A Short Term Test and Bullish Long Term Objectives

Click Here For Wyckoff Wave Chart 11-22-2013

This past week the Wyckoff Wave rallied to point D on the daily vertical line chart. It then reacted, and is now testing that high. The Optimism – Pessimism Index’s short term negative divergence and the Technometer’s overbought condition indicate this test may be successful.

If it is, and the answer will come next week, the Wyckoff Wave is vulnerable to finally react back towards the top of the trading range. The trading range is defined as the line drawn from point J through points U and A. This is now the front edge of the Creek.

If this reaction is on reduced price spread and volume, we could be looking at another Last Point of Support and the trading range could be defined as a period of re-accumulation.

To make this point, let’s go back to 2012 and begin to analyze both the Vertical Line and the 100 Point & Figure charts.

After rallying off the bottom of the 2008 – 09 bear market, in April of 2012 the Wyckoff Wave began a long sideways movement. It begins at point F on the attached vertical line chart.

The Wyckoff Wave then rallied to point capital J (May, 2013). It then moved sideways. I would suggest this is a period of re-accumulation, with resistance at points U and A and a support line at point Q.

The attached 100 Point & Figure chart of the Wyckoff Wave divides these areas of accumulation into phases and marks objectives. As the count guide tells us to begin the first phase at a Last Point of Support, I have used points M and B to begin my counts.

I have identified 4 phases on the initial period of accumulation from point M over to point F. If the entire count works out, this gives the Wyckoff Wave a maximum objective of 50,200.

The re-accumulation period begins at point B (October, 2013) and extends over to point Q. So far, the maximum objective here is 43,900. However, point B may not be the final Last Point of Support. In addition if you look at the price spread and volume in this area, supply really did not dry up, demand came into the market.

It is fair to conclude that on the rally to point D, the Wyckoff Wave “jumped the Creek”. If there is a successful backup and the Wyckoff Wave holds above the Creek area, this would be the important Last Point of Support mentioned above.

The count line would then move to this LPS and the space between the LPS and point B would be added to the count. This adjustment would now give us a higher objective. While the minimum price would remain at 35,300, the maximum objective would be based on the price at the Last Point of Support. This would put the Wyckoff Wave in a position to reach the maximum count of the original accumulation area of 50,200.

Will the Wyckoff Wave reach that objective? It may or it may not. However, the market has built the cause that has the potential for the Wyckoff Wave to reach that maximum objective.

As the Wyckoff Wave reaches each of the individual the phase objectives, it will be extremely important to watch market action and look for signs of distribution.

While we don’t know what the future brings, Wyckoff strategies and techniques teach us that if we pay attention, the market will tell us what is going to do.