All language subtitles for [English (auto-generated)] Session 02 WTC January 14, 2019 [DownSub.com]

hello everyone today is January 14th and

this is our session number two of the

work of trading course we had a really

good session first session that was

Alexa a lecture session today just

because we haven't covered a lot of the

material last time or at least as much

as I uh planned uh to cover we're just

gonna probably be still in the lecture

mode today but starting from the next

session where we will discuss the

homework on accumulation specifically

Home Depot that would be the case study

for us for homework

um then I will start pulling out people

and we'll start conversing and we'll

start talking and we'll start analyzing

so we'll get to this point don't worry

about this guys

the main thing to remember

um is that once you have their homework

what I really would like you to do

and this is going to be extremely

important to us is to submit your

homework in a specific way one file

uh either PowerPoint PDF or word doc and

then put your first name with the last

name and initial in the name of the file

email it to me to my personal email I've

sent out you know instructions for the

homework

and I've mentioned that my personal

email simple caught at hotmail.com is

the one that you should use

I will remind you again I will email you

again I will also will email you tonight

the home page for our class so this page

usually will contain

the videos and the slides so I will

email you the link to this page because

it's unlinked so you cannot see this

page on our website

and then I will email you the password

to that page it's a password protected

so and I would like to ask everybody to

be confidential about the you know the

access information it's only for your

use

okay

let's talk about what we're going to

cover today and what's coming

so session number two we're still on the

price structural analysis we're going to

talk today about the change of character

this is a very simple concept very

elegant and very powerful so we will

explore the reasons of why we need to

understand the change of character uh

what it leads to and what kind of

assumptions deductions we could make out

of that on the analytical front and then

once we will understand that shift that

change of character provides from one

environment to another we're gonna

reside for a while in the environment or

in the non-trending environment with the

bias to the upside so both accumulation

and re-accumulation will be discussed

there we will be discussing like of

events Wyclef phases

and we'll talk about the phase analysis

a little bit today

um on the reaccumulation we will have a

conversation about conventional and

alternative labeling so we'll revisit

that and that will be extremely helpful

for your homework so guys please pay

attention so especially those of you who

are going to do their homework and then

time permitting we're going to start

covering price structural analysis

points um that um

are going to be related to both

accumulation and distribution but there

are certain things certain events

certain phases certain shortcuts that

I'm gonna give you and we'll talk about

different characteristics for different

work of events so in this conversation

starts today

for your homework this is the one that

we haven't done for this class so this

is going to be an accumulation labeling

and as I mentioned it's going to be off

the Home Depot

all right and then um in the next class

which is going to be a January 21st we

still cover in price structural analysis

we will review our homework so there

will be a lot of questions every cycle

there are so many questions the students

sent on with in their emails with their

homework this is fine you can do this

just don't expect me to answer those

emails

um you know uh

via emails because I just don't have so

much time to answer each email that

comes to me but I will my promise to you

is that I will look through all of your

homeworks that's number one secondly I

will identify what is the common theme

for mistakes that we are as a group

conducting and therefore those are going

to be the primary questions that we're

gonna answer

um in our homework review also with the

homework review this is the chance for

for us to establish that communication

where I open up the microphone and

somebody steps in a volunteer and then

we go through the chart first and we go

through the logic of labeling how we're

labeling the chart what's going to be

the first thing to label what's going to

be the next thing to label and so on so

forth so please be prepared for this

type of the conversation for the

discussion of the homework uh for in the

next class then and we're gonna continue

uh exploring all of the price structural

analysis points distinctions

uh something that you know

we we either gonna cover more or we're

going to cover in general there's going

to be some distributional things that

I'm going to add to this as well and uh

next session also will be devoted to a

distribution so we'll talk about work of

events there like a phases

um the psychology of the distribution

and so on and so forth and their

homework is going to be obviously on a

distribution so you will have you know

six seven eight charts that you will

have to label

um and then we will review this homework

in session number four so that's the

plan for today and for the next session

as you could see it always changes it

depends on how much time we have each

session how much material we cover

sometimes we slow down because something

is very important and we need to

understand those Concepts sometimes we

actually you know

um

speed up so we'll see how it's going to

go it's always kind of like a live-in

breathing organism

okay so the first concept that we'll

talk about today is going to be a change

of character

um and that concept is going to be

discussed for both accumulation and the

distribution

so let's talk about

the theoretical

uh portion in the theoretical

um

concept of the change of character

and we're gonna start with a very

simplistic explanation as to

uh

what are we actually looking for in the

markets as we look at the price

structure

and we definitely realize that there are

two types of environments that we're

expecting

first environment is the non-trending

environment this is the environment of a

consolidation

we also will call this environment a

trading range

we also will intermittently call this a

non-trending environment so all of this

semantics regarding the trading range or

consolidation are valid for us so when

you gonna say something like okay I'm

looking at the trading range I'm looking

at the consolidation I'm looking at the

non-trending environment I know

instantly that we're discussing a

trading range which is confined between

the levels of support and the resistance

and predominantly which is going to have

some kind of horizontal

um

horizontal

range where the price deviates around

the mean horizontally

I will discuss later on some other

trading ranges which are going to be up

sloping and downsloping so it will give

the definition and also give you I'll

give you the rules as to how to

construct those

but for now we are either discussing a

non-trending environment or a trending

environment a trending environment is

going to have two types for us an

uptrend and a downtrend so that's how

simple simple I wanted to think at this

level and these are kind of like the

basics these are very simplistic stuff

but at the same time I want everybody to

be on the same page

so the biggest question that we have

about these two environments obviously

is for the non-training environment you

know we want to understand the bias

we want to understand the timing of when

the price price comes out of that

environment and starts to Trend we also

want to understand the character

with which the price will travel out of

this consolidation so those are the

goals for us to explore analytically uh

in the non-trending environment and then

in the trending environment obviously we

would be assuming that we already in the

position

and if we're not then we would be

looking for another trading range which

is going to be a re-accumulation range

in the uptrend and this is where we

would be looking for to establish the

position

and we want to understand the character

so character is extremely important and

then

um

the last thing about the trending

environment is we want to understand

where the stock in action occurs

reversal and a switch

into a non-trending environment so those

are kind of like the priorities for us

uh with stringent transient environments

um having said this when we are in the

um the main thing between these two

environments

is that switch that I already mentioned

um so we want to see let's say a

non-trending environment

then we want to identify some kind of

switch

which would lead us to a trending

environment

we want to do this in the reverse as

well from a trending environment we want

to identify the switch

that will

give us an understanding that we are

going into now non-trending environment

so what is this switch

how would this do how would it look and

how would how would we see it well first

of all the name for this switch is going

to be a a change of character

and the change of character if you think

about

the name a change of characters so it

seems that one environment had a

specific character and then it changed

so what has changed what what would give

us an indication that a change of

character has happened so obviously a

change by itself is the word

um assumes kind of like a minion of uh

something is going to be happening in a

different way than uh the way how it

happened before

so when we talk about let's say one

environment which in this case on the

schematic is a downward trend

and we would be thinking what kind of

character of a trend it would be

um so obviously the legs to the downside

are going to be much more pronounced

than let's say the legs to the upside

where we're going to have attempts

to reverse and to actually cover the

ground that you know we we lost in the

downtrend and obviously those rallies

are going to be smaller

um they're going to be populated with

some you know Park itself increased

Supply this is where you know more

selling is going to occur and then

additional selling is going to come so

it will not allow the price to go up

significantly and that's going to be you

know the main price characteristic the

main volume characteristic of the

downtrend is going to be all about the

increase of the supply on the reactions

and then diminishing volume signature or

diminishing demand signature going into

a railing mode

and then every time we're going to have

some kind of consolidation in the

downtrend we're going to structurally

jeopardize

the support area and we're going to

break to the downside so that's going to

be your repeated behavior until we

actually exhibit a stop in action uh

which is going to be labeled by us as a

cell in Climax

so then this is what we're going to have

in the downtrend and this behavior is

not going to change until a certain

point

so what is that point that's the biggest

question that we want to address and

that point is going to be

a change of character and think of this

in Reverse I've just shown you how a

downtrend would behave

then think about that change of

character so if in the downtrend we had

the price going down more than up then

obviously in the change of character

environment we want to have the rally

that's gonna start out performing

that's number one and probably on this

rally we want to see the increase of the

demand we want to see the presence

um you know of buying and usually that

presence because it's so early in the

trading range it's so early in the

accumulation process it's mostly going

to be associated with the contrarian by

and by huge institutions we'll talk

about this a little bit later on

let's come back here to the change of

character so the rally should change the

behavior of the rally should change

um and we're gonna say that the distance

of the rally should increase relative to

the distance of rallies that we've

experienced before on the way down

the up spread

should increase that's what's going to

kind of propel our view on how buying is

unfolding

that's what's going to increase the

distance that's what's going to increase

also the velocity and the momentum uh

behind by behind buying and we obviously

want to see the change in the volume

Behavior so we want to see the demand

increase we want to see volume increase

in general because it would signify to

us that it's not only selling by

weekends that we're experiencing on the

way down into the climactic action but

also there is some bind behind this and

also on the automatic rally that first

change of uh character first change of

behavior we want to see the volume

increase we want to see the demand

increase as well

so um it's in this area after the stop

in action that we are going to see

the best rally that we have seen in the

downtrend

and right away

um

when we think about this rally and we

think about that this is a possible

change of character we always thinking

that the change of character will lead

to the change of the environment so we

were in the downtrend environment

so now we would change that to some kind

of consolidation

so we know that the trading range is

going to unfold we still don't know the

bias

at this point

and this is a little bit more of the

advanced studies that we do in the

practicum there are certain things

certain ways of how you could identify

possibly the potential bias of the

consolidation in Phase a

I will give you some of the shortcuts as

to how to logically think about the bias

you know even in Phase a and as we go

through phase B and specifically in

Phase C and D

uh but at the beginning usually we're

gonna be uh questioning as to what kind

of bias we have

we also will not know a specific

specificity like a duration of the

trading range and that's going to unfold

again in the practicum just because it's

more for the advanced studies we will

create kind of like an understanding as

to how we would measure a potential

duration in the consolidation so I think

it's extremely important as well

and obviously you know uh it's important

to also understand the character with

which the consolidation could unfold is

this gonna be a long-term range or a

short-term range how is supply and

demand are going to behave what is the

behavior of Institutions and weekends uh

around the edges of the trading range of

the support and the resistance and so on

so forth so quite a few things to

address

the main thing was this new rally was

the better rally is that the change of

character is possibly unfolding and that

would mean that from a downtrending

environment we are going to change into

non-trangent environment where we have

to define the bias where we have to

understand the duration and the timing

with which the prime when the price is

going to leave the trading range and

then the character of the trading range

itself

the confirmation of this change of

character is going to come on the next

attempt to push the price lower

and this attempt will fail

um and it will create a test what we

will call a secondary test I often call

this a local test to the local event

which is the climactic action we will

discuss the selling climax later on

today but for now just keep in mind that

this final test of the change of

character that this is an attempt to

continue a downtrend which will always

fail

and even if we have different secondary

tests we could have a secondary test

that is going to be like shown here on

the schematic a higher low we could also

have a test that is going to be a low

low

uh

and we also could have the test which is

basically going to be at the same level

as the selling climax so in all three

cases this is a successful test even

though the lower low is being created

the low low is just basically tells us

that there is still some Supply

available or demand is still relatively

poor and that what brings the price

below the support

but they all three are going to be

successful tests why well because they

recover after the test they reverse and

they come back to the area of the

resistance therefore finishing the

downward swing and reversing that swing

so again something you know for the

future for us to remember

so let's come back again to the change

of character

as we're experiencing our first change

of character in The consolidation and

there are by the way two of those

one is on the way into the trading range

and one is on the way out of the Dragon

range

change of character you could also say

the first one is in Phase a

so what is happening here as well

um well we said that the price is going

to look different the volume signature

is going to look different and then it's

going to be confirmed on the secondary

test well why is all of this happening

let's quickly kind of like you know talk

about this

well the first assumption that we have

of why the change of character is

happening is that

the behavior of Market participants has

changed

so if we talk about strong hands

and we obviously would be thinking about

hands like composite operator huge

institutional Trend followers

you know big money contrarian type of

Traders

what are they seeing here around the

climactic action well what they see in a

panic

by weekends

which basically leads to on the very

technical physical level increase in

volume

signature and therefore a very

substantial increase in liquidity

and by liquidity I mean the availability

of shares in big quantities

we always think about the CO as being

limited by certain Rules by certain

um

regulation statement what are those well

um because of their big size they want

to open big positions how do you open a

big position in a stock that might be

maybe like a liquid right so they would

never go to this type of the stock they

need to be in the stock that is liquid

number one and they need to invest at

the spots in the price structure that is

liquid

imagine the big institution that's

trying to establish a position on the

sign of strength or only breakout or in

the uptrend what would that produce

that would produce such a big jump in

price because of their size so they need

to cover their steps and open the

position when they can when liquidity is

available to them when Shares are

available to them and readily available

so a panic by weekends where

um

either public or professional hands that

are on the wrong side of the trade

institutions that on the wrong side of

the trade they're having a panic a

meaning that they're capitulating and

they're getting rid of their Holdings

quickly without any doubt that you know

there could be a stop in action soon

and they're willing to do this at any

cost

so that's what produces that increased

volume signature acceleration of the

price to the downside and that's what

creates the liquidity that is needed by

institutions

the next thing that they really need at

this point is some kind of uh value

proposition

they need uh this stock uh to be at the

price that has a long-term value for

them because still thinking about the

