1. How do we know that this is true rally?

*we see volume come to upside, we see buying expand, we see price range or
spread expand that’s mean activity going on, buyer are bidding and price get higher.

2 How do we know corrective reaction likely to take place in?

Rally see to loose the momentum by volume sees decrease, instead of closing high
we see close in middle or low of the bar range, buyers are unable the hold the top,
we see diminishing volume and poor closes, we make a less progress, cluster of
closing around same level.

3 if we want to see bullish move still intact which kind of thing we want to see in
corrective reaction?
As we come down volume remain very light, spread or price range of bar should
not be expand

4 when we see market goes above previous high (into new ground) and range
narrows we have aware cause market running out of demand.

5 when we see abnormal volume in middle of the day its usually indication of
something potential changing.

6 The study of responses is an almost unerring guide to the technical position of the
market.

7 Price doesn’t move in term of daily or 5 min or 15 min but it moves in wave form.

8 When u see there is no vol to upside there is lot of chances of liquidation come in
downside.

9 often a end of trend mark by swelling of volumes.

10 Finally, in the area of the selling climax there is an extreme widening of spread and
high volume. This action may occur over one day or it may be over several days, but
the selling climax has a widening spread and increasing volume. If it does not have
this it is not a selling climax.

11 Any climax must always be regarded as a potential or a possible selling climax until it
is proven by the secondary test.
12 It’s a different perspective, but the principle is the same. Preliminary support is
followed by a selling climax, followed by an automatic rally and then a secondary test.
Remember this very important lesson.

13 The price reached on the last point of supply after a sign of weakness very often is in
the same area reached on the preliminary supply. Analytically, the significance of the
preliminary supply is that if the entire area is distribution, that distribution may have
begun in the area of the preliminary supply.

14 The secondary test is indicated by decreased spread and decreased volume on the
rally to test the buying climax. That secondary test may end above, below or at the
same price level as the buying climax. It is not particularly important where it comes to
an end. What is important is how it comes to an end. The demand should be less. If
there is still good demand on the first secondary test, you may expect another test of
that area which will either succeed or fail.

15 Those students who are going to operate for the larger move will not buy on either
the climax or the secondary test terminating a major down trend. Why? When they
buy on a selling climax they are bucking the major trend and this is highly dangerous.
Also, as there is no cause, one has to form. If they buy here, they may be shaken out on
a terminal shakeout or have the price go drastically against them. These students will
use the preliminary support, the selling climax, automatic rally and the secondary test
primarily as an analytical tool, but will not use them to establish trading positions.
Instead, they will establish their trading positions as the trading range comes to an end,
which occurs after accumulation has taken place.

16 First, let us define a terminal shakeout. A terminal shakeout is a sharp downward

thrust through a previous support area. It is executed for the purpose of buying all the
stock possible from weak or vulnerable holders. It is preceded by a trading range or a
support level. It is followed by an attempt to begin the mark-up phase of the cycle. The
terminal shakeout is a drive down through the support level for the purpose of shaking
out all of the people who can be scared out or forced out of the market and forced to
sell.

17 The difference between a terminal shakeout and an ordinary shakeout is that the
terminal shakeout occurs at the end of the accumulation area and at the end of a
trading range, while the ordinary shakeout occurs in an upward trend. An ordinary
shakeout may be defined as a sharp downward thrust occurring in an upward trend
without extensive previous preparation. It is executed for the purpose of buying all the
stock possible from weak or vulnerable holders. It is preceded by an upward move. The
ordinary shakeout is characterized by price weakness and usually increased volume; in
other words, wide spread and some increase in volume. However, the volume may be
high, medium or low.

18 In summary, do not use the spring as a mechanical gimmick. Use it as a means of

estimating the amount of supply that comes in on the dip into new low ground and a
way of judging the strength of the demand on the rally following the spring itself. The
supply may be heavy; it may be light. The demand may be strong; it may be weak.
Judge it and then act. If you wait until you can detect an area of accumulation
terminating with a spring, do not buy in the trading range.

19 and eventually backed down into this area at (point) 12 and again at (point) 13. Why
would it do this? There may be several reasons including the action of the general
market itself. The stock may be ready, but the general market may be simply reacting
and usually a stock will not buck the general market move for too long.

20 Distribution is usually accomplished in a relatively short time, whereas accumulation

usually takes much longer, sometimes over many years. Major distribution occurs in
only a few weeks or perhaps a few months, very rarely over a several year period.
Distribution is usually characterized by wide price movements and heavy volume and
great activity.

21 The LPSY came in the vicinity of the half-way point. It is not particularly important
where the LPSY stops on the rally, however it very often turns in the vicinity of that
half-way point.

22 when a stock is in a trading range and rallies to or through the top of the range and
then encounters heavy, massive, sustained volume over four, five or six or more days
with little progress, this is evidence of heavy, sustained selling by large interests and
the inference is that many of the longer term holders in this situation are getting out.
Why? Usually because they see that they are unable to do what they originally intended
to do. Usually this heavy, sustained selling will stop the move for a long time, anywhere
from several weeks to several months or more. Frequently it will force the stock back
towards the bottom of the trading range as a minimum.

23 Mr. Wyckoff says that each stock or each move goes through a period of preparation
before the execution of the move.

24 Now for a word of caution. Be very careful of an action which is not normal, for
instance in an up trend, when the stock runs out of demand. This would be indicated by
a narrowing of the spread and a decreasing volume as it continues to move upward.
Also be careful of heavy sustained supply on the downside. This is not normal for a
normal correction.

In a sustained down move be careful of good demand, wide spread and a long
sustained volume on a rally. The running out of supply in the down trend, evidenced
by decreasing volume and narrowing spread can leave it vulnerable for a rally.

25 The stock then goes into a trading range such as in section B. Generally in the first
part of the trading range the price swings are rather wide. Then in the later part of the
trading range the price usually begins to narrow down: The stock gets dull. What
happens to the volume or the general level of trading? Well, usually in the early part of
this range there is rather high volume, sometimes rather erratic volume; both the price
and volume action may be somewhat erratic and very difficult to analyze. Then in the
latter part, the closer you get to the end of the trading range or leaving the trading
range the volume begins to dry up. As the floating supply or the flow of orders coming
into the market begins to decrease, the general level of the daily volume should
decrease.

26 Now, why must there be a sign of strength? Simply because a stock can continue to
move sideways in the trading range indefinitely until it has a sign of weakness or a
sign of strength. Why must there be a last point of support? Simply to confirm that the
sign of strength is in fact a sign of strength. Let us define the sign of strength. The sign
of strength is an action which shows that demand is in control. The sign of strength
should have good demand on the up move; a wide spread (and) increasing volume on
the upside. The last point of support should have a lack of supply, indicated by a
relative narrowing of the spread and a decrease in volume. The comparison is
between the up move, constituting the SOS, or sign of strength, and the reaction
following it, the LPS or last point of support. What if the stock has a possible sign of
strength indicated by a widening spread and an increasing volume on the move up and
is then followed by good supply on the possible LPS, indicated by wide spread and high
volume on the reaction? This cancels the probability of the first action being a sign of
strength and the stock will probably continue in the trading range for additional testing.

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