The Wyckoff Method Quiz

Wyckoff Method for Stock Market Analysis

• Wyckoff method involves analyzing stock market behavior through phases such as accumulation, re-accumulation, and distribution
• Accumulation phase involves intense selling pressures followed by automatic rally and successful secondary test
• Re-accumulation phase occurs during a longer-term uptrend and resembles distribution in Phase A
• Phase B involves institutions and large professional interests accumulating low-priced inventory, with multiple secondary tests and upthrust-type actions
• Phase C is a decisive test of remaining supply, including a spring to trap late sellers and indicate a new uptrend
• Phase D shows consistent dominance of demand over supply, with advances and reactions indicating initiation or addition of long positions
• Phase E marks the stock leaving the trading range, with demand in full control and short-lived setbacks
• Distribution phase includes events such as preliminary supply (PSY), buying climax (BC), automatic reaction (AR), and secondary test (ST) to confirm a top
• PSY and BC mark the beginning of distribution, with intense volume and price spread signaling a change in trend
• AR follows BC, with diminished intense buying and heavy supply, defining the lower boundary of the distribution trading range
• ST involves price revisiting the area of BC to test the demand/supply balance and confirm a top
• Wyckoff method is based on chart analysis to identify the behavior of large operators and the balance of supply and demand in the stock market

Wyckoff Method for Market Analysis

• The Wyckoff method involves the analysis of trading ranges to improve market timing and anticipate favorable reward/risk ratios.
• In accumulation and distribution trading ranges, the Composite Man is actively buying and selling, with accumulation involving more shares being purchased than sold and distribution the opposite.
• The extent of accumulation or distribution within a trading range determines the cause that unfolds in the subsequent move out of the range.
• Wyckoff offers guidelines for identifying and delineating the phases and events within a trading range, providing the basis for estimating price targets in the subsequent trend.
• Accumulation involves events like preliminary support (PS), selling climax (SC), automatic rally (AR), and secondary test (ST), with springs or shakeouts occurring late within the range.
• Springs and terminal shakeouts are not required elements, but they allow large interests to mislead the public about the future trend direction and acquire additional shares at bargain prices.
• Large operators always test the market for supply throughout a trading range and at key points during a price advance, with signs of strength (SOS) and last points of support (LPS) marking important phases.
• The "back-up" is a common structural element preceding a more substantial price mark-up, representing both short-term profit-taking and a test for additional supply around the area of resistance.
• Phase A marks the stopping of the prior downtrend, with the approaching diminution of supply evidenced in preliminary support (PS) and a selling climax (SC).
• The law of effort versus result provides an early warning of a possible trend change in the near future, with divergences between volume and price often signaling a change in the direction of a price trend.
• Point and Figure chart counts are used to measure a cause and project the extent of its effect, illustrating the operation of the law of accumulation and distribution within a trading range.
• A successful Wyckoff analyst must be able to anticipate and correctly judge the direction and magnitude of the move out of a trading range, using time-tested guidelines for identifying and delineating the phases and events within a trading range.

Wyckoff Method for Supply and Demand Analysis

• Short-term (ST) may take the form of upthrust (UT), moving above resistance before quickly reversing
• Price often tests the lower boundary of the trading range (TR) after upthrust
• Sign of weakness (SOW) is observable as a down-move to or slightly past the lower boundary of the TR
• Last point of supply (LPSY) represents exhaustion of demand and the last waves of large operators’ distribution before markdown begins
• Upthrust after distribution (UTAD) provides a definitive test of new demand after a breakout above TR resistance
• Phase A in a distribution TR marks the stopping of the prior uptrend and provides evidence of supply entering the market
• Phase B builds a cause in preparation for a new downtrend, with large interests disposing of long inventory
• Phase C may reveal itself via an upthrust (UT) or UTAD, testing the remaining demand and often misleading uninformed break-out traders
• Phase D arrives after the tests in Phase C show the last gasps of demand and price travels to or through TR support
• Phase E depicts the unfolding of the downtrend, with supply in control after a breakdown of TR support
• Analysis of supply and demand through examination of volume and price movements is central to the Wyckoff method
• Price bars with wide spread, closing at a high accompanied by higher-than-average volume, suggest the presence of demand, while high-volume price bars with wide spread closing at a low suggest the presence of supply

Test your knowledge of the Wyckoff Method for stock market analysis with this quiz. Explore the principles, phases, and strategies involved in understanding stock market behavior, supply and demand dynamics, and the influence of the "Composite Man" in shaping market movements.