whole process of absorption of the

supply that is available in Phase a you

know they might be thinking that it's

going to take some time for the price to

stabilize and then for the price to

start actually going up so they have an

understanding of the time Horizon that

they will need and

their biggest one of the biggest two

requirements to get into this position

is also going to be the value is it

worth it to me at this point of of time

with this price to get in to this

position

substantially or at least that scaling

into the position

if the price is attractive if the stock

in their opinion is undevalued they're

going to come in and establish this

position at least incrementally

and because of their size what's

happening is whatever increase of the

supply that was

produced by the weekends on the

capitulation

it's going to start gradually be or

observed

and we could observe some of the

situations where

big institutions co-type contrary

institutions already in the buying mode

they are accumulating and yet some other

institutions and the public the weekends

are still selling and that's the

exchange of shares that happens around

the climactic action and specifically

selling climax

panicking uh Panic by by weekends

produces a lot of volume signature a lot

of liquidity takes the praise the price

down to the point uh to the zone of

value

and that creates those two conditions

where big institutions that the

contrarian are coming in and they are

buying those shares as they buy the

supply that is presented by weekends as

being observed by strong hands

and uh that stops the price first from

moving further down in a very

accelerated way that's number one

secondly

uh it um

stops the price then from moving further

down and thirdly once absorption has

happened at that local level

uh then the price could actually go up

and create an automatic Rally or a

change of character route

so and that's the whole process around

the cell and climax and that's a that's

the whole idea

behind the change of character

so with change of character again

is a change of behavior

and it's a change of behavior for both

weekends and strong hands

and visually we could identify that

change of behavior

and which would suggest to us a change

in the environment and from a trending

environment we're going to go into the

non-training environment

okay let's talk about the second change

of character that second change as I

mentioned is going to be on the way out

it doesn't really matter whether it's an

accumulation or a distribution it's

still going to be on the way out uh

before the markup happens and the

markdown happens actually if we would be

more precise we could say that this

change of character is going to be a

part of the emerging trend

and by the way I've talked about this in

the last class it's an extremely

important concept for us from the point

of view of timing

this is where the uh all of our trades

are gonna originate and this is where

I'm gonna lead you guys to

um both in the selection process and

also in trade management

in hours uh selection process we just

want to find this moment

we want to find the moment where

accumulation has been either concluded

or in the last stages of conclusion and

therefore we could say in the last

stages of absorption of the supply

whatever Supply is available at that

point of time

and the price and the volume

starts to show with different Behavior

what is that behavior by the price and

volume well the first thing that we will

notice is that again on the price side

we want to see the difference between

how they rally the most current rally

has been unfolding relative to the

behavior that was exhibited of the same

behavior that was exhibited in the

trading range before

and here we would be comparing again

the distance that the rally

is increasing

this spread the up spread

that is increasing as well and has a

different type of look we also will be

talking about some you know Gap

activities there on a sign of strength

and then we also want to see from

let's say the price Behavior the

reactions

on that sign of strength uh how are they

going to behave are they going to

exhibit

uh increase in Supply and if they do

with that Supply be observed if uh it's

going to be observed then how quickly

it's going to be observed we also would

like to see the volume change as well so

really and the volume so here in the

volume signature

one of the things that we're gonna pay a

lot of attention is increase of the

demand or the consistency of demand

and that would identify for us the

buying by institutions that's number one

secondly we want also to see what kind

of urgency of the demand is there

that's another question and that's going

to address the character of the next

rallying of the next Trend actually so

it will study this more you know in the

second portion of the course on the

supply and demand so we'll talk about

this

but coming back to the change of

character the concept is going to be the

same as the concept of the change of

character in Phase a

we want to see the rally that is going

to be better than what

uh preceded it

so in the case of the phase a change of

character

where we had the downtrend we want to

see the rally that was a better rally in

the downtrend and then we want the

secondary test to confirm that there is

no further

continuation of the downtrend in the

change of character in phases C and D we

want again the same thing we want to

look at the rally and we want to say

that this is the better rally of them

all in the non-training environment that

we are currently in

and then as a confirmation we want to

look at the backing up action

and we're going to say that for the

first time

this is the reaction that is so

different

then what we've seen before in the

trading range in on this schematic it

looks even different it's hard it's more

horizontal than vertical right uh then

the reaction that goes down to the

support

it still goes down to the support but it

goes down to the support now that has

acted before is the resistance and

that's also a big difference

it's also a change of behavior and that

concludes a change of character we also

would like to see that the supply

signature is going to be diminishing and

there are quite a few variations on the

supply how it occurs and phases d

um this is again something of a more

advanced studies you know for the

Practical and for the second portion of

the course but generally we would like

to see that Supply on the backing up

action or last month of support is going

to have those

uh you know con Contracting uh elements

or if Supply comes the absorption

happens much faster and much easier so

we'll talk about that

all right so these are the two changes

of character again change of character

in Phase a that's gonna be on the way in

to the trading range change of character

and phases C and D is going to be on the

way out and it doesn't really matter

whether it's a accumulation

re-accumulation distribution or

redistribution

it's going to unfold the same way it's

gonna

have some variations you might have a

variation where let's say a buy and

climax happens and then you have you

know very frustrating increased you know

diagonal formation where the change of

character might come slightly later on

you know and we'll we usually talk about

this in the practicum this is a little

bit more advanced and then have a

trading range so you know something like

this obviously it's just a variation on

the theme but once you identify a change

of character then you know what's going

to happen next most likely that's going

to happen as a trade-in range

the same with the distribution we're

looking for the climactic Stop in action

and then we're looking for the first

reaction that's going to be so different

than any of the reactions that we've

seen before on the way up

since the last meaningful consolidation

and then after that

um you know as it suggests the

consolidation then we will be thinking

about okay well in this consolidation

what is the boss

and then what is the timing as to when

the price is going to leave the trading

range and then what is the character and

so on so forth

uh change of character in The

Distribution on the way out

is going to have the same

characteristics as an accumulation is an

accumulation

uh only reversed we're going to have the

reaction that is going to be the best

reaction in the current environment

which is a non-trivial environment

um and then after that it's going to be

confirmed by an attempt to Rally that is

going to be the the worst than what

we've seen

um in this distribution formation and

therefore we are confirming a change of

behavior and a change of character

before the actual move to the downside

one last thought here on this slide

please note that

um you know structurally we always talk

about YCA flares right so when we talk

about uh let's say specific volume

signature should be this and such you

know in a specific phase so I want you

to think about the change of character

and think about like a phases and work

of events and where a change of

character usually would occur so on the

way in whether it's accumulation or

distribution that's all going to be in

Phase a

and you're always going to be looking at

the automatic respond

or automatic rally in the accumulation

and automatic reaction in the

distribution as those first two count to

the trend events

that gonna lead you to the conclusion

that this is a change of character and

therefore we are gonna you know start a

non-trending environment and then

secondly in Phase a is going to be

confirmed by a secondary test

so that's on the way in on the way out I

want you to remember that the events

like of events that we're going to

discuss is

the lowest point of the trend in Phase C

for accumulation the highest point of

the trend in the down in the

distribution

and then a sign of strength a major sign

of strength and a major sign of weakness

which are going to be followed by the

small counter move to that so you're

going to be predominantly in Phase C and

D

and you're going to be covering the

major the major sign of strength and the

major sign of weakness as your first uh

change of character lag

all right any questions any comments on

this

and by the way at any point of time guys

if you feel that you have questions just

type it in or just say I have a question

and I will come back to you and I can

unmute you

but if there are no questions I'm gonna

assume that

everything is fine here so let's go to

the next slide

and let's look at the examples

of

of a change of character and how it

unfolds and I'm going to show you here

uh oh okay great we have some questions

so I'll just address some questions

first

okay let's go to

Eric

hey Eric

a e

okay so what's the question

okay Eric I'm trying to unmute you

so you have to unmute yourself

okay to check hello everyone yes hi how

you doing

uh one my my big question is in the face

a or in the change of character

and the secondary test you say that can

go below

of the selling climax

okay so I give you three scenarios for

the secondary test we're discussing this

spot right here so still phase a

and secondary test acts as a local test

of the climactic action it basically

tells us the story of the supply

is there still a lot of Supply left or

um a story of the demand what kind of

demand we have there and again three

types of secondary tests that we could

have right so a test that goes and

creates a low low

a test that goes and creates a higher

low and then a test that is basically on

the same level

so what's the question

well the question is hey when the the

secondary test go below this the

southern climax so how to identify in

the volume that the price will go up

again to the trading range

well it's it's like uh like uh

the dove that I have okay I got it I

think I understand the question okay so

the question is how do we know let's say

if it goes to the lower level how do we

know that this is a legitimate secondary

test so that's the question well thank

you

sure okay I'm gonna

okay so you muted okay great

um so the first thing there are a couple

of things here that I want you to think

and we are definitely kind of like

jumping a little bit ahead but that's

fine

um I like the you know the Inquisition

of the mind even at this point so that

that excites me

um there are two things that we should

consider here the first one is if we

correctly identified as selling climax

which is going to be a stop in action to

a downtrend and then we correctly

identify the characteristics of the

automatic reaction or rally rather in

the accumulation

then our assumption that the secondary

task is going to come and it's going to

be confirmed are probably very high

and even if it's going to create the low

or low you know that's totally fine we

just don't want this lower load to be

significantly lower right so we don't

want the price to fall you know another

like 50 and then say this is an uh

secondary test no that's not going to be

the case for us it has to be relatively

close to the support

um so this the action by which we

identify a potential stop in action and

automatic uh rally should lead you to

the conclusion that even a lower low

could be a secondary test

the second Point here is all about

um supply and demand and the price

reversal around the area of the support

so we will be observing specific

um price reversal patterns that are

being confirmed with the volume

signature so for instance a reversal of

the last significant bar we will talk

about this more

um you know in April March

and then increase in demand signature

that would suggest that demand is

actually coming in and it not only

observes the supply it actually pushes

the price back above the support level

and that's when uh we're gonna say that

now we see a confirmation of the

reversal therefore we're going to have a

rally up therefore secondary test is

confirmed

so we'll talk about this process but you

know a good question

all right let's see some other comments

here

a question from uh Rami

um

um automatic

AR is this an automatic rally

excuse me

depending on the context

um

okay so

um there are

three ways of how I'm gonna address

automatic

uh a rally or automatic reaction

um I'm gonna say in general terms

um automatic response

so it's the same you know

um

the same letters AR

but obviously we want to say automatic

rally for accumulation

and re-accumulation and we want to say

automatic reaction

for a distribution and read

distribution

and then obviously in the

pre-accumulation and redistribution

we're going to change that and I'll talk

about that

but for now I just want you to remember

that AR this rally right here

is basically an automatic response

automatic response to what

it's an automatic response to the change

of behavior that we have around the cell

and climax so in a way it's an automatic

response

to the selling climax itself what is

happening at this point

we also sometimes mean that automatic

meaning that it's almost like a

technical rally right so what would

constitute a technical rally for us a

technical rally is something that

happens

um just because the there is a close of

positions in the direction of the

previous bias so we had a downtrend and

a lot of professional Traders were short

in this market

and then once they see that the

conditions are changing at the bottom of

the selling climax what do they do they

close their positions so therefore there

are short positions of being converted

into the market position which is it by

uh order

and therefore

they are not bacon

necessarily and gain the profits from

the market potentially reversing and

going up short term on the automatic

rally but what they're abetting on is

that this is going to be the low and I

need to get out of this position because

this trade is done

so in a way their behavior is an

automatic way of pushing the price up so

sometimes I think about automatic

responses that you know automatic

covering of the short position by those

who have profited on the way down so

that's why it becomes an automatic

response

okay

should we wait for stop in action or

selling climax before we get out of the

existing position one and short

um from nylash okay I'm sorry if I

mispronounce your name and I'm glad that

you joined us for this session so that's

great

um so we will address this a little bit

later on

um then the next question from Joe is

there any big news usually associated

with

uh with what uh with the selling climax

with the secondary test

we'll talk about this as well

okay

okay where's the selling climax okay

well as long as we're here let's just

you know address this and then we will

come back to the slide

yes selling climax is

um gonna be associated with a big event

and that big event usually

is going to be the price action itself

so for those of you uh who watch let's

say CNBC right

um I usually don't watch it that much at

all

um only watch it at the points of

interest

uh CNBC or any other you know TV shows

could act as a contrarian tool could act

as a sentiment tool and usually when

let's say a stock is exhibiting some

kind of uh Panic where the price is

going down so quickly and there is a lot

of selling by week strong hands

uh how do you think there's going to be

uh it's gonna be portrayed on the TV

so usually they're gonna say apple has a

gap down like it has recently has had

and um overnight action is gonna uh show

us the Gap to the downside at the open

the volume is very high

uh and it's going to be in the news

especially a stock like apple I mean

obviously a small stock not an

interesting stock nobody would even care

but something like apple will have a

spot on the TV show

um as it consumes so that would be a big

event for the stock itself having said

this uh what obviously Joe meant is

um the event something like earnings

right or the reaction towards a change

in management you know some kind of you

know big uh numbers that are coming out

um on the revenue on the sales and so on

so forth so those could all be big

events and they could produce a lot of

volatility uh up and down a lot of

liquidity and so on so forth so yes

selling climax could be potentially one

of those spots and uh when we say big

events we usually think big volume big

liquidity so and selling climax is

exactly that type of the event

big volume

big point of liquidity a lot of value so

could be both event as a price event by

itself and then some kind of catalyst

event that are going to produce that

price action

yeah really good questions today I

really like that

um okay from a Mel are there a limit to

the number of secondary tests in the

trading range before the Sprint how do

we identify as spring versus a secondary

test

yes okay again so

um

Inquisition by your minds at this point

you know bringing us a little bit faster

to you know where we should be

um so I welcome all of these questions

but at this point let's just uh kind of

like note them and we will answer as we

go as we uncover this stuff

let's come back to the change of

character

let's look at some of the examples

so this is Yahoo

um you guys don't see this but this is

Yahoo and this is what 2012 2013 14.

