Take Solutions + Wyckoff Model - Long
Updated
Here we come across Accumulation phase as specified in Wyckoff Model. As per the model one can take a long position in Take Solutions. The details of the model is described below.
The four stages of Wyckoff model (Accumulation Scheme) are: -
1. Phase A
The selling force decreases, and the downtrend starts to slow down. This phase is usually marked by an increase in trading volume. The Preliminary Support (PS) indicates that some buyers are showing up, but still not enough to stop the downward move.
At Selling Climax (SC) the intense selling activity slows down and comes to an end. But as the selling drops the price quickly reverts into a bounce or Automatic Rally (AR), as the excessive supply is absorbed by the buyers. In general, the trading range (TR) of an Accumulation Schematic is defined by the space between the SC low and the AR high.
As the name suggests, the Secondary Test (ST) happens when the market drops near the SC region, testing whether the downtrend is really over or not. While the ST often forms a higher low in relation to the SC, that may not always be the case.
2. Phase B
Phase B is the consolidation stage, in which the Composite Man starts accumulating the assets at its lowest possible fair value. During this stage, the market tends to test both the resistance and support levels of the trading range. There may be numerous Secondary Tests (ST) during Phase B.
3.Phase C
During Phase C, the Composite Man ensures that there is little supply left in the market, i.e., he accumulates greater amount of shares. A typical Accumulation Phase C contains what is called a Spring. It often acts as the last bear trap before the market starts making higher lows. The Spring often breaks the support levels to stop out traders and mislead investors. We may describe it as a final attempt to buy shares at a lower price before the uptrend starts. The bear trap induces retail investors to give up their holdings. In some cases, however, the support levels manage to hold, and the Spring simply does not occur. Still, the overall scheme continues to be valid. Incidentally in the above case we do not find a Spring.
*See the tremendous accumulation of stock as is evident in volume. However the price shows sidewise movement. The buyer wants to buy maximum shares in a slow pace without letting others know about it.
4. Phase D
Typically, the Phase D shows a significant increase in trading volume and volatility. It usually has a Last Point Support (LPS), making a higher low before the market moves higher. The LPS often precedes a breakout of the resistance levels, which in turn creates higher highs. This indicates Signs of Strength (SOS), as previous resistances become brand new supports.
Despite the somewhat confusing terminology, there may be more than one LPS during Phase D. They often have increased trading volume while testing the new support lines. In some cases, the price may create a small consolidation zone before effectively breaking the bigger trading range and moving to Phase E.
Phase E
The Phase E is the last stage of an Accumulation Schematic. It is marked by an evident breakout of the trading range, caused by increased market demand. This is when the trading range is effectively broken, and the uptrend starts. As of now Phase E has not started. Since we are at Phase D hope Phase E starts soon.
*Now we are in the accumulation phase.
Wyckoff’s Composite Man Principle – Relevant to above theory
The Composite Man,proposed by Wyckoff in reality, represents the big players in the market such as rich individual and institutional investors. He states that the Composite Man, in theory, acts behind the scene and manipulates the market to the disadvantage of the traders if they do not understand the market game. Conversely, it acts to traders’ greatest advantage if traders truly understand the market game. Wyckoff always wanted retail investors to trade just like the Composite Man who acts in the below mentioned manner: -
(i) Accumulation
The Composite Man accumulates assets before most investors. This phase is usually marked by a sideways movement. The accumulation is done gradually to avoid the price from changing significantly.
(ii) Uptrend
When the Composite Man is holding enough shares, and the selling force is depleted, he starts pushing the market up. Naturally, the emerging trend attracts more investors, causing demand to increase.Notably, there may be multiple phases of accumulation during an uptrend. We may call them re-accumulation phases, where the bigger trend stops and consolidates for a while, before continuing its upward movement.As the market moves up, other investors are encouraged to buy. Eventually, even the general public become excited enough to get involved. At this point, demand is excessively higher than supply.
For more information look in the comments.
The four stages of Wyckoff model (Accumulation Scheme) are: -
1. Phase A
The selling force decreases, and the downtrend starts to slow down. This phase is usually marked by an increase in trading volume. The Preliminary Support (PS) indicates that some buyers are showing up, but still not enough to stop the downward move.
At Selling Climax (SC) the intense selling activity slows down and comes to an end. But as the selling drops the price quickly reverts into a bounce or Automatic Rally (AR), as the excessive supply is absorbed by the buyers. In general, the trading range (TR) of an Accumulation Schematic is defined by the space between the SC low and the AR high.
