundamental data they could find a winner and all that without any sense of understanding of how the market really worked. So even though we have all this wonderful technology to plot any chart of any time frame we wish, nothing has really changed from then. The public for the most part are fooled or worse yet just blindly investing pay period to pay period. There was a man however by the name of Richard Wyckoff who's mission was to tell the truth about markets, but his special knowledge did not come cheap. As I understand, even back in the early 30s his course material sold for $3500. That was like the price of the typical house I think. One of the top Wyckoff students/mentors today, David Weis, talked about his days working for a brokerage, probably about the same time as my buddy and I were tape reading Alice Chalmers. He said that he had an opportunity to take the course and in those days they talked about the Wyckoff course in hushed tones; it was not something the brokerages wanted everyone to know.

 

I would say that the SOW you show with a question mark, does not qualify as a SOW. For one, the high-range close shows that buying stepped in and overcame selling. Also, a SOW should occur in the right-hand side of a trading range. Here the trading range continued on with signs of further support by the CM. The SOW occurs when the CM has finished his distribution and no longer has to support the range leaving the stock almost entirely in the weak hands of the public. Without the support of the range by the CM the public would have sold it off and that did not happen.

Also, a UTAD usually occurs rapidly on high volume. Here the rise was a steady stair-step climb on fairly normal volumes. As you alluded, since demand has already been proven itself the price can rise on normal or even light volume.

 

Bruce Fraser's latest Stockcharts blog concerns the P&F targets being met on the semiconductor ETF, SMH. Which is pertinent for my AMD holding and to ADA's WDC discussion above.

http://stockcharts.com/articles/wyckoff/2017/12/do-semiconductors-still-compute.html

I don't agree with his "larger" 1x3 count. I would've counted only back to the BC. He appears to take the liberty to count further back to get a price target that agrees with his 60-minute count without any explanation. C'mon man!

 

I still use the free version, but having been a long time user, I still have access to more than just a couple study windows/frames. However, if I delete any of them now, they won't come back...so I'm stuck with the studies I have...which is probably a good thing.

As ADA said, look in the upper left for this "+" icon. Once you press that you'll get control icons for all the windows/frames in your chart.

Also, as ADA said, look for the "gear" icon to change your main and study window properties. I use a separate window for volume and use the histogram choice. Using the "Area" choice for the "Volume MA" shades it in and obscures the underlying volume bars. I use one of the "line" choices for "Volume MA" and also diminish the average volume line by selecting a line color that matches my background color, as I'm not interested in averages. ​

 

So based on your chart above, that MGM looks ready to go. Is that your take on it?

 

You might be right to be cautious. The 0.5x3 PnF may be saying it has more work to do so that this re-accumulation (stepping stone) projection matches the base count projection