um and uh Yahoo actually was such a

great trait out of 2012. there was a

management change that came aboard

um I believe in 2012

there was quite a big trading range that

came out of the oversold condition

um

and

then we went into the accumulation range

and out of that we're looking at the

latest phase C right here it's out of

that with that we have the first leg to

the upside and this acts as a sign of

strength in the backing up action so by

itself it looks as a change of character

relative to the environment that we've

been in before

do you guys already see where is the

high probability point for n of entry

for us

it's not necessarily in the area of the

emergent trend

it's actually in the area where trend

has been confirmed so where do you think

the trend has been confirmed write it

down really quick

where do you think the trend has been

confirmed for Yahoo you know give me the

time stamp like a month in the year

what is the highest probability spot for

us to participate in this move to the

upside

okay backing up and last point of

support So somewhere here uh December

January

of 2013 backing up of 2013 February

mid-october high volume okay great great

so I will come back to October uh in a

second but everything else uh sounds

really good

so what are we looking for as kind of

like this final final confirmation is

the confirmation that should be given us

you know a high level of confidence to

follow up with this uh with this trade

it's probably going to be in the spot

here after the major sign of strength

which basically tells us that the

character now is to

move the price to the upside and have

small reactions

very very small reactions

and this major sign of strength confirms

the uptrend and the backing up action

confirms the change of character so

anything around this area where we could

identify a potential C in a smaller

trading range that's number one where we

see the breakout that's number two where

we see a smaller backing up action

that's number three where we see another

breakout that's number four and it also

presents a short-term weakness

after this rally so therefore it acts as

the final confirmation

especially on the breakout right here of

what's to follow so I wanted to think

about this for a second

why is this so important well because

usually students come and they say well

I want to invest here in Phase C Could

you teach me to invest here

and I usually say yes I can but before

you learn how to do this can you please

start uh identifying this spots to me

you know where you have a very high

level of confidence that there's going

to be a continuation once you can deal

with that could you identify to me in

the middle of the sign of strength rally

a point of entry there

or maybe a point of entry on the last

point of support in Phase uh C or even

OD and only after that

go for phase C so it has to be

sequential

the way how you educate yourself because

the mind is always going to be egoic the

Mind our minds are always going to be

based on the fear and greed and here we

will be thinking about uh greed we would

want to go in to establish the position

at the bottom but in a way it's not even

greed it's still fear-based Behavior why

well because if if we're thinking about

establishing

um the position at the lows of phase C

we're basically saying I'm fearful that

the price will go low from here I always

want the price to go higher so fear is

an extremely strong emotion for us you

know humans and a lot of the survival

mechanisms are built around fear and our

trading unfortunately build around those

surviving mechanisms

um so fear is going to be very very

dominant

now there was one comment here which I

really liked from Adam

said that

um

the high probability place to open the

position is going to be in mid-october

somewhere here which is based I believe

Adam said high volume signature

um so

disregarding even the volume signature

which we will discuss in the second

months

this is a correct place to think about

the point of entry this is not

necessarily the highest probability

place and that's the only caveat that I

would add to Adam's remark but it's

still one of the points of Entry that we

will be discussing in this course it

comes after phase C it shows to us a

short-term ability of the rally to come

to the previous local resistance and

look how flat this trading range is this

reaction is it doesn't come to the level

of the support it's all flat and

obviously you know we again we could

talk about the volume signature here but

maybe not for now

um not only that on the relative

strength ratio line which basically

shows the leadership of the stock

relative to the market we're seeing that

the breakout produced also a breakout in

the in the leadership which is the

confirming sign as well and we will

study that in the third months uh you

know when we'll talk about the relative

and comparative comparative uh

performance so all of the points of

entries are going to be talked about

guys so don't worry about that

um all of the confirmations are going to

be talked about it's just a lot of

material and obviously I can't give it

to you right away you know um so

we'll see how it's going to unfold

um so after the first rally into the

major sign of strength we're seeing a

reaction and hopefully guys you could

see this I'm gonna put the color here

blue color this is the reaction that

we're seeing so for the first time in

this rally

since the lows in the potential phase C

we're seeing the reaction that is

outperforming all of the reactions to

the downside we see how this reaction

increases in distance

you don't see it here but you know I'm

quite positive that with that increasing

distance the down spread has increased

as well

and we're seeing you know maybe a slight

increase of the supply here it's

actually not that pronounced

so it's more over the latest reaction

actually Supply level is kind of the

same as other reactions which tells us

what

here is you know kind of like a preview

on phase a uh bias identification phase

a

bias so what would we be thinking about

the bias in Phase a well because the

supply is at the same level or somewhat

low and does it doesn't produce you know

an extreme move to the downside we don't

actually go to even one half of the move

that we've done we probably would be

thinking that the bias are still going

to be re-accumulation at this point

and that's the way how I'm going to

teach you guys your first assumption

about a

reconsolidation or a stepping stone

trading range is always going to be the

bias that you've defined in the trading

range itself and you know the trend that

we have had so therefore uh applies to

the upside and therefore every

accumulation and then we would be

seeking confirmations

throughout the range and either we're

going to confirm that this is a

re-accumulation or we're going to reject

this as an idea so uh all of this

elements here are just on the price

alone suggests that we're gonna go into

a trading range by the way now that I've

talked about the buys let me talk really

quickly about the duration this could be

just the preview of what they had for

those of you who's going to kind of

graduate to more advanced level

think about the increase of the supply

is it a lot of supply

a not a lot of Supply that comes in on

this change of character

probably not right so increases but not

substantially

so what could we say about the level of

the supply the level of supply

is average

so therefore we are not expecting that

the duration

um of this trading range is going to be

big you know it's not going to take a

lot of time to observe whatever Supply

is common so duration is probably going

to be not that uh not that long

and we see that that on the next you

know attempt to go down there is a test

which looks like phase C sign of

strength back enough action and off we

go to the next change of character which

is somewhat hard to see here but if we

would be thinking about the rally into

the sign of strength comparing it to the

previous rally we would see that it's

much better as a rally

in this trading range that the reaction

is more horizontal so that suggests a

change of character

and within the context

of the previous range which we thought

was a re-accumulation range and then the

context of the uptrend

we are saying that the change of

character acts as the resumption

of uptrend

why is this significant

well because this is where we're going

to originate our positions

this resumption of the trend of the

uptrend gives us a timing

it's a timing tool to consider that now

is the time to go in and open the

position

in the Assumption it was an assumption

that there's going to be a continuation

of the swing or continuation of the

longer term trend

okay well imagine that we've opened the

position and imagine that we opened two

position positions

one is a swing position and one is a

long term

um lawn position kind of like investment

position right or you know we're just

trying to uh catch a much larger swing

our entries are going to be here here

and here four points of entry on the way

up

and then as we go

through the uh through the uptrend

we see the break of that uptrend and

then we look at the reaction and it's a

little bit complex it has ABC formation

or one two three

for those of you who are familiar with

Elliot wave you will recognize this

reaction so look at this reaction and

compare this reaction to every reaction

that came before

what do you see

well I see that

we definitely

overshooting uh you know the distance

with which the price travels to the

downside so this becomes the largest

distance

again downward spread is increasing we

could see maybe some increase in the

supply as well over the previous

reactions so the latest reactions but

it's not as significant

um and again we probably are thinking

here that this is a re-accumulation if

distribution would come it probably

would look differently you know Supply

would be more violent and the price

action would be more violent to the

downside we don't see that here but we

are concerned with this slightly low low

now what happens next is so amazing

because

the next rally

suggests a sign of strength being

followed by the backing up action and if

we would look at all of the rallies in

this trading range that precede

we could say that this is the largest

rally so therefore

the price behaves differently and we

want to acknowledge that and we want to

say that this looks like a change of

character and then the backing up action

confirms that

so here we're thinking if this is a

change of character again this is the

timing for us

to find points of entry in this error

as our assumption

about the trend is such that the uptrend

uh

will be resumed again

so if we are swing Traders

our tactics are going to be such that

most likely we're going to be exiting

somewhere here this is our last point

where we're going to give up our

position

and this is going to act as kind of like

this local capitulation

and as we're closing the position on

that particular bar we will be a part of

that capitulation we still will have a

really great trade

you know this is the trade right here

and for a swing Trader that could be a

great trade later on in the course I

will show you or rather in the Practical

I will show you how to identify this

action as a potential point of exit this

is all going to be associated with the

climatic run into the Stop in action of

divine climax

and I'll outline to you the spots where

we're going to be exiting the position

or scaling out of the position

but for the

uh long-term investor we still would

stay in this position

there is if the if the initial bias in

Phase a

based on the supply signature suggests

that this is still re-accumulation then

we want to stay in this position

actually we want to add to the position

and we will be really heavily adding

here

and then somewhere here on the Breakout

so these are the two spots

um

of

short-term weakness

in the context of a much larger trend

long-term uptrend

that we will be looking forward to

for the long-term investor to add to the

position

and for the short-term swing Trader to

establish the position for the next

swing

now uh

a couple of you a couple of you

you know before the class we're talking

about you know yourselves and by the way

guys could you please email me

um

like one paragraph on who you are as a

Trader what do you trade and then what

kind of History was the wife of method

you have and also how did you hear about

you know our course just uh let me know

the source I would really appreciate

this and you know send that with your

homework you know don't send this as a

separate email you know

um or you know if you want to send it as

a separate email that's fine as well

a couple of you identified yourselves as

long-term investors and the question

about the course was well is it going to

be helpful to me well hopefully even

from this picture you kind of could see

that it should be extremely helpful

because we will be discussing obviously

Aboriginal accumulations but here in the

trend itself how to decide are you still

staying in this position as a long-term

investor or not where potentially could

you add to the position those are also

very crucial places

um and then where do you actually exit

so look at the next change of character

that comes

it seems like all of the reactions here

which is one and two

of the same magnitude and then suddenly

we have such a huge reaction to the

downside this is by far the largest

reaction not only on the last leg up but

actually since the lows in the potential

phase C here

and not only you know when we look at

this reaction we would be thinking okay

well is the trend done is the uptrend

done and at this point of time because

it's a much more substantial reaction

that what we've seen before we probably

would conclude or make you know couple

of deductions here our first deduction

is going to be that well first of all

after the change of character

we're definitely going to experience a

non-trending environment that's number

one secondly because of the size of the

change of character

we're probably gonna say that that

trading range is going to increase the

duration then anything what we've seen

before so therefore the timing comes in

as an element of our analysis so this is

not necessarily in the methodology this

is something that I've developed with

the advanced students in the practicum

you know just addressing exactly this

question what about the duration of the

trade image so and um

it's not necessarily a common knowledge

I know that Bruce does not use this I

know that other you know work effects

first do not actually use this but

um

it's a very hard

you know evidence you know that we see

even on this slide alone

uh to make some kind of assumption or

judgment about the duration the smaller

the change of character

the smaller the duration of the range

the larger the change of character or

the larger the presence of the supply

the longer it takes time to observe this

Supply so therefore duration of the

range is going to increase

okay what are the assumptions could we

make here well obviously assumption on

the bias is going to be something of

interest to everyone here

but at this point of time we would just

have to say that

it looks like the selling has come but

it's not you know extremely heavy we're

still going to be under the assumption

initial assumption that this is a

reaccumulation and then we either gonna

confirm it

through the price action

in phases B

C and D or

