WYCKOFF BY THE ACTION-SEQUENCE METHOD, AN EFFective Way FoR TEACHING & LEARNING TECHNICAL MARKET ANALYSIS; In his workshop, Hank Pruden will introduce his Action-Sequence method of learning, a uniquely effective technique for enhancing teaching and learning skills that calls upon parict- pants to interact in a way that goes well beyond a basic workshop. You will be part of an. Action-Feedback-Replay exercise in which you will conduct an ongoing technical analysis exer- cise, monitoring the daily vertical line chart of @ marker index. Hank will provide you with all of the appropriate Wyckoff principles and techniques, and then conduct this session as an ‘open book” exercise First, you wall receive an ACTION form. You wil be asked to reconstruct the chart price and volume, and interpret the present postion and probable furure trend of the market. Furthermore, ‘you will be requested to judge the underlying motive of the “Composite Operator” and take defi- nite action: buying, selling, or remaining neutral. You will then exchange your ACTION sheet for a FEEDBACK sheet which will retell what actually took place (interpreted using the Wyckoff Method). You will then compare your expectations, based upon yout ACTION form, to the actual results. Finally, you will proceed to a REPLAY sheet (another version of the ACTION sheet) which will give you the opportunity to rectify past mistakes orto reinforce past successes. Upon comple- tion of the REPLAY sheet you will receive the next ACTION sheet in the sequence. You will continue through the ACTION-FEEDBACK-REPLAY cycle until the end of the char data This workshop will provide you with a unique opportunity to lear from your own mistakes under the mentorship of an expert. At the conclusion of this exercise, you wall have leamed the principles of the Wyckoff Method of technical analysis and trading, Through repeated applica- tions in a simulation, this interactive session will enhance both your trading skills and your ability to judge critical trading situations. Tim Slater's Note: Richard D. Wyckoff probably contributed more to the study of price movements than anyone else in America. He was a superb technician who first codified many ofthe technical tools and techniques still used profitably by traders today. The schoo! he founded in 1932 to teach the Wyekolf Method (both onsite and via correspondence courses) has undoubtedly served to educate rmore market technicians than any other single institution. Wyckoff surely holds an honored place in technical analysis equal to that of Eliott, Gann, Hamilton, and Dow. Hank Pruden is a professor in the School of Business at Golden Gate University in San Francisco, California. He also serves as the executive director of the Institute of Technical Market Analysis (TMA) at Golden Gate, Hank earned his MBA from the University of California at Berkeley and a Ph.D. from the University of Oregon Since 1976 the accredited courses in technical market analysis, which Hank developed at Golden Gate University, have expanded to include advanced topics in technical analysis and trading, Hanke emphasizes the psychology of trading as well as the use of technical analysis methods in his courses, ‘and he has published extensively in both areas.He is a proponent ofthe case study method and is responsible for the development of The Action Sequence Method of active learning, He is editor of The Market Technicians Association Journal. More than a theoretcian, Hank has actively traded his ‘own account for the past twenty years. Hank serves on the Board of Directors ofthe Technical Securities Analysts Assocation of San Fran- isco, and isa past president ofthat asociation. He is also a member of the Board of Directors of the Market Technicians Association, and from 1982 until 1993 was a member of the Board of Trustes of Golden Gate University Ml TAG Xvill New Orleans 1996 HENRY (Hank) PRuDEN Gotnen Gate University 536 Misson Sr, ‘San Franoson, CA 94105 (415) 442-6503 FAX (415) 461-4390EXHIBIT 1 - Interactive Session - WYCKOFF BY THE ACTION-SEQUENCE METHOD AN EFFECTIVE WAY FOR TEACHING & LEARNING TECHNICAL MARKET ANALYSIS ¢ ACTIVE LEARNING ¢ WYCKOFF METHOD ¢ ACTION-SEQUENCE METHODEXHIBIT 