As the name suggests, the Secondary Test (ST) happens when the market drops near the SC region, testing whether the downtrend is really over or not. While the ST often forms a higher low in relation to the SC, that may not always be the case.
2. Phase B
Phase B is the consolidation stage, in which the Composite Man starts accumulating the assets at its lowest possible fair value. During this stage, the market tends to test both the resistance and support levels of the trading range. There may be numerous Secondary Tests (ST) during Phase B.
3.Phase C
During Phase C, the Composite Man ensures that there is little supply left in the market, i.e., he accumulates greater amount of shares. A typical Accumulation Phase C contains what is called a Spring. It often acts as the last bear trap before the market starts making higher lows. The Spring often breaks the support levels to stop out traders and mislead investors. We may describe it as a final attempt to buy shares at a lower price before the uptrend starts. The bear trap induces retail investors to give up their holdings. In some cases, however, the support levels manage to hold, and the Spring simply does not occur. Still, the overall scheme continues to be valid. Incidentally in the above case we do not find a Spring.
*See the tremendous accumulation of stock as is evident in volume. However the price shows sidewise movement. The buyer wants to buy maximum shares in a slow pace without letting others know about it.
4. Phase D
Typically, the Phase D shows a significant increase in trading volume and volatility. It usually has a Last Point Support (LPS), making a higher low before the market moves higher. The LPS often precedes a breakout of the resistance levels, which in turn creates higher highs. This indicates Signs of Strength (SOS), as previous resistances become brand new supports.
Despite the somewhat confusing terminology, there may be more than one LPS during Phase D. They often have increased trading volume while testing the new support lines. In some cases, the price may create a small consolidation zone before effectively breaking the bigger trading range and moving to Phase E.
Phase E
The Phase E is the last stage of an Accumulation Schematic. It is marked by an evident breakout of the trading range, caused by increased market demand. This is when the trading range is effectively broken, and the uptrend starts. As of now Phase E has not started. Since we are at Phase D hope Phase E starts soon.
*Now we are in the accumulation phase.
Wyckoff’s Composite Man Principle – Relevant to above theory
The Composite Man,proposed by Wyckoff in reality, represents the big players in the market such as rich individual and institutional investors. He states that the Composite Man, in theory, acts behind the scene and manipulates the market to the disadvantage of the traders if they do not understand the market game. Conversely, it acts to traders’ greatest advantage if traders truly understand the market game. Wyckoff always wanted retail investors to trade just like the Composite Man who acts in the below mentioned manner: -
(i) Accumulation
The Composite Man accumulates assets before most investors. This phase is usually marked by a sideways movement. The accumulation is done gradually to avoid the price from changing significantly.
(ii) Uptrend
When the Composite Man is holding enough shares, and the selling force is depleted, he starts pushing the market up. Naturally, the emerging trend attracts more investors, causing demand to increase.Notably, there may be multiple phases of accumulation during an uptrend. We may call them re-accumulation phases, where the bigger trend stops and consolidates for a while, before continuing its upward movement.As the market moves up, other investors are encouraged to buy. Eventually, even the general public become excited enough to get involved. At this point, demand is excessively higher than supply.
For more information look in the comments.
Note
Terminologies used : - PS:Preliminary support - here buying begins to provide pronounced support after a prolonged down-move. Volume increases and price spread widens which signals that the down-move may be approaching its end.
(Although it’s not visible in my chart because I have zoomed out).
SC: Selling climax- It is the point at which selling pressure decreases and heavy or panicky selling by the public is being absorbed by larger professional interests at or near a bottom.
AR: Automatic rally - It occurs because intense selling pressure has greatly diminished. A wave of buying easily pushes prices up; this is further fuelled by short covering. The high of this rally will help define the upper boundary of accumulation.
(Automatic rally and bounce back is visible by continuous upper circuit).
ST: Secondary test in which price revisits the area of the SC to test the supply/demand balance at these levels. It is mainly to confirm the bottom which is the support in the area of the SC. It is common to have multiple STs after a SC.
(Generally, ST occurs in the First stage itself. But here it has not occurred or one may assume it occurred in the Second stage).
ST: Support Test—Large operators always test the market for supply throughout multiple tests at the demand zone.
SOS: Sign of strength- It is showcased by a price advance on increasing spread and relatively higher volume.
LPS: Last point of support - the low point of a reaction or pullback
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