we're just gonna reverse our bias and

add this bias original bias which is to

the upside is going to fail

and then with this failure we're going

to say that most likely we're in the

distribution

so this has to be

you know confirmed as well as we go

through through the whole trading range

okay

um well hopefully

this is

simple

and understand understandable in terms

of the

first

major concept that we want to to work

with change of character again is

extremely important concept and that's

why I'm teaching this concept first I

did not even talk about

um you know uh I would say accumulation

or distribution

in general

let's look quickly at another example

here excuse me

by water

we are

um again talking about Yahoo and this is

a daily chart

2002 2003 uh lows as a trading range and

then

um look at how the first momentum black

is identifying urgent buying

by institutions

and those are predominantly Trend

followers

and then look at the backing up action

here it's not just flat it's actually

sloping up so there is a lot of

structural strength in this reaction by

itself and it happens on the background

where Supply is the lowest Supply within

the whole range so that was a really

good trade right there or a point of

entry

and by the way for those of you who are

extremely picky about you know all of

this stuff and which I want you guys to

be you know because I am the same way

you might be saying okay well where is

this uh sign of strength you know if if

you're talking about the change of

character like this is a change of

character but where is that sign of

strength it should overcome the point of

the resistance well

you're looking at this in a slightly

different way so look at the lower high

lower low

so what does this look like this looks

more like a triangle

so the backing up action actually comes

exactly to the point of that uh sloping

down resistance

and uh therefore you know it's all in

line with the sign of strength and the

backing up action this this

characteristic we will study later you

know characteristics of Apex and what

kind of sign of strength in the backing

up action there we could

um expect

as the price goes up look at the texture

of all of the moves up

and the reactionary textures

so reactions are either flat or none

significant

and then the moves to the upside have

some kind of deterioration of the

momentum so we have first a lot of

momentum of the low

then continuation of that momentum we

still see some bind here in this area so

that's great on the way up and this is

how institutions Trend Fallen

institutions are getting into the

position

they are assassin at this point of time

um you know the bias

the value proposition that they have uh

the liquidity that is available to them

at this point of time and because they

are already late to establish a position

at the level of support

what they are going to do here is

they're gonna be uh buying

on the way up

and this buying on the way up is gonna

look like this

so obviously this is buying off the low

and also we could say buying on the way

up by itself

but after the first initial momentum by

by institutions this is what we're gonna

see so there's going to be fewer

institutions that's number one

uh secondly you know this buying is

going to be on the way up so it's going

to push the price up

and as as we understand these concepts

of the initial momentum bind and then

just continuation of this bar and

throughout the trend then we could see

that momentum on the next rallies is

fading and we don't see as much bar and

behind you know those waves so we could

expect some kind of Stop In Action Line

Climax and then a change of character so

how would the change of character look

uh like well obviously it's going to

look different from what we've seen

before from the reactions that we've

seen before

look at those

do you see how different the latest

reaction is so right away we are

noticing that we are making a note here

and at this point

we are going to say we're going to make

couple of deductions change of character

and here also a small break of trend as

a confirmation of that

it means that it's going to be a trading

range we don't necessarily see a lot of

volume signature that is different

on their reactions so we're going to

assume at this point that the bias is

still up and again remember what I said

don't take only these words from me

that the first thought is going to be

oh it's the same bias as the trend

before

just because Supply is not there

we need either to confirm

or reverse our bias as we go through the

range

and the reversal of the bias Could

Happen many times

um you know um in a lot of stocks

because uh

it's not always that's going to be some

kind of continuation you know of the

previous term so at least here what we

could deduct you know is that we've

experienced the buying climax

a change of character

and therefore an automatic response or

automatic reaction in this case

and we could

form a trading range by

applying the parallel lines to the bind

Climax and this is going to be our

resistance and support which is going to

be defined by the out the law of the

automatic reaction

our next assumption is going to be by

white coffee and structure we're going

to ask ourselves a question what comes

next

well obviously if there was a climactic

stop in action there is still going to

be some momentum to the upside that we

need to check

right so we expect in a secondary test

in Phase a and as we've talked about

secondary tasks to the

uh

cell and climax that there are three

types

we also

think that this they could be the same

situation for a distribution where we

could say that

buying climax is going to define the

point of resistance and then we could

have a secondary test that's going to

have a higher high

or a secondary test that is going to

have a low or high

or a secondary test that is going to be

kind of on the same level or close to

that

of the buying climax so the same

structural options on both accumulation

and the distribution so and you kind of

could see guys already where I'm leading

you with this

if you understand like of context if you

understand what I call Wyclef layer on

the analysis on the structural analysis

of the conventional technical analysis

you could anticipate things

the way how they should unfold the

character of those things to come and

more importantly to understand should I

be trading in this environment or not

and if I'm trading you should be

understanding how you should be traded

so for instance if I have been in this

position and I'm a swing Trader then my

decision making here is going to be very

simple I'm just basically looking for

the points of exit I could exit on the

way up into the climactic cache I could

exit on the change of character bar I

could exit on the change of character

reaction I could exit on the way up into

this secondary test rally there are

quite a few spots to exit that we will

be discussing as a part of this course

if I am a long-term investor I'm still

in this position I still need to go

through the whole Trend uh trading range

to define the potential bias and either

to confirm that bias or to reverse this

bias and therefore start scaling out

if

um if I am

a short-term Trader and I'm not in this

position and I'm looking at this

potential phase a as it unfolds and I

look at this change of character I'm

saying there is no swing opportunity for

me here this is just uh phase a I still

have to go through phase B

and then phase C and to Define that bias

you know go into phase C so I will not

be participating

um you know as a swing Trader in

anything what's unfolding right now

and instead this a much shorter swing

Trader might be thinking okay well I see

that we've experienced automatic

reaction I'm looking for the secondary

test

I see that Supply is somewhat the same

then at other spots or the reactions and

that the initial change of character

actually was not that pronounced so as

we're experiencing this secondary test

most likely this test is going to be

strong and therefore a higher high end

will create probably some kind of

uptrust opportunity so how do I trade

that well I want to establish position

here somewhere on the intraday basis and

then trade through the resistance and

once I see first intraday science of

distribution I will be out

but again this is somebody who's going

to trade on the intraday level on a very

very short term swing uh trading level

so in here I went through

all of the possible you know uh Traders

and their

requirements as to how they would be

thinking about the work of structure at

this spot

well let's see what happens next

so

um we said that you know Supply was not

that impressive and then the change of

character was not that impressive either

you know relative to this whole move so

most likely the secondary test Raleigh

is going to produce some kind of after

our situation with the high so that was

great we were correct on that but we

know by the Wyclef context by the Wyclef

layer and structure that phase a is

going to conclude with this secondary

test and we're going to go into a very

volatile and predictable phase B

as we go through this phase

and here is my

uh honesty and authenticity and my

commitment to all of you guys and more

importantly even to myself and for those

of you who know me for a while and I see

that some of you guys here are alumni

first of all great to see you here you

know great to have you in the class

don't forget to give me some feedback as

you've listened to me and to this course

you know maybe a year ago maybe two

maybe three years ago maybe even more

than that

you know let me know how the course has

improved and where how else we could

improve the course I'll be very curious

to hear

um so but my commitment to you guys is

of the highest honesty

I'm gonna tell you exactly how I'm

conducting my trades I will not hide my

losses I will not hide my mistakes it is

not my intent to do so so when I say

something

usually take it for what it is usually

this is how I think and this is the most

honest answer that you could get for me

so looking into phase B environment

and looking at the higher lows

I still is a long-term investor would be

thinking that the bias here is to the

upside

there is really nothing distributional

about this pattern in Phase B

nothing

you don't have a lot of Supply coming in

it's somewhat mediocre average

and it doesn't produce you know anything

larger than the change of character

which is by itself is not such a you

know big retracements from the lows to

the highs of the buying climates from

the lows of phase C into the Mayan

climate side

so I'm still gonna be thinking that this

is a potential reaccumulation at this

point the only question here is just the

timing are we in Phase b or in Phase C

if this is if we're thinking in Phase C

then we should wait if we uh I'm sorry

if we're in Phase B we then we should

wait if we're thinking that we are in

Phase C then you're gonna originate a

trade somewhere here

and your point of exit is going to be

this bar right here so basically you're

going to have a break even trade

again this is something that I don't

mind for my round trading and for the

trading of my students what this trade

does it creates two levels of

understanding

um the failure of this trade creates two

levels of understanding the first one is

going to be that the analysis is

actually Incorrect and it doesn't matter

whether the analysis is incorrect

because it didn't really show us

what it's going to be in the trading

range itself sometimes the bias is so

evident even in Phase a you can't really

think anything else

but then in some instances like this one

you're gonna see a lot of elements of

our performance like Yahoo was

exhibiting in 2005 in Phase B and phase

C and you might not distinguish this as

a potential distribution

in the first class in the first lecture

I have shown you an actual trait in

novadia that idea just recently where

novideo as in leadership stock was

exhibiting elements of reaccumulation

and what turned out to be you know a

distribution

the same here with this stock with the

same as Yahoo

why is this happening well because there

is a lot of leadership characteristics

on the way up

and they are not going away really fast

in the dragon range that turns out to be

a distribution

so therefore a trade like this the one

that I'm showing you here is actually an

okay trade if you're not okay with this

trade then you are greedy and something

you've got to check with your ego

because we never

100 right in this in this craft trading

is not about being the right you know

all the times trading is about making

money

there are no other goals there are no

other intentions but to make money if

you're spending time on this you should

be making money if you're not making

money then you should make some kind of

adjustment get more knowledge get more

skill you know um

and develop that skill

all right so

um as we go along this range so what do

what else do we see

we see an up thrust

and then a failure so it's right here on

this failure

of the up thrust this is where we're

gonna start thinking like what is going

on look how Supply is starting to show

the picture uh of the distribution where

the supply is starting to increase there

is a lot of selling off the top

so in usually that type of selling is

always going to be institutional

so we might be thinking here that with

the increase of the supply and the way

how the price quickly reacts back into

the trading range we might be in some

kind of either short-term distribution

or in the much bigger distribution

so a short-term distribution would take

us to the support level and maybe even

below that level

and then

that could be a trade by itself you can

establish a position somewhere here on

the failed signal

and then continue

with this position until you see some

kind of flow or low so exit here or

somewhere here

would be okay

and then you could wait

you don't necessarily have to continue

with the short trade here you could wait

and you could see how the last point of

Supply is going to unfold or is it going

to be possibly a spring

because in some of the cases we could

have volatility going into phase C of

the reaccumulation and then move to the

upside so that's why we would want to to

wait and to see if there's going to be

some kind of further failure

and further behavior that is going to be

associated with the distribution

well um

we talked about the changes of character

and that's the main topic today

um look at this reaction to the downside

compare that to the reaction that we've

seen throughout this whole Trigon range

is it expanded yes is the down uh spread

expanding as well relative to what we've

seen in the current environment and we

see that those are the big spreads the

only spreads like this we've seen on the

change of character itself so that tells

us that we definitely seen some bearish

characteristics here

uh with the volume signature increase

yes with the supply signature increase

was that yes absolutely so we're seeing

here a synchronicity

and this is just again you know a WTC or

word synchronicity

between the downward effort which is

expanded and the downward result which

is expanding as well

therefore

the bias at least short term at this

point is going to be bearish

so and please note again

let's be honest

about where we Define the bias let's be

honest about even questioning where

we're defining the bias if you're gonna

say that why not Define the bias before

let's say the beginning of 2006.