2 TEACHING AND LEARNING GOALS ¢ ACTION SEQUENCE = EDUCATION PROCESS GOALS = THE HOW ¢ WYCKOFF METHOD = TECHNICAL ANALYSIS and TRADING GOALS = THE WHATEXHIBIT 3 - ACTION SEQUENCE = EDUCATION PROCESS GOALS = THE HOWEXHIBIT 4 ¢ EDUCATION PROCESS GOALS -- THE HOW | v HiIGHER-ORDER THINKING v SKILL IN APPLICATION vy JUDGMENT IN DECISION ¥ ACTION®> FEEDBACK ® REPLAY SEQUENCE : A SIMULATION v FEEDBACK: MENTOR AND MARKET v MISTAKES TO LEARNINGEXHIBIT 5 PARALLELS: ACTION SEQUENCE and the CASE METHOD © Analysis of practical problems drawn from real life situations. ¢ Students putting themselves in the positions of active managers. ¢ A decision-making orientation. ¢ Learning by doing or an experiential approach. © Developing within the student the qualities of understanding, judgment and communication leading to effective action. ¢ Building dependable self-reliance within the student.EXHIBIT 6 ¢ WYCKOFF METHOD = TECHNICAL ANAI YSIS and TRADING GOALS = THE WHATEXHIBIT 7 WYCKOFF METHOD: TECHNICAL ANALYSIS and TRADING GOALS e THE WHAT WYCKOFF SUPPLY AND DEMAND ROLE OF THE COMPOSITE OPERATOR ¢ ACTION: TAKING POSITIONS, MOVING STOPS, ELIMINATING POSITIONSEXHIBIT 8 WYCKOFF e LAWS © PRINCIPLES ¢ TECHNIQUESEXHIBIT 9 WYCKOFF LAWS 1. LAW OF SUPPLY AND DEMAND 2. LAW OF CAUSE AND EFFECT 3. LAW OF EFFORT vs. RESULT The Law of Supply and Demand: “when demand is greater than supply, price will rise and when supply is greater than demand, price will fall.”EXHIBIT 10 WYCKOFF SUPPLY and DEMAND Idealized Cycle Source: Stock Market InstituteEXHIBIT 11] PRINCIPLES OF SUPPLY and DEMAND PS - Preliminary Support SC - Selling Climax AR - Automatic Rally ST - Secondary Test GENERALLY ACCOMPANIED BY VERY HIGH VOLUME Source: Stock Market InstituteEXHIBIT 12 WYCKOFF “TECHNIQUES for STUDYING SUPPLY and DEMAND © Price Spread * Volume Level © Support and Resiscance * Comparison of Waves I e L Support Source: Stock Market InstituteEXHIBIT 13 ACTION SEQUENCE METHOD: A SIMULATION Wyckoff Law, Principle, Technique ™ Action Sheet for Application ™ Feedback From Market and From a Wyckoff Expert ™ Replay to Correct Mistakes or to Reinforce Learning.EXHIBIT 14 ACTION | Date: 1. Redraw the chart on transparecy paper in your own hand so as to get a fee! forthe price and volume action. (Verbaize to yoursel, in Weta tems and pneipes, your observation ) 2. Interpret the relation. 3 between supply and demand. What is the present postion and probable ‘future trend of te market? ‘2. Whatisthe mative ofthe Composite Operator? 4. Select one of the fotowing Flin the bans, ©. Buyergoleng 3t__ waa stop at. ». Salter go short at th a stop at €. Close out an existing potion at 4. Move the tp on an exiing postion to, 6. Do nating: ana futher demlopmentsVolume EXHIBIT 15 INTERPRETING SUPPLY and DEMAND 1. Redraw the chart on transparency paper in your hand so as to get a feel for the price and voiume action. (Verbalize to yoursels, in Wyckoff terms and principles, your observations.) 2. Interpret the relationship between supply and demand. What is the present position and probable future trend of the market?EXHIBIT 16 3. What is the motive of the Composite Operator?EXHIBIT 17 THE CONCEPT OF THE COMPOSITE OPERATOREXHIBIT 18 Follow in the footsteps of the COMPOSITE OPERATOR. Think like him and act like him.EXHIBIT 19 A. Market is made by the minds of men, and all the fluctuations in the market and in all the various stocks should be studied as if they were the result of one man’s operations.EXHIBIT 20 B. The Composite Man carefully plans, executes, and concludes his campaigns.EXHIBIT 21 Cc. A “broad market” is created by the Composite Man advertising his stock on the ticker tape.EXHIBIT 22 Dz. Study charts with the purpose of judging the behavior of the stock and the motives of those who dominate it.EXHIBIT 23 E. To study charts, look for the motives behind the action which the chart portrays.EXHIBIT °4 F. But, the market behaves naturally in this very manner, and, if you learn to make judgments, then conclusions, a positive effect in your stuck market operations will result.EXHIBIT 25 ACTION 4. Select one of the following. Fill in the blanks. a. Buy or go long at with a stop at b. Sell or go short at