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Wyckoff trading method, page-515

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gamefisherman

3,651 Posts.

69

11/03/16

02:02

Post #: 17244229
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Originally posted by Jako64 ↑

View attachment 154430

E. Price opened and closed at the same level, again a battle between buyers and sellers. Price could not push higher however was able to push back to rest in the support area.

E- Arrowed
Narrower spread downbar, closing mid/high on low volume......ring a bell.....
This was an attempt to test and needs an upbar to confirm it as successful.

F. Low spread and low volume day representing a lack of interest by the CO. Sometimes however a low volume low spread day can be a trick used by the CO to attempt to put off retail buyers by taking their money off the table so to speak. Probably was suggesting a lack of demand given the lack of buyer aggressiveness in the previous couple of bars. The next couple of bars would also assist us to see if we are on the right track.

F- Narrower spread downbar, closing low, on even lower volume than the previous bar.
Officially this would be a potential "no supply" bar, but I am lumping all these into tests generally, to keep things simplified.
So I would say that this is a secondary test (actually it also shows the initial test was a failure, however if spread, and more importantly volume, is reduced over the first attempt at a test, a secondary test is acceptable).

****Now I usually try to do commentaries as if they are live bars, and try not to do things in hindsight if possible.
However, at this point in time we can all see the two tests, are failed tests, so I need to make a point.

Bar A and Bar D were both widespread upbars closing in the middle, which found supply above, which needed to be absorbed if price was to continue higher.
And the big players are usually not very willing to "just buy (or absorb) at any price". They want to do things at the lowest price they can if possible.
So after two decent efforts on Bars A & D, which could not bust through the supply above, the obvious next option available to them, is to shakeout the market, and try to encourage some of that supply above to sell out at a cheaper price (eg- if the supply above is just waiting for price to come up to their breakeven level so they can 'get out'. And remember, they may have been holding at a loss for quite some period of time. Then, if they see price turn and start to move away from them (lower) after coming so close to 'getting out' at breakeven, they may just choose to just sell, rather than continue waiting even longer than they already have.
Which is exactly what a shakeout is designed to achieve - get the supply above the current price, which is causing resistance, to sell out at a cheaper price than would have had to be paid if it was to be absorbed on the way up).
So if a shakeout is successful, it can clear away some (or all) of the supply above, which is causing resistance to price rising.

Oh and one other thing, sometimes a shakeout can also be used to accumulate more stock, although the above explanation is more common in my experience.

cheers

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O...K....

Interesting re your comment around the shakeout............I actually would have thought particularly in cash markets that the shakeout would be used as a standard weapon used frequently.....hmmm

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