I'm gonna honestly answer you that

I did and my bias back then was still to

the upside

in this area until it actually showed a

failure

and this is where my bias has changed

and there is nothing wrong about

changing your bias as long as you

understand why and as long as you could

use it and make money

so

um just something like you know as we go

through the material guys I'm giving you

my belief systems about trading uh and

about money as well

and you should make those notes

somewhere and just in general a piece of

advice for those of you who are

seriously studying this course

for the for those of you who are going

to be spending you know hours on

homework

I'm gonna push you a little bit more

and I'm gonna say that your main

homework should be not just labeling the

charts that I'm gonna give you but it

also should be

um making notes

listening to the recording again and

making notes and sending those notes to

me

um what that does is as you could see I

go through the material somewhat fast

and I'm giving you a lot of material

yes the superior this material is being

repeated over and over but still I'm

giving you a lot of material our minds

are just not capable of absorbing all of

the material at the same time that's

what I've seen from students from cycle

to cycle to cycle it's not just you it's

very common I cannot absorb all of this

material even of this session you know

like if it would be a new material to me

so therefore uh watch the recording

again make notes send those notes to me

so let's come back

um so we clearly see some bearish

activity on the possible change of

character we're assuming that this is a

sign of weakness and that the next rally

which is not going to be extremely

strong is going to be a less point of

Supply rally we're looking for the

points of confirmation of this

information and this last bar actually

gives us exactly that

by itself

this rally into as a last point of

Supply rally is better than any of the

rallies that we have seen

um on the change of character so

therefore we might be even thinking that

there could be another trade-in range

here before we continue to the downside

with the bias uh with the overall boss

that you know started with the up thrust

here so therefore we could be either

entering a position right here this

could be our point of entry but the very

vibrant rally

suggests that demand is there and this

demand is probably of weak hands but

increase of the demand is increase of

the supply will always have to have some

kind of test or re-test

so we are thinking that maybe there's

going to be some kind of test

again at this level and there's going to

be another uh point of entry for us here

okay well let's see what

has happened

cool and I don't have this how come

okay I apologize so if I remember this

correctly and you know you guys could

check out on Yahoo I think it oh it's

been discontinued but still

um I believe we had some kind of trading

range here and then we went to the

downside so that was the history

okay

all right so

um important concept on the change of

character

uh if you don't did not fully understand

it please review uh rewind the uh

recording listen to the recording again

stop the spots that you don't understand

rewind it listen to it again if you

don't understand steal and have a

question email me and we'll just uh go

from there

okay

all right

let's talk about accumulation so that's

the next question for us right because

um as we think about a change of

character which is basically you know

from let's say an accumulation a

downtrend changing into the non-trending

environment into the trading range

as we enter

the uh

trading range in Phase a the biggest

question from students and it's just

funny how it is uh I would actually

never be thinking about this question

because there are so many things that

are gonna still unfold as consolidation

unfolds by itself but that question is

always about the bias so students always

want to know what is the bias

um again as I mentioned before the

advanced studies which we're going to do

you know um in the practical

course I'm going to address this

question to assert to a certain degree

not necessarily to the fullest degree

but to a certain degree but for now what

I want you to do is just to think of a

change of character as a change of the

environment and then once we are in the

trading range that's when we want to

observe how it unfolds and we want to

solve this problem of the bias

the timing

when the price is getting out so

therefore identifying phase C and D

correctly and then the character

and usually the character is going to be

all about the leadership

and the way how the price is going to

travel you know what kind of structure

it's going to give us

so how would we do this how would we

Define accumulation well there are a

couple of things that are going to help

us out the first helpful thing that

Wyclef method and this is the value of

the of the week of methodology by the

way I was talking

um to Bruce the other day and I was

telling him that if you think about the

Wyclef method

um you know all of the elements

the

most important concepts are all on the

level of price structural analysis

everything else is just more in depth on

the technical analysis Concepts and I

recognize it could be more in depth

let's say when we talk about the volume

you know I meet very rarely people who

don't know about Wyckoff and they talk

about the volume on the very high level

um but majority of volume

volume guys

um are going to be all about you know uh

some kind of like of background

um so uh but predominantly it's all

about

you know the structure and health and

Falls so we'll talk about the phase

analysis

and phase analysis is extremely

important because

phase uh analysis uh gives us the timing

uh it gives us to a certain degree the

bias as well but more importantly it

guides us through the process of how

trading range unfolds

and we know that the specific phase is

going to have specific like of elements

specific like of events and those Wyclef

events are going to unfold in a specific

way and that could give us a hint for

the bias as well

so what do I mean by that what do I mean

by this phase analysis and how

everything happens kind of in the same

way well let's talk about phases and

let's start with phase a and we spend

some times already on phase a we said

that in Phase a we have the conclusion

of the previous trending environment in

this case a downtrend and it's going to

conclude uh with four points the first

one is going to be always failed attempt

to stop the price from moving further

down and it's going to be our

preliminary support

so here's on this slide

something that I want you not only to

read but I want you to remember

I want you to memorize this you know you

know to the majority of it at least you

know I want you to memorize this

sequence

of events that are going to come in the

trading range this is one of the

mistakes that students make uh make a

lot so I want you to understand that

first is going to be preliminary support

that's going to be followed by the

selling climax that's going to be

followed by the automatic rally then

secondary test and so on and so forth

from one phase to another

I want you to remember this sequence of

events how trading range unfolds come

into phase a

coming back to phase a

preliminary support is the first attempt

to stop the price from moving further

down and usually this is still going to

be an Institutional activity

and some institutional buy

institutions at this point of time

already see in some kind of value and

some of them just do a little bit more

premature enter in the position which is

totally fine with them because their

time Horizon is so

um you know long and big that even if

they bought here and they sold somewhere

here this is still a profitable trade

for them also please think that there

could be scaling in into this and uh

they could buy more at the selling

Climax and kind of average down and then

turn out to be averaging about one half

of the trading range or even below that

so

um quite a few different

uh you know ways of how institutions

could

um start to accumulate and preliminary

support is going to be one of those uh

initial uh first points where

institutions could establish a position

then

this preliminary support definitely

going to fail preliminary support

preliminary Supply points will always

fail you will always see either a lower

low for the selling climax or a higher

highs for the buying climax if you are

labeling it as a preliminary support

which is the lowest point on the chart

like this this is wrong so this is

incorrect right away

so sell in Climax is going to come as I

mentioned as that Panic from weak hands

and again weak hands at this point and

this is more of the general capitulation

so at this point weak hands are not just

public and this is what been taught to

us that weak hands are going to be

public no

that's not correct get this out of your

head especially those of you who've been

studying the methodology for years and

years

weak hands are not necessarily just

public weak hands are always going to be

public

plus institutions

otherwise we would not have such a huge

volume signature on the selling climax

public cannot produce you know

um overextended volume spikes like that

so on this General capitulation the

volume signature is going to increase

dramatically

Supply is going to increase dramatically

demand is going to increase as well and

that increase of the demand that's

what's going to start absorbing the

supply

this is initial absorption

and who's observing

Co

composite operator composite man and

then as this absorption happens

initial stop in action happens and this

stop and could could be a uh having such

different variations

uh momentum momentum could slow down but

price could still go down at the same

time

uh you could have situations where let's

say there is a deterioration of the

supply price still goes down

uh you could have a stop in action by

itself where you have a spread that is

decreasing

by the spread daily spread

and it decreasing significantly at the

same time the volume signature is

spiking up so what does it mean this

means that there is a force that pushes

the price down there is a force that

pushes the price up so supply and demand

increases at the same time volume

signature increases dramatically but

yeah there is no progress the result is

kind of the same

so that is a stop in action and then

um you know another one on the increase

of the demand you could start seeing the

price actually not just stop it but

start moving up

so that's the whole process behind the

cell and climax again obviously the most

interesting part about this is the

exchange of shares between weekends and

strong ants at this point of time

both groups have different intentions

one group wants to get rid of the

position because the emotional pain is

too much

another group is trying to establish the

meaningful position because there is a

point of liquidity and value to them

all right

um after the selling climax as the

supply is being observed that produces

automatic response which has not just

the buy-in by institutions on the way up

but short covering by professionals that

pushes the price up

and that establishes a change of

character

and establishes the high for automatic

rally with low selling Climax and

therefore establishes the boundaries

yes

for the trading range itself establishes

the resistance and the support lines

this is a very valuable piece of

information

actually I've given you today so many

great tools

on how to think about the change of

environment

and how to establish the trading range

and how your decision making at those

spots are going to be tested by all of

these events so I want you to understand

all of this I want you to memorize all

of this because as we go along and we're

going to go into much deeper stuff

especially with supply and demand I want

you to think about the definitions I

want you to know them

so um very valuable information with the

resistance in the support lines Why well

because for the majority of the duration

of the trading range this is where the

price is going to reside it's going to

have some points where it's going to go

into the oversold condition or

overbought condition

and it's going to create low lows higher

Highs but that's not that important the

majority of the deviation of the price

is going to be still around the mean

that was created by that phase a

you might have some slope to the upside

to the downside but predominantly it's

going to be horizontal so therefore

think about the trading strategies that

you're going to have here if you're an

option Trader your strategy is going to

be collection of options and very short