with a stop at c. Close out an existing position at d. Move the stop on an existing position to e. Do nothing, await further developments.EXHIBIT 26 ACTION WILL HELP YOU.. ee in establishing a speculative position. ** to identify trading opportunities with potentially eK **k ver: favorable risk/reward parameters. become aware and conclude that supply or demand is becoming dominant and correctly anticipate the coming move. employ bar charts along with certain terms and principles in action to determine the expected direction and timing of the coming move.EXHIBIT 27 FEEDBACK 1 (Mr. Wyckoff selected the daily vertical line chart of the New York Times Averages of 50 Stocks for this analysis. The action reflected by this chart is interpreted as follows: We use the period from December 8 to December 17 as our starting point, without regard to the market history previously recorded. This interval of nine days marked a sharp acceleration of the previous major deciine, culminating in a widening spread of the daily price range and also a very marked expansion in the daily volume of trading as the market reached its low point - thereby reflecting the panicky selling which takes place under such conditions. ‘The volume on December 8 was around 2,000,000, This increases to 5,000,000 on the day of the low point. Tape observers would have noted the fact that a large part ofthis volume occurred as the market recorded the extreme low and on the rally from the lows. This confirms the fact that the climax of the downward movement has actually been passed, and gives us the starting point for our next analysis. (The ‘Wyckoff Chart would show the details of this tape action, including the feverish activity around the day's ow point) “The phenomenon ofthe seling climax caused bythe panicky uniaaing of stocks (euppy) by the pubic and ther weak olders which is matched againet buying (demand) of (1) experienced operators; (2) the large interests and “sponsors of various stocks who now ether see an excelent opportunty to replace a kw prices the stocks they sold ‘her up, of wish to prevent futher demeratzation by ghng the mark temporary suppor; and (8) shot coverng Dy the bears who sense a tum ‘Stocks thus become ether temporary or more lastingly edged in strong hands. An abnormal increase in volumes ‘one ofthe characteristic symptoms of a seling chan, since supply and demand must both expand sharply under ‘hese condtions. Bu the supple now of poor qually and the demand of good qualty; and since the force of ‘supply now wil have been exhausted, a technical rly ensues. ‘buying on the break (Le, during the seling cimax) was principal forthe purpose of supperting prices temporarily ‘and checing a pan, or relieving a panicky station, this support stock wil be trown back onthe market atthe st favorable opportunty, usually on De echnical rebound which customarily folows a seling climax. This, and other ‘sling onthe rebound may increase supply sufficient to dive prices through the lowe ofthe climax day and bring ‘about a new decine, that i, a resumption of iquidation, Conte cher hand, shoul! a secondary reaction occur after the technical rly refered to above, and prices hold ‘round or above te cimax lowe, whe a the same time volume shrinks appreciably, we have an indication that Fquidaion wes completed and supports again coming nto the market. Therefore, the markets behavior on these ‘secondary reactions is usualy indicative ofthe nex impertant move. In this connection f should be noted tha he same principles which apply to the large swings also apply to the ‘smaller moves anc to the day-to-day buying and seling waves. Thus, a careful examination of your wend charts, ‘group chart, and charts of ndhdual stacks over a period of time, wil reveal numerous examples ofthe above Phenomena, These wil appear ona smal as well 2s a large scale. However, you must alow for variations. Thats, ‘Gonct expect one seling climax to look exact like another. The same basic characteristics may be observed: but {the time and magnitude of price moverent and volume, and the extent and sequence of price movement ames invariably wil eer. For example, the abnormal volume may last ether one or several