An Interesting Intra-day Analysis
Click Here For Wyckoff Wave Chart 09-18-2015
This past week the Wyckoff Wave rallied and met resistance just below the bottom of an old trading range. On Thursday, experienced an intra-day failure to the upside as supply came into the market and the Wyckoff Wave reacted to its poor close.
This would suggest that the Wyckoff Wave had found an important resistance level in the new trading range. It also suggested the Wave would react and finally put in that elusive Secondary Test of the climactic action at point Q.
While it could be argued that the support the Wyckoff Wave received in the area of point S was a Secondary Test, the relatively high volume on the reaction suggests supply was still present.
After Thursday’s intra-day failure, it seemed logical that the Wyckoff Wave would react on reasonable price spread and good volume. That didn’t happen. Instead, the Wyckoff Wave reacted on narrowing price spread and noticeably increased volume.
The narrowing price spread to the downside and high volume usually indicates the presence of demand. On the surface, this would suggest the Wyckoff Wave would rally and make another attempt to move through the support line drawn from point E.
This was an unusual time for demand to come into the market. When that happens, it is helpful to drill down to see what really happened. This is best done by analyzing the intra-day waves.
Friday’s market action, on the intra-day chart, begins a wide gap opening to the downside at point 1.
The first intra-day wave of the day was an up wave that began at point 1. Notice the small price spread. However, the volume was extremely high and the intra-day waves only lasted for 15 min. This indicated the presence of supply and set the tone for the remainder of the trading day.
After reacting to point N on a lack of demand (increased price spread, but decreased volume) the Wyckoff Wave attempted to rally. The rally was not particularly successful. Notice the quickly decreasing price spread on the up waves and relatively low volume.
The intra-day wave that took the Wyckoff Wave to point O was also on relatively low volume. The intra-day waves to point L ended at 11:50 a.m. This would suggest that the morning’s market action featured supply and then a withdrawal of demand.
When demand is withdrawn, it creates an opening for supply to commander the market. That’s what happened as the Wyckoff Wave reacted off point O. However, the supply was not sustained and began to dry up as the Wyckoff Wave approach point P. It was also a slightly bullish indication that point P held above the mornings low at point N.
Demand had a second opportunity to return and take control of the market. That didn’t happen. The rally to point Q was on reducing price spread and relatively low volume. In addition, point Q was substantially lower than the mornings high at point O.
This gave supply one more opportunity to come into the market and it took control during the last hour of the trading day. Price spread and volume increased on the last two down waves of the trading day.
In addition, the final wave of the trading day was on extremely high volume. However, like the first wave in the morning, the Wyckoff Wave made little progress to the upside. This continues to to indicate the presence of supply. This gives the Wyckoff Wave an opportunity to continue to react on Monday.
The intra-day chart shows the Wyckoff Wave in an intra-day up trend. The support and supply lines are drawn in blue. Notice that the Wyckoff Wave was unable to reach its intra-day supply line at point M. This makes it vulnerable to continue to react and weaken the support line.
On September 9th, the Wyckoff Wave began an intra-day trading range at point C on the intra-day chart.
While there was no spring, the Wyckoff Wave put in an intra-day sign of strength from point I to point J and continued to rally to point M. The Wyckoff Wave is now reacting back towards the top of the intra-day trading range and attempting to put in an intra-day Last Point of Support.
Instead of seeing a drying up of supply, supply continues to be dominant. In addition, every time the Wyckoff Wave attempts to rally it runs out of demand.
This would suggest the Wyckoff Wave will react back and quite possibly, through the intra-day trading range.
This takes us back to the daily chart. It is important to note that the Technometer has been overbought for several days. This makes the Wyckoff Wave vulnerable to continue to react. It also makes it extremely difficult for any rally to develop.
While the overbought Technometer is somewhat mitigated by a strengthening Force Index, it is expected the Wyckoff Wave will find support above the climactic action at point Q on the daily chart. That means the Wyckoff Wave will only have to react to a point between points S and Q. This would be the elusive Secondary Test.
This will also begin the support level of the new trading range.
It appears for the first time in several months the Wyckoff Wave is in a defined trading range that begins with a Selling Climax. It is in the process of establishing resistance and support levels. While it will take a while for this cause to develop, the results may well be a nice move to the upside.