duration kind of leak weekly options uh

type of directional traits if you're a

long-term investor

your goal is here to identify the bias

of the whole formation and timing

identifying phase C and phase d as your

potential points of entry on the

emergence of the trend if you're a swing

Trader then most likely this is not even

going to be the best candidate for you

even to be here but if you're a very

very short-term Trader or just oriented

for this specific stock then you could

have some directional trades and those

should be originated at the points of

resistance and support so around the

edges of the range

all right so as we conclude our phase a

with secondary tasks which is again a

local test of the climactic action

it basically asks a question do we still

have a lot of Supply left from the

downtrend and the last lag in this

downtrend uh the capitulation into the

selling climax and if we don't if we

don't see that continuation

and we see the reversal then it confirms

a change of character by itself it

confirms the idea that we are in the

trading range and we also will start

thinking about phase B and how that

phase should unfold

we will be talking about the intentions

of the Dragon range of the phases in the

trading range and that is also something

that I want you to remember by heart

the intention behind phase a is all

about stopping the previous track

in the accumulation you will be stopping

the downtrend in the distribution you

will be stopping an uptrend

then therefore the intention is just to

stop the previous trend

in Phase B we are doing two things we

are building a Cause

and building over cause happens because

there are so many fluctuations in Phase

B that we could

um observe and those fluctuations

are just are kind of uh reflection of

buying and selling by different groups

and through this buy and selling what is

happening in Phase B in their

accumulation

it's the further process

of absorption of the supply

that is going on that is happening here

and it's not going to be extremely

visible

and again this is something that I'm

gonna be extremely extremely honest with

all of you guys

this is not a linear craft this is not a

linear analysis this is something that

it only could become linear if you

understand all of the variables and

unfortunately we can't even comprehend

the number of variables that influence

the movement of the price of a single

stock

but what we could comprehend is the way

of how patterns should unfold

and we're obviously saying the pattern

will unfold with different variations

and those different variations is going

to create different structures and we

have to make sure that we understand the

process with which the trading range is

going to unfold so in Phase B there's

going to be still in accumulation that

process of absorption that is not going

to be extremely visible to us in some

instances it's going to be extremely

visible we might have some you know

elements of strength let's say as a sign

of strength and we're going to say this

is a minus sign of strength and it acts

as an up thrust action in the possible

accumulation and then we're going to see

a very laborious move to the downside in

Phase C maybe into the higher low as a

last point of support rather than a

Sprint with the lower low or a ShakeOut

so those are going to be extremely

visible to us but in some instances they

will not be and what we will have to do

is we will have to make the best

judgment in Phase B and then look into

phase C and D as a confirmation for that

bias

and this is as own as as I could be with

you and one more thing that I'm gonna

say here

you will make the mistakes

making that judgment call

and that's okay

you make the mistake you post Analyze

This you understand was this analytical

mistake or systematic mistake or was it

a Trader mistake my mistake and then you

address that you make an adjustment

um if there's something new on the

analysis part you take that chart put

this in your library you bring this

chart to me we discuss this and uh you

know either in session number 15 or in

the Practical or somewhere else

um and we will understand it better

but you know those things will happen

so phase B also as I said you know

building cause through this buy and then

selling waves and then it's all about

the supply and demand you know is there

absorption happening or maybe Supply is

very dormant but the quality of the

demand is not there so what does that

suggest probably suggest a continuation

rather than a reversal

um so again something that we will be

discussing and practicing and developing

the skill to recognize

then we go into phase C

and phase C is the most important phase

um in the whole trading range for me why

well because it's the

last test

at the level of the support for

accumulation and re-accumulation

and what is it tested well obviously

it's testing the availability of the

supply it's testing the availability of

the demand and the quality of the demand

at the support level

and if we would be just thinking about

the testing of the previous price action

then the test is definitely oriented to

us toward test in the support in Phase B

and her test uh testing of the support

in Phase a

we want to see if the price not only can

commit to the downside and I'm not

talking about the temporary commitment

where we have one or two closes below

the support level and then instant

resumption uh you know of the upswing no

I'm talking about a more meaningful

commitment to the downside ironically

the current market shows a lot of those

spots where there is you know a

significant commitment to the downside

and yet even that could act as a

ShakeOut

and we kind of seeing how the market is

reacting uh in the mornings the behavior

is always sell and then into the close

even today into the close we're seeing

some kind of move up

so whatever Supply comes in on the

discounted news from overnight or from

over the weekend it's still you know

some buying that is present there we are

at the very kind of like uh interesting

spot where we could have a reaction

but we also if you know the price action

is going to be uh you know more bullish

we could continue with that move to the

upside or we could have a very shallow

reaction so we'll just have to see but

phase C

is that the last test

at the level of the support this is the

test of the supply and the task of the

demand at the same time

and um this is a test number three I

will come back to this idea

and this is a pure romanism that's how

students call this

um

because I mean the original course or to

gu course or you know whoever you you

know took this course before

um there probably there is no mention of

this

um but I wanted to create some kind of

shortcuts for you guys

in order for us to just understand the

concepts and I will develop you know the

idea of why test number three later on

but for now I want you to remember that

the first test is going to be a local

test of the climactic action

uh to the selling climax that's that's

number one that's in Phase eight

the task number two is gonna be the test

of the support area in Phase B

and then test number three at the

support level is going to be the test

um of the last point of support the test

of the spring the test of the ShakeOut

and it's still gonna provide us the clue

that

um even if Supply is available here at

the spot demand is capable of reversing

the price

back into in the trading range and then

pushing the price back to the resistance

point

our force test

is going to be a backing up uh action

and this test is going to be at the

level of support but at the different

level of support this level of support

is going to be all about a conversion a

switch from resistance to the support

and that's gonna that task number four

is going to confirm a change of

character

okay well if uh phase C is the last test

and that's extremely important to

observe this test of the supply and

demand at the support level and to seek

the confirmation that the price comes

back into the trading range and has

characteristics of being able to move

the price up on the bullish volume

character the bullish price character

and so on so forth then phase D already

becomes a part of the markup phase or an

uptrend

and usually when we look at the historic

chart and you need to quickly identify

phase C what do you do

you look for the lowest point

in an uptrend

and usually that's going to be your face

C

now it's going to be a shortcut as well

and especially for the homework that I'm

gonna give you guys

so uh phase D is a part of the uptrend

already

and in the uptrend the behavior is going

to be different

and we're going to experience that

change of character again as I mentioned

before the rally is going to be the best

rally out of all of the rallies in the

range and then the reaction is going to

be the best reaction in the range and in

a lot of cases it's going to be more

horizontal than the reactions in the

trading range itself

and then after that

as we confirm the uptrend with the

breakout out of this area of the sign of

strength and the backing up action

that's when we enter phase e and this is

where it seems so at least that's what

we were taught you know things are going

to be easier

not necessarily the case the character

with which the price moves could become

very dull and interesting and you could

regret this trade that's number one

secondly even in the uptrends we're

gonna encounter a lot of consolidations

and we still have to go through the same

process of identifying you know the bias

and why confidence phases and so on and

so forth

um some last thoughts on this slide uh

first of all I want you to read all of

this this is your homework so read all

of this

then try to find all of these points on

the schematic

and then also as you read through this I

want you to identify certain certain

characteristics

that are going to be useful in

identification of all of this week of

events what do I mean by that

wall for instance an event like selling

climax is going to be associated with

the increase in

um

momentum to the downside

uh increasing downward spread increasing

volume signature increasing Supply

signature

um automatic rally might have the

increase of the demand and increase of

the up spread behind it

secondary test is going to see the

dimension downward spread and

diminishing volume signature and

specifically diminishing Supply

signature

um

spring

as well as a ShakeOut will have a

structural lower low

and then we'll study the Sprints

Sprints are going to have

different levels of supply and price

penetration below the support

and specific failures

like spring number one

and then a ShakeOut is going to have

characteristics where

the volume signature is going to

increase

a lot and there's going to be a lot of

commitment

by the price below the support

and it's going to look a lot like a sign

of weakness so the biggest question here

is going to be to decipher whether we

are in the bullish or bearish bias

uh sign of strength

is going to have characteristics where

the up spread is increasing

where

um the volume signature in general is

increasing and therefore demand is

increasing as well

in a lot of cases when I'm gonna ask you

what is the definition of the sign of

strength you're going to give me the

incorrect definition and instead you're

gonna talk about the character of the

sign of strength bar

a sign of strength rally

is a different Beast than a sign of

strength bar

on that rally and usually students are

given me the the character of the sign

of strength bar not even the definition

of the of the sign of strand bar so I

want to point this attention uh this to

your attention

foreign

then the backing up action is going to

have characteristics where the down

spread is decreasing where the supply

signatures decrease in volume signature

is decreasing and so on so forth so as

you could see

each week of event

has some specific characteristics

whether those are price characteristics

volume characteristics or contextual

characteristics as to where those events

are going to happen at the level of

support at the level of resistance in

phases A B C or D

and what it does to us once you

understand all of this once you get all

of this

is that it acts as a road map for us

not just for the timing when the price

is leaving the trading range but for the

buyers as well

you might be thinking oh okay well

ShakeOut looks like sign of weakness so

it's a bearish bias but then the price

quickly comes back into the trading

range shows some bullish characteristics

would you change your bias then

you should

and that's why methodology is so great

just because it gives you that

contextual layer that you could apply to

your analysis and that layer is not only

for the price structure itself

