Accumulation Schematic

Phases A through E: Phases through which the Trading Range passes as conceptualised by the Wyckoff method and explained in the text. Lines A and B… define support of the Trading Range. Lines C and D… define resistance of the Trading Range.

(PS) preliminary Support is where substantial buying begins to provided pronounced support after a prolonged downmove Volume and spread widen and provide a signal that the downmove may be approaching its end.

(SC) Selling Climax… the point at which widening spread and selling pressure usually climaxes and heavy or panicky selling by the public is being absorbed by larger professional interests at prices near a bottom.

(AR) Automatic Rally… selling pressure has been pretty much exhausted. A wave of buying can now easily push up prices which is further fuelled by short covering. The high of this rally will help define the top of the trading range.

(STs) Secondary Test(s)… revisit the area of the Selling Climax to test the supply demand balance at these price levels. If a bottom is to be confirmed, significant supply should not resurface, and volume and price spread should be significantly diminished as the market approaches support in the area of the SC.

The “CREEK” is an analogy to a wavy line of resistance drawn loosely across rally peaks within the trading range. There are of course minor lines of resistance and more significant ones that will have to be crossed before the market’s journey can continue onward and upward.

Springs or Shakeouts usually occur late within the trading range and allow the market and its dominant players to make a definitive test of available supply before a markup campaign will unfold. If the amount of supply that surfaces on a break of support is very light (low volume), it will be an indication that the way is clear for a sustained advance. Heavy supply here will usually mean a renewed decline. Moderate volume here may mean more testing of support and to proceed with caution. The spring or shakeout also serves the purpose of providing dominant interests with additional supply from weak holders at low prices.

Jump Across the Creek (JAC) is a continuation of the creek analogy of jumping resistance and is a good sign if done on good spread and volume – a sign of strength (SOS).

Sign of Strength (SOS)… an advance on good (increasing) spread and volume. Back Up (BU) to a Last Point of Support (LPS) – a pull back to support (that was resistance) on diminished spread and volume after a SOS. This is good place to initiate long positions or to add to profitable ones.

Note: A series of SOS’s and LPS’s is good evidence that a bottom is in place and Price Markup has begun.

Resources: http://www.hankpruden.com/MTWyckoffSchematics.pdf