Wyckoff Power Charting. Happy Birthday!: Click Here For A Link

Wyckoff Power Charting. Happy Birthday!
We have reached the one year anniversary of the Wyckoff Power Charting blog. Many
thanks for being enthusiastic and supportive readers. Lets pause and look back at
what we did in the first year.
Richard D. Wyckoffs emphasis was, first and foremost, to educate investors about the
Real Rules of the Game of Wall Street. The public must understand that investing is a
competition where they are trading against the sharpest minds and the best systems
imaginable. The absolute finest of this professional class of investors are the Super
Traders whom we call the Composite Operator (C.O.). The C.O. is the very, very best
on Wall Street and they manage inordinately large portfolios. When the C.O. finds a
stock they plan on owning and campaigning, they build a huge position in it. This takes
knowledge, time and skill. The C.O. class of investor also must compete with other
large C.O. types to lock up the float of the available shares.
In the blog post Getting Some Basic Terminology Under our Belts (click here for a link)
we explore the investment cycle. The investment cycle is classically composed of
Accumulation, Markup, Distribution and Markdown. This cycle repeats endlessly on
Wall Street. Mr. Wyckoff wanted us to understand that the fate of a stock is the result
of who owns it. Who has absorbed and controls the floating supply of shares available?
The law of Supply and Demand is the dynamic at work here. If the Supply of shares is
in the strongest hands (the C.O.) then the float is locked up. The Composite Operator,
through their campaigns, have limited the shares available for others to buy. A slight
increase in Demand for the shares, combined with scarcity of shares obtainable, will
send the stock price rocketing upward.
The process of Absorbing shares of a stock is called Accumulation. After a markdown,

the C.O. determines the price where value exists and Supply is present (the area of the
Selling Climax, SCLX) and initiates the Accumulation process. This is the start of the
absorption of the floating shares. Early blogs were devoted to the study of
Accumulation, beginning with the stopping of a downtrend (SCLX). Then the
C.O. carefully absorbs shares without unintentionally driving the stock upward until a
full position is Accumulated. Mr. Wyckoff made the case that we could detect the
footprints of the C.O. on the tape (in the vertical bar chart) as they stealthily did their
work. Through the analysis of the Phases of Accumulation (click here for a link),
Wyckoffians learn how to see the nuanced changes in the stock price action that tells
of the completion of Accumulation.
Completing Accumulation (absorption) tips the Supply and Demand balance toward
scarcity of shares and this puts the stock into a robust uptrend. The Wyckoff method
has a unique and all its own quality to trend analysis. Trend channels in the form of
Demand Lines and Overbought Lines show the Stride of the advance and provide
junctures for the purchase of shares during the Markup. Trend analysis is unique in the
ability to identify trend exhaustion which either leads to the Stepping Stone
Reaccumulation or the Distribution Phase.
A Wyckoffians objective is to detect the stock that is under Accumulation and then to
time purchases to coincide with the stock Jumping into an uptrend. The mission here is
not to compete with the Composite Operator, but rather, to trade in concert with their
campaigns.
Exhaustion of the uptrend arrives with a series of Climactic price spikes. Either a
Stepping Stone Reaccumulation or a Distribution formation follows Climactic stopping
action. A Stepping Stone Reaccumulation is a period of time in a trading range where
stock is Reaccumulated for another leg up of the bull run.
Distribution arrives after many months to years of rising prices. The C.O. is very, very
carefully selling their large holding of stock with the objective of not inducing
weakness while they sell and prematurely putting the stock in a downtrend. A stock
requires the active support of the C.O. to remain in a bullish uptrend. The removal of
that campaign of support will stall the stock and produce a sideways market. The act
of selling will eventually produce a bear market. The best markets to sell into are frothy
with bullish news on the market and on the individual stocks sunny prospects. This
glow of good news has the effect of keeping institutions and individual investors in the
stock and buying more. The paradox of good news at the top is one that Wyckoffians
must guard against. Good news during Distribution and bad news during Accumulation
is a signature of all market cycles. Selling in concert with the C.O. is the objective of
Wyckoff Analysis.
The Markdown is the inevitable result of the C.O. finally selling all of their stock during
Distribution. Typically the downtrend begins with a bang as prices tumble violently.
Downtrend channels are very helpful tools for evaluating and trading bear markets.
In Wyckoff Analysis the compliment to the vertical bar chart is the point and figure
chart. The horizontal counting method provides the Wyckoff trader the ability to
estimate price objectives. By counting across the horizontal area of the Accumulation
range or the Stepping Stone Reaccumulation the potential reward or extent of the
move can be calculated. Counting the Area of the Distribution and Stepping Stone
Redistribution accomplishes the same objective for declining markets.
First Year Highlights for your Review (click on the title for a link):
'Wyckoff Walk Around the Clock' For a review of the investment cycle of Accumulation,
Markup, Distribution, Markdown.
'Wyckoff Power Charting. Let's Review' A discussion of the Phases of Accumulation
with Schematics.
'Context is King' A discussion of the Phases of Distribution.
The Laws of Wyckoff and The Illustrated Wyckoff A discussion of the three laws of
the Wyckoff Method.
'Intro to Point and Figure Construction' This is the first of seven posts devoted to
horizontal point and figure construction and counting.
We have done much work in building the Wyckoff foundation during the first year. As
year two begins, we will focus more attention on skill building and mastery
development. There is also more to reveal about the method and its hidden secrets.
Again, thank you for your readership.
Also, I would like to express my gratitude to Chip Anderson and the staff at
stockcharts.com for their ongoing support of Wyckoff Power Charting.
All the Best,
Bruce
Professor Roman Bogomazov and I discuss the Wyckoff Method in a three part webinar
series (6 hours in total) on May 9th, 16th and 23rd. Roman teaches the Wyckoff
Method (online course) at Golden Gate University. It is not too late to sign up for this
lively discussion of the Wyckoff Method. All sessions are recorded and available to
each attendee. Join us for two more sessions of live discussions and review all of the
recordings at your convenience. We will use the Wyckoff Power Charting blogs as
the framework with additional material added. The fee for this series is only $49. Click
here to sign up now.

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