that layer could be used for supply and

demand characteristics and that's why

supply and demand is so huge in lack of

analysis it could be used for the

relative comparative purposes and

comparisons and more importantly it will

be used by US with tactics

you know tactically we want to

understand that the best phase is for us

are C and D so identification of those

phases are going to be crucial that's

number one

secondly we could bring you know into

with tactics a lot of the

structural events

uh type of uh interpretations where we

could open the position on the screen

itself on the test of the spring on the

breakout of the local Sprint on the sign

of strength bar on the reversal of the

backing up action and on the break

Breakout

I just went really quickly through all

of the points of Android that we will be

discussing and we will be discussing

those in more details as to where

exactly you know is it that the open of

the bar at the end of the at the close

of the bar

um how would we use intraday and so on

so forth so that's all we had

so I want you to understand all of this

so you need to read all of this you need

to memorize this you need to understand

the characteristics behind each event

okay

and um you know I've talked about the

different

type of uh variations on how uh let's

say in accumulation absorption could

happen

let's imagine that there is a lot of

value

in the climactic action for the stock

that has just very very you know big

move to the downside and selling climax

becomes the lowest flow in this cold

range

how is it possible

why would this structure be created

instead of a more horizontal more

conventional structure that we see here

on schematic number one

well you we can think about this right

so there is a lot of value

and not only a lot of value this is an

extreme value for institutions

wait they're just saying wow the value

of the stock is somewhere here and now

it's just so undervalued

so I'm definitely going to buy this

because it's almost like a free trade to

me at this point of time even if it

consolidates and at some point it will

come to the value Zone

then I'm going to make money so what

they're doing here at this spot is

they're buying a lot

and because they are buying a lot and

they're willing to buy even more because

still at this point of at the higher low

there is still extreme value for them

and then at another higher low there is

still some value for them so they're

coming in and buying on each reaction

and supporting the price and that does

not allow the price to go back to the

support level and even create the low

low

so there is some urgency in the way how

institutions accumulate in this

particular pattern and that's what

creates this pattern the upslope and

structure and that shows a potential

leadership in the future

it's different than the conventional

accumulation range where we would see

the stopping of the downtrend with the

buying from institutions and then it's

kind of flat and the spring could be a

lower low the ShakeOut could be a little

low low but we could also have a higher

low here as a last point of support

so why is it different again

different urgency to accumulate

and the conventional schematic the

urgency more

as the price leaves the range this is

where the value becomes scarce in you

know institutions that are late they are

the ones that are going to push the

price up

in the extra strength trading range it's

slightly different extreme value at the

point of the climactic action and then

every time it gives a reaction that it

still some value so they are pushing the

price up and that's what creates the

structure

in the continuous weakness where we have

the lowest point as a Sprint or ShakeOut

and is different than the conventional

one even though it's a low low as well

we kind of see that there is some kind

of downslope and structure here

so lower lows throughout and those are

significant lower lows what does it tell

us that even though initial accumulation

has happened here on the cell and climax

there is still Supply present that

pushes the price down

and then at the lower points now we see

the value and this is where institutions

are accumulation and that's how this

structure is being created

the traditional sources are rounding up

formation

you know here are the same thought even

though selling climax is at the high

level still there is some elements of

the supply that push the price low lower

retesting it and then until the next the

last test is showing some kind of

deterioration we will be testing it and

it will still we'll be looking at this

at the downtrend it's when the change of

character happens

and then we start seeing this different

Behavior higher highs higher lows and

the volume signature is going to exhibit

you know this type of the behavior

that's when we're starting to think

about this pattern as well so we can I

don't want you guys to be linear in your

thinking about how we approach this

analysis you got to be flexible your

minds have to be dynamic

um the only way how to behave linearly

about this are two ways take just one

small event and there you can say yes

this should unfold this way and if it

doesn't then it's a failure and I'm

gonna trade it in a different way and

secondly if you are capable of thinking

you know thousands of variables at the

same time then you can think linearly if

you could analyze so many data points

then you can think linearly so

so what I would like you to do for your

homework go into the previous slide

going back to the previous slide print

it out have it for your library of

slides have it in front of you as you do

your homework and use it for your

homework as you as you start labeling

and then also look into this schematic

right here or schematics rather and then

um print those out as well and uh try to

identify as you go through the homework

as to what kind of range you have there

is there extra strength or extra

weakness is there you know

um some kind of specific formation that

you know uh that you see in your

homework

and that that would be the best

all right uh

rear accumulation yeah let's go through

the reaccumulation this will be really

helpful for the homework and then we'll

discuss the homework and then we'll

probably stop at this point

uh so usually I jump right into the

distribution but this cycle I decided

that I'm gonna go about this in a

slightly different way and you kind of

see how I'm creating this secret so

going from a change of character that

basically tells us how the environment

changes

uh so from the down environment to

accumulation

um you know this is the change that

we've described a change of character

and this is a change change of character

and those are the spots where we're

going to make majority of our trading

decisions

in between we said that we need our

phase analysis

to define the bias

timing

and next character

but once we're in the trend

we could also go into non-trending

environment

and obviously at this point of time you

would be thinking is this a distribution

or a re-accumulation

we're going to concentrate today on the

reaccumulation just concentrating on

bullish patterns for now

so re-accumulation is some is different

from accumulation

and the way what preceded it so on the

way up we have an object

in the uh for the re-accumulation

um in accumulation we actually had a

downtrend and that's the only difference

so whenever I'm gonna ask you what's the

main difference between accumulation and

reaccumulation that's how you address

this question

accumulation had a downtrend before that

reaccumulation had an uptrend before a

Consolidated environment

so we want to look into reaccumulation

and specifically label it how we're

going to label it

um and then you know as we go further

into the studies of the bias

then we'll talk more about

reaccumulation and the difference you

know between reaccumulation and the

distribution

actually with me

take a picture of this

okay

all right

so what are the

reaccumulations the areas of uh

reaccumulations

we definitely

um

should understand that

um there are different Cycles

as to how the price moves

there are cycles that are very short

lift cycles and they exist on the

intraday time frame

uh the longer Cycles would be existing

on The Daily time frame

and then weekly and then monthly and

then you could even go further with the

quarterly and yearly

and within those Cycles within large

Cycles like a monthly cycle uh a monthly

move to the upside you are going to have

your original areas of accumulation

you're gonna have some kind of moves to

the upside and then areas of every

accumulation

that would uh

have some elements of the distribution

which are going to be a short-term lived

elements

that will also have elements of

absorption

but once the accumulation has been

concluded and ran its course then we're

going to resume an uptrend which is now

becomes a very very much long-term

uptrend and we're gonna we're gonna go

into the uptrend Interiors option of

that uptrend

it's this spots

um the trading range the consolidation

within the structure of a much larger uh

price cycle where the price

stops

exhibits some temporary weakness

which is being produced by temporary

selling

and we could discuss more the reasons of

why the selling would occur at those

spots

and then

um absorption of that Supply absorption

of those distribution elements and the

resumption of the uptrend and those

um what we are going to call Stepping

Stone reaccumulation trading ranges

could occur on different time frames

and uh at different points of the

uptrend so here we're seeing

the same magnitude re-accumulation

ranges

on the way up

and then we see a different magnitude of

the reaccumulation range and we will

have to make that distinction because we

will need to understand

um you know how we trade in this if I'm

a swing Trader a short-term swimming

Trader then definitely you know small

trading Rangers are the ones that I'm

looking for and these are the swings

that I'm looking for if I'm a long-term

investor I really would like to exploit

this opportunity which is a long-term

value proposition to me

uh as as I am a long-term investor and

this is the position that I will

establish and then hold on to it for

quite some time I also would be looking

for the points to add on the way up

um so we we just have to be very mindful

as to

the stepping stone recognotion Traders

occur how they unfold and then what kind

of Trades are available out of those

spots to us

okay well let's look at the example of

labeling so this I've taken from Hank's

book

which I hope that you all

already in possession of again with

Hank's book here

chapters three to seven are the chapters

that I want you to read if you read it

throughout the course this is fine as

long as you read it

um so definitely a really good case

study on the introduction of the Wyckoff

method itself and here we're seeing what

I call you know a conventional

uh way of labeling and re-accumulation

we start with the preliminary Supply

then buying climax as a stop in action

biggest reaction to the downside as a

change of character

which is also labeled as automatic

reaction and then a secondary test rally

would conclude phase a

phase a remember the intention is all

about stopping what are we stopping

we're stopping the uptrend from further

movement up

the change of character phase a defined

the non-trending environment to trading

range

and then throughout the trading range

again we're gonna go and Define

different points Wyclef events we're

gonna try to Define phase C anything in

between in between is going to be phase

B

sign of strength backing up action so

from this perspective everything looks

uh the same as an accumulation with an

exception of the buying climax automatic

reaction and secondary test it's almost

as if it's reversed

right

so here's the accumulation selling

climax automatic uh rally secondary test

so we have a reverse mirror image of

um of that accumulation in the

reaccumulation in Phase a but everything

else is the same we're still gonna have

secondary tests in Phase B if those are

lower lows then this is going to be

identified as minus sign of weaknesses

uh we're still going to have in Phase B

up thrust attempts or up thrust actions

we're still going to have phase C uh

with the uh lost point of support is the

higher low

or spring or ShakeOut as the low low

we're still going to have a sign of

strength in Phase b and a back map

action in Phase D I'm sorry not phase B

phase D sign of strength in the backing

up action uh so all of this is going to

be the same here's an example it's not

that great because this article has been

written quite a long time ago more than

20 years ago I believe it was written oh

look at this 1992.

