Wyckoff trading method, page-519

K. The open saw price gap up. This bar contains both accumulation and distribution. At one point price was able to push through resistance, however supply came in to force it back down. Volume was also absorbed by buyers, and price closed equal to its open. Price was also able to close back in the new support zone.

K- Arrowed
Yep, this was a gap up (circled), and these gap up tactics are used to jump over a line or zone of potential resistance and accelerate price higher, in an attempt to encourage existing holders who may be considering selling their position (and therefore causing resistance to price rising). The idea being that a holder may be so encouraged by the sudden price rise, that they begin to get a little greedy, and change their plans from sell, to hold.
(a gap down can also be used in the opposite direction, to trap holders into a weak position).
and Yes, there is most likely a considerable element of absorption in the individual bar, or at least an attempt to continue absorbing supply at this level (where supply has previously been seen.


L. Price opened at the same level as the previous bar, however selling pressure forced price lower to close around support.

M. Low Volume on a day where price closed near the bottom of the bar, suggests that there was no demand from the CO. Perhaps at this point the CO was not quite sure if all of the overhead supply had been absorbed or was negative on the market. Either way at that point there was no interest to take it higher

N. I have used the next 2 bars for N. Initially price was driven higher, but there was also some selling as price bounced back off support to close near the top of the bar. Volume was not excessive. Perhaps this was a type of test as the next bar confirmed weakness with price closing down significantly.

O. Price gapped up on significant volume (potential weakness coming in) to close up 16%

P. Bars P and Q confirmed the potential weakness of bar O both closing lower, volume on that first bar was large and the second was not as low.

R. Price mananged to find support, spread was narrow and volume fairly average. Probably was some kind of test, but certainly supply seemed to have been small and demand was enough to halt further declines.

*** all these bars together (L M N O P Q & R) form a series of absorption bars, then a little testing at the end.
The 'pressing nature to the upside' can be seen, especially in the first half dozen bars, where price is slowly moving up and absorbing some supply, then coming back and testing for supply.  To me this is all indicative of the absorption process.  At the time it would have been difficult to tell exactly what wa going on for a few bars, however at no time did it really look vulnerable, and eventually the penny would drop that as there had been supply at this level previously, and that a shakeout was not very successful in drawing out that supply. So a gap up, then a slow absorption process was the most likely option to move price higher.


cheers