days; or the abnormal volume may precede the Tecorcing of te extreme tow point by one or more days. In ether words, aseling climax may be completed in one ‘ay orbe spread over a few day, and volume may reach unusual proportions on the day the low point is made oF ‘some days ahead of he fra low.EXHIBIT 28 FErDBACK : SELLING CLIMAX ¢ Widening price spread and an expansi*n volume at the low point = panicky selling. ¢ Rally .m the Price Low and an Increase in Volume From 2,000,000 to 5,000,000 Shares = . Panicky unloading by weak hands and buying by strong ‘ ands = selling climaxEXHIBIT 29 FEEDBACK: TECHNICAL RALLY, SECONDARY TEST e Supply is exhausted; an automatic technical rally ensues. © Secondary test = will the next decline in price bring out more liquidation or is the heavy selling exhausted?EXHIBIT 30 FEEDBACK: LIQUIDATION COMPLETED and LONG-SIDE POSITION Holding near sesiing climax lows on comparative lighter volume shows that li is completed. * A long-side position with a stop below the selling climax low could be ventured.EXHIBIT 31 REPLAY 1 i ? 4. Optional - redraw price and volume ation on your transparency sheets, (Verbalze to yourself in Wyckott {ermsipincipes your daly cbservation). 2. Interpret the overall relsionship between supply and demand to determine the presen postion and probable {ture trend ofthe market, Fee! free to paraphrase Wyckot's words from Feedback * ee ‘3. Think of market action as controlled by a composte operate. Behind the action of the market you observed, what was the probable motive ofthe Composte Man? — ee 4. Select one ofthe folowing Px Levels: 1. Goong and place stops, . . Go-short and place stops _ —_ 6. Move stops on a current position to, 4. Do nething,awat further developments Sell-Quiz Circle Tithe statement is tue or F ithe statement is false. 1. Ina seling climax demands ofa good quality, and supply is of poorqualty TF 2. Aseling climax takes pace in one to two days and forms the same _geometical igure on al charts TOFEXHIBIT 32 REPLAY 1 ¢ SAME AS THE ACTION SHEET ¢ CORRECT MISTAKES ¢ GET IN GEAR WITH MARKET REINFORCE LEARNING MIMIC WYCKOFFEXHIBIT 33 ASSESSING THE ACTION SEQUENCE e SURVEY OF STUDENTS ¢ MATURE, PROFESSIONAL, WORKING ADULTS ¢ DOES DEVELOP SKILLS IN APPLICATION AND JUDGMENT e ALSO DEVELOP COMPREHENSION OF BASIC PRINCIPLES AND PROCEDURESEXHIBIT 34 ASSESSING THE ACTION SEQUENCE ¢ FAVORABLE COMMENTS v “Like being an apprentice” v “hands on”; “active participation” v “involved in a real-time situation” v “practice, feedback,.. reinforcement of concepts by hands on practice” v “learned from mistakes” vy “learned | could make correct market decisions”EXHIBIT 35 ASSESSING THE ACTION SEQUENCE « “Pay Dirt,” Performance e “Past students are the ‘real deal’” ¢ Rebekah Helzel “The surprise hit at the 1993 Annual Market Technicians Association Seminar was the methodical, rational presentation of Rebekah Helzell, at that time a currency trader for Bank of America, now a proprietary trader for BA Securities. Ms. Helzell exclusively used the Wyckoff Supply/Demand studies in her analysis and presentation, and credited Dr. Henry O. Pruden for introducing her to the Wyckoff methodologies.” by Sam Hale , MTA JOURNAL/FALL-WINTER 1995EXHIBIT 36 WHAT NEXT? ACTION 2 TO PRUDEN! ® You are invited to send ACTION 2 to Pruden for comments and the FEEDBACK SHEET. Send completed ACTION 2 along with a prepaid/stamped self-addressed envelope to: Dr. Heury O. Pruden Executive Director, Institute for Technical Market Analysis Golden Gate University 536 Mission Street San Francisco, CA 94105EXHIBIT 37 Name ACTION? Date: 1. Geta fel forthe market's behavior by redrawing the price and volume action on your transparency. (Gis you go along verbalize to yourself in Wyckof erms and principles what you observe day-by-day). 2. To determine the preset postion and future trend of the marke, Interpret the veri relatonship between supply and demand. a2 27 3 De! anEXHIBIT 38 WYCKOFF BY THE ACTION SEQUENCE Discussion Points / Review * Supply & Demand. Active / Interactive Learning ¢ Spread arVolume * Coach / Guide ¢ Selling Climax ¢ Habits * Action and Test e Mentor * Comparison * Mistakes « Composite Operator « "isk vs. Reward