and it was written by Jim Forte

um and I in my opinion this is the best

article on price structural analysis

that has been written

um not just recently and I know that

Hank you know wrote on that Bruce wrote

in the blogs but to me personally it's

James article that is extremely

important and this is uh this was the

homework for you for today to read this

article if you haven't read this article

go to our website go to the resources uh

page and you will find that article it's

a requirement for this course

this is the most comprehensive article

on the price structural analysis that

I've encountered and if you don't

believe me here is a story uh you know

about this article

um I went uh in 19 what was it 1914 or

13 uh to Singapore to the iftar

conference which is the International

Federation of technical analysts and I

met their

um

uh John Bollinger and you know all John

you know with his Bollinger pants

um and we we were chatting we were just

chatting at the break and uh he was like

you know the best article on on wykov on

the structure was by Jim and Jim was

saying the class was meme uh an actual

multiple classes when I was at Golden

Gate University so

if you don't take my word as a

confirmation of the value of this

article then take uh the word of John

Bollinger and he said to me that I

actually keep it handy I keep it close

to me because it acts as a reference

point to me when I look at the structure

so

um you know Jim has done a tremendous

job with this article and here is an

example which I actually think is not

that great

um you know so he talks about the

shakeouts here well maybe shake out

attempts but definitely looks more like

a spring actually I would do more of the

horizontal

um downsloking Range like this but the

principles are going to be the same

phase a is going to be a stop in action

of the previous uptrend then phase B is

going to be multiple tests at the

support at the resistance level and then

phase C is going to be your third test

and then the resumption after the sign

of strength in the backing up action I

would actually identify sign of strength

a little bit higher because this looks

climactic to me oh he has two arrows

here so this is great

okay so um

yeah really good start is my gym

um so I started thinking about different

variations on the re-accumulation Range

and in anticipation that students are

going to have questions you know

um I'm kind of

showing you something that I've

developed in a slightly different way

um a lot of the times the first move to

the downside as a change of character

is going to have characteristics of a

ShakeOut

and then the next rally is going to look

like your regular automatic rally in the

accumulation and then your next reaction

is going to look like a secondary test

so I started thinking that a lot of the

reaccumulations are going to kind of go

through

a very quick phase of distribution

on that first ShakeOut move

and you could think of

2010 May 6.

flash crash

as an example and I should bring this to

your attention

so flash crash like this

and then a quick recovery as an

automatic reaction and then a test a

secondary test so here we are kind of

dealing with the issue that

we have two changes of character at the

same time we have the change of

character on the way down and then on

the way up

so that suggests that automatic rally is

still here then how would we label this

well obviously this looks more like a

ShakeOut or sometimes I'm gonna put a

cell in Climax

as a climactic action so your downtrend

is very fast within the context of

re-accumulation in some instances you're

going to have a push to the upside

climactic action very small

distributional pattern which would point

on the PNF that there's going to be some

kind of downtrend so you have to go

through this and then a local selling

Climax and the regular accumulation

labeling

is going to be applied to this but

within the context of a much larger

Trend this is just a re-accumulation by

itself

so different time frames right different

time frames on

um

you know a secular big uh or cyclical

uptrend

and then much much shorter tone weakness

and a downtrend

within the uh context of a much larger

Trend up

so again just slightly different

labeling that you could apply

if you're seeing all of the ShakeOut

elements and elements of the automatic

rally in the secondary test then I'm

actually okay if you label it like that

I'm definitely okay and I'm gonna ask

you to label it exactly like this if

you're going to have a small

distribution pattern a down move and

then a local selling climax automatic

rally and secondary test

and again this is something that you

will encounter with your homework and

we'll discuss with the homework review

um again

different it seems to be the same

concept right a concept of accumulation

a concept of a re-accumulation another

reaccumulation another reaccumulation

another reaccumulation and yet look at

the different variations on the same

bullish bias

the first are

the first pattern shows to us that in

2008 there was a short-term downtrend

and I'm thinking about the 2000 the

reload for apple and this is Apple

um so this 2009 low

on this secular basis acts as a

re-accumulation low

rather than you know a downtrend but on

a short-term basis

we are in the downtrend right here so

here is that schematic that I've just

shown you

and

um it just

shows you know examples from life you

know this is how it unfolded and then as

we go to the next minion full

consolidation

um this consolidation is a

re-accumulation

and it has a higher low

uh in Phase C so it looks like this

this one right here this is the flash

crash um in May on May 6 in 2010

um here is that example where you could

label a buying climax sell and climax or

shake out and it looks like a ShakeOut

automatic Corral is secondary test phase

a

test and B test in b

face C and relative to the previous low

the flashcard flow this is a high low

again so the same schematic

the next Ray accumulation has a

downslope of instruction to it so we see

that phase C is a low low

like right here like in this schematic

and it leads us to this Frame and it

shows us a sign of strength and here is

a sign of strength and the back end up

action that's going to back up you know

to the same level of the support that

acted before is a resistance

so

the linear thinking about the method

should always be about the process

itself

we are in the trending environment

change of character happens we are in

the non-training environment in the

non-triguing environment we're going to

go through our phase analysis to Define

bias timing and character

once that is defined we want our tactics

a layer of tactic of tactics in phases C

D and early e to enter the position and

to scale into the position

then we're going to have an upfront

with potential

uh areas of consolidation where we could

add to the position or establish the

position those are going to be a

reaccumulation areas

they are all going to start the same way

as other consolidations

with the last climactic run with the

change of character with the failure to

continue the previous move

and therefore with the consolidation

around the mean

um they could take different shapes and

forms but the process is going to be

linear again you're going to go through

your phase analysis you can identify all

the Y confidence

and then you're going to apply your

tactics

and it's going to continue until you

actually

come into the

um

distribution and there the

characteristics are going to be

different

and that's going to repeat over and over

and over again and this whole craft is

just about that

it's about identification of the bias

inside about identification of the

opening of the position at the most

opportune time

where your trade becomes efficient trade

where you don't wait for the trade to

happen it happens right away

and that gives you the most efficient

run for your money

all right

so that's a re-accumulation now let's

talk about the homework so this homework

is going to be

uh for next week

um we are going to look at the Home

Depot charts

and the assignment is very simple

I want you to label all of the trading

ranges

that I identify on the slides

and

um I want you to label those with YCA

phases that's number one

wake up events that's number two

and changes of character that's number

three

four

the E is

of conducting this exercise I want you

to

print out this slide right here

this slide is gonna

show you the template with which you

should label it's gonna identify for you

the sequence of like a finance sequence

of phases intentions behind the phases

characteristics of all of the uh y

confident in the consolidation and after

that I just wanted to go to

all of these slides and by the way I

will make this slides available to you I

will explain as explained in a second

uh you know uh how you could

get the slides so you'll have two type

of slides you go you're gonna have

uh PDF slides

uh for lecture

and you're gonna have PowerPoint slides

for your home assignment

this is just the new innovation for the

course that I'm gonna try this cycle and

see whether it's going to be you know

more successful

um please note that I don't have the

volume signature here so not all of the

charts are gonna uh have the volume

signature this is not necessary at this

point of time

and I'm very serious about that I don't

want your minds to be distracted by

additional information it's just not

um conducive to the understanding of the

price structural analysis at this time

just follow my lead and don't even think

about it

so look at all of the trading ranges

that I identified with the support and

the resistance

and just go through all of them and

label them

and then in the next class

we'll talk about all of this labeling

and we gonna

review

all of these slides and I'm going to

give you my

um

solution slides and I'm gonna look

through your homeworks and we're gonna

talk about specific points where you

guys you know more commonly making the

mistakes that would be a great time for

us as we go through the view of the

homework you know to answer some of the

questions that are relate to price

structural analysis so I see today some

of the questions come which is great but

a lot of the questions I actually on the

material that is still ahead and

obviously I don't want to jump ahead

without

establishing you know very proper Basics

so in this exercise is all about the

basics now let me

talk about what's going to happen today

and tomorrow and then I'll

um I'll go to your questions and

comments if you have any questions you

can type those in

so I mentioned already a couple of times

a couple of things

um first of all I will email you either

tonight

or tomorrow morning

and I'm gonna email you with the access

information

um on the

uh

web page

for this class

and for this particular cycle

so please

um you know expect the email to come to

you this information is confidential so

um I would like to ask you to keep it

just to yourself

and then

um

on this page you're gonna have usually

uh

two things a video

and slides

so the video is a player

that is built in

so what you need to do when you watch it

is make sure that you expand it

right that you expand the view

and you can watch it on the whole screen

slides is just a link and slides you can

download

and what I'm gonna do for you is again

I'm gonna have a PDF slide on the

lecture itself

and then I'm going to have a PowerPoint

slide

for your homework it's just going to be

easier with the homework if you have

power uh you know PowerPoint slides

because you could work with those right

away you could just narrate them right

there and just send those back to me so

you don't have to think about you know

scan those or maybe converting them into

a different file format it's all going

to be done for you

um so just use that

okay so access homework what else yes

send me

uh with your homework uh one paragraph

identify

um how you heard about us

how you heard about

WTC

and then what kind of

Wyclef method history you have

you know whether this is studies

or Trading you can tell me what kind of

results you have with your Trader

and all of this by the way right now I

want to establish that all of the

communication with me

would go to this address

simple kot hotmail.com the reason why I

want to use this address is because it's

just faster for me to see uh right away

that your emailing me uh plus the wake

of Associates at gmail.com email is just

for business purposes and the whole team

sees those emails and you know it's just

distracting for them so I just want to

make sure that all of the emails go to

my private email and you know I could

answer much faster I'm not guaranteeing

that I'm gonna answer right away but I'm

definitely gonna see it much faster

okay questions comments on the homework

or on the material that we've covered

today so let me just see some of the

comments questions here

okay a question uh multiple questions

from Eric here

in accumulation schematic number one

okay let's go there

okay

if they move up after secondary test

and phrase B goes far above the previous

high in Phase a so we're assuming up for

us which is overextended

uh can we think that we are still in the

accumulation

okay so this is a question kind of like

in the moment right so for instance uh

you know if the price goes up are we

still in the accumulation well by the

definition you know of the higher highs

higher lows here we already would be in

the uptrend if this to happen

in some instances the operas could be

overextended but still will come back

into the trading range that's just the

definition of phase B

right so phase B here

is going to suggest that the test at the

level of the resistance

could have either a failed up thrust

attempt

or it's going to have an up thrust

attempt

I'm sorry off thrust action

um so therefore operas by itself

concludes with the return in below the

support line below the resistance right

so therefore by definition of the

accumulation the price will come back

in the case that you're describing Eric

you know with the prices going up up

from here then we are in the uptrend and

I would be questioning if this type of

structure is just uh phase C of a much

larger formation so you have to think

about that

okay next question

okay so the main thing in the array

accumulation is Phase a

um that is similar to phase a

um in the distribution

but phase B is the only difference that

I could see with the sign of weakness

that goes below the automatic uh

reaction in the distribution

um Eric again I'm I like all of the

question I think that we're just jumping

a little bit ahead so I would just say

like stay patient patient and it will

come to us as we're discussing in the

next two sessions you know all of those

elements would go through the homework

but the very simple quick answer to this

um is that uh you know there are quite a

few things

that we will be discussing as to how to

define the bias

and yes you're right in the

redistribution the first one third of

the range I'm sorry in the

re-accumulation

the first one third of the range could

develop

the same way as a distribution

it just starts with the same stop in

action change of character and the

secondary test

so it's gonna

uh look the same it could look different

price and volume characteristic that

could be the distinction but again the

goal for this course for this particular

four months is for you not to

necessarily give the bias in Phase a

I'm kind of teasing you a little bit

with that material

because I know that we discussed this in

the practical

but for now this is not the time to

discuss that for now I just want you to

remember that re-accumulation

distribution is going to start the same

way so it's going to have the same

labeling and then as we go through the

trading range this is where we want to

define the bias

with distribution show up or would a

recumulation show up and that's how

we're gonna determine what to do next

can you address some differences in

phases B to discriminate if phase B of

the recumulation and distribution kind

of the same thing right so this is more

advanced as a material we're still on

Basics so we're going to discuss those

probably even more in Practical like

phase B is definitely practical because

this is one of the hardest phases that

we will be discussing so with that just

you know everything is ahead uh you know

don't worry about this uh we will

definitely you know get to all of this

material the the main key right now is

observe all of the basic and absorb them

at the good level so that's the home

assignment okay guys well that's it for

today

um okay quick last question

is why governmental methodology is

suitable mostly for liquid stocks uh

from nylash no

um we could definitely use some of the

examples of the liquid stocks as well

now the methodology will be applied in

slightly different way there and we can

talk about this this could be uh

knowledge this could be a really good

question for session number 15 which is

going to be a q a session so once we

understand all of these Concepts

um you know a question like this will be

just perfect

all right guys thank you for all of the

questions even though we really did not

have a very interactive session but

still really good second session we've

covered a lot of material which pleases

me a lot because we've got a lot to

cover you know in the next couple of

sessions even just on price structural

analysis

please do your homework if you have more

time watch this recording again

create your notes send those to me but

send me your homework to simplekot

hotmail.com and send those before the

class not in the last hour I beg you you

know if you're gonna send me in the last

hour most likely I'm going to be busy

just preparing for the class I will not

even see it

um send me all of your homeworks before

12 noon on Monday and preferably on

Sunday over you know at any time on

Sunday or if you could do this even

before Sunday even better

all right guys that's it for today uh uh

expect my email with the access

information and I will be expecting your

emails with the homework I will see you

next week at the same 3 P.M Pacific

um happy trading until then and uh thank

you so much bye-bye