Using Simple Sell Rules 03 02 2013

Case study: Analysis of RIMM (weekly) 1

Step by step Wyckoff analysis

Distinction: Continuous weakness TR Think of a conventional TR collapsing down because of present supply and downward pressure.

3

5 AR

Phase A

Phase B

Phase C

Phase D

Phase E

7 Failed thrust - SOW

2 8 10

Reverse use of trend lines

AR

SC 4

SOS 14

16

12 ST 6

LPS SC

9

15

ST

11

Spring

13

Spring area

September 1, 2012

FI354 course, Golden Gate University

Break of trend

#1-#2: MSOW after all time high high – expect lower prices after rally or consolidation. #3: Rally (and not a consolidation) is evidence of prior leadership, fails to make a new high – SOW and expect lower prices. #3-4: Next decline to #4 is aggressive but only makes small progress beyond #2. Down thrust contracts – possible stopping action ahead. ahead. #4: Big spread and consistently increasing volume – sign of potential SC and beginning of Phase A. #5: Reversal and biggest reaction against down Trend – signs of AR. AR. Volume spikes – still evidence of supply left. Expect lower prices. #6: Price reverses in the area of SC and rallies, volume decreases decreases – signs of ST. Reverse Reverse trend line is touched and confirms potential reversal and subsequent rally. Stopping action of Phase A #7: Inability to rally to AR high – SOW and expect lower prices. Volatility is an element of Phase B. #8: Reversal of a failed up thrust is confirmed by a big spread and a volume spike –SOW and expect lower than ST area prices . #9: Almost 3 day rally on relatively increasing volume and increased spread. 1 st signs of stopping action for current short-term decline. Potential local SC and testing of Phase C. #10-13: Price repeats bigger fractal pattern with SC, AR, weaker ST, failed up thrust and a shakeout. #13: Reverse trend line is touched again and gives more weigh to reversal. Volume has dried out from SC at #4 to #6 to #9-13 – supply is exhausted and absorbed absorbed – readiness to rally. #14: Aggressive up move out of oversold condition on increased spread and increasing volume. Break of a down trend line. Close above AR high creates a higher high – all are elements of SOS. Minor SOS for bigger TR and major SOS for smaller TR. Start of Phase Phase D. #15: Price backs up r epeating fractal move down in a Continuous weakness TR which creates BUC for smaller TR and LPS for a bigger one. Down trend line becomes becomes a support – expect a rally from here and a start of Phase E. #16: Price travels easily above #10 and #14 on lower volume volume and increasing spread – major SOS and demand being in full control. Phase E is under way.

Prepared by Roman Bogomazov

Case study: Analysis of RIMM (weekly)


Break of trend 5

Decline = 42%

BC

ST

10

7 AR

4a

SOS

13

12

PSY AR SC ST

4

6 8

9

Phase A

Phase B

LPS

Spring

11 C

3

2 1

D

#1-#2: The stride (slope) of an up trend is defined and reinforced at #11. #3-4: Significant volume comes in at around #4 and makes it a significant resistance point to construct a reverse up trend line. #4a: First significant reaction and PSY. #5: Volume spikes and spread volatility form a small distribution TR on a daily chart and decline the stock 42%. The whole area exhibits climactic behavior and potential is a stopping point. #6-7: After decline, stock rallies aggressively in the AR manner which creates upper and lower boundaries of the TR. #8: Price reacts on lower volume to support area and forms a successful ST. Stopping action of Phase A. #9: Two rallies fail to advance – SOW and expect lower prices. Supply is still present and is an evidence of P hase B. Quick penetration of support line and return back to the range - Spring #2 with subsequent test at higher ground. #9-10: On the way up, supply is being absorbed in a laborious up move which leads to a slight new high – SOS and first sign of demand. Expect a test of Phase C. #11: Successful test of the support lows of Phase A & B – principle behind Phase C. Price creates a smaller fractal presentation of larger TR. Price is touched by long-term up trend line and reverses off it – confirmation of valid LPS. #12: Price travels easily to resistance level of the range on increased spread and Slightly increasing volume - Minor SOS and principles of Phase D. Low volume shows an absorption of supply and ability of price to move without effort – Law of Effort vs. Result. #13: Move beyond boundaries of previous high at #5 on major increase in spread and volume – Major SOS and Phase E. Stock is under active Markup.

September 1, 2012




7 UTAD

Test of UTAD as LPSY

BC 4

Distinction: Leaders will be the last among stocks to be distributed As the distribution TR develops in a leader, the initial price action is very constructive and resembles reccumulation. It supports the idea of an up trend continuation. Major failure comes in the right part of the TR with signs of UTAD and SOWs.

Step by step Wyckoff analysis 9

ST 6 10 Return to ICE

SOW 8 AR 5 A

11 SOW 3 Phase B

Break of LT up trend

C

D

Break through ICE and MSOW

12

2

1

September 1, 2012


#1-#3: Two supports of reaccumulation areas create a new sharper stride (slope) which is further being honored at #3. #4: Price advances fast to higher ground and suddenly reverses on i ncreased volume and volume spike – evidence of climactic action. #5: Quick reaction to downside comes with increased spread and presence of volume – initial supply comes in. Evidence of AR. #6: Rally fails to advance to BC area and comes with consistentvolume – further evidence of supply – expect lower prices. Phase A of stopping the up trend is potentially complete. #7: Price drops on increased volume below initial support level – principles of SOW. Two scenarios from here: consolidation or lower prices. During consolidation, Wyckoff trader will look for signs of distribution or accumulation to make final judgment to a health of a stock. #7: Laborious rise on consistently decreasing volume. Stock is still within the boundaries of the line of least resistance and promotes the up trend, but the gains are limited to the range. Volume on breakout is low and looks suspicious. Potential UTAD and Phase C. #7-8: Break of the shorter-term trend line – SOW. Price moves freely to downside without big volume – no demand for a stock – SOW. #9: Stopping action of previous decline is within the boundaries of the range and attracts more public to buy. Rally is weak as it fails to leave the range or create a new high. LPSY at higher ground. Expect a break through the support level and a MSOW. #10 Quick one week rally returns price to The range only to fail again – SOW. #11-12: Break of long-term up trend line and MSOW – Phase E. Prepared by Roman Bogomazov


1


3 BC

5 ST 6a

Failed rally

8 Failed rally turned LPSY

AR 4 SOW 6 MSOW 7 Phase A

Phase B

C

D

2

September 1, 2012


#1-#2: Major SOW from initial distribution range. Big spread, big volume – evidence of further possible distribution. #2: Small accumulation range based on the stopping action of the first MSOW. Public is buying at lower prices. CO is covering initial shorts. #2-3: Aggressive rally on consistently decreasing volume forms a provisional BC – wait for confirming evidence of supply to continue bear campaign. #4-5: Rally advance slightly above BC area and fails instantly on increased spread and volume spikes – evidence of supply and expect lower prices. Phase A is potentially complete. #6: Price drops below initial support level – principles of SOW. Phase B is under way. #6-6a: Rally is laborious and fails in the middle of the range – SOW and expect further lower prices. #6a-7: Price easily travels below Phase A lows and below recent SOW. This action occurs on consistently increasing volume – MSOW. #8: Rally is an attempt to test previous highs – principles of Phase C. Volume contracts on the way up – no demand. Rally fails and creates a lower high – stock is on a Springboard to decline. Phases D and E. #1-8: Failed rally in Phase C creates a second point for a construction of a down trend line.


Using Simple Sell Rules 03 02 2013

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