Ri

char
dD.Wy
cko
ff
RichardDe mi l
leWy ckoff(1873–1934)wasane ar
ly20t h
-c ent
uryp i
o neerint h
et ec hnicalap proac hto
studyi
n gt hes tockmar ket.Hei scons
ideredoneo fthefive“ti
tans”o fte chni
cal an alys
is,alon gwi th
Dow,Gan n,El l
iottandMe rril
l.Atage15,het o
o kaj obasas tockru nnerfo raNe wYo r
kbr oker age.
Afterwar ds ,wh i
lestil
li
nh is20s,hebecamet hehe adofhisownf i
rm.Heal sofo u
n de dan d,forn e arl
y
twode c adeswr ote,andeditedTh eMagaz i
neo fWal l
Street,which,ato nep oi
nt,h admo ret han
200,000s ubs c r
ibers.Wy ckoffwasanav idstudentoft h
emar ke t
s,aswe l
l asanac tiv
et ap er eade r
andt rade r.Heo bservedthemar ketactiv
iti
esan dcamp ai
gnso fthelege ndarys toc kop eratorso fh i
s
ti
me ,inc l
udin gJPMo r
ganan dJesseLiv
ermore .F
r omhisobservati
o nsandi nterviewswi tht hosebi g-
ti
met r ader s,Wy ckoffc o
difiedthebestpracticesofLivermorean do t
he r
si ntolaws ,pr i
nciplesan d
techniqueso ftradingme thodol
ogy,moneyman age mentandme ntal di
scipl
ine.

Fr
omh ispos
iti
on,Mr .Wy ckoffobservedn umerou
sr etai
linv
estorsbei
ngrepeatedl
yfleec
ed.
Cons
equentl
y,hede di
cate dhimsel
ft oins
tructi
ngth epubl
icabout“therealru
lesofthegame”as
pl
ayedbythelargei nt
ere st
s,or“ s
mar tmo ne
y.”Inthe1930s,hefounde
das choolwhi
chwo u
ldlat
er
beco
met heStockMar ke tInsti
tute
.Th eschool
'scentralof
ferin
gwasac ou
rsethatint
egratedthe
co
nceptsthatWy ckoffh adlearnedabo uthowtoide n
tif
ylargeoperato
rs'accumulat
ionand
di
stri
buti
onofstockwi thh o
wt otakep osit
ion
sinh armonywiththesebi
gp l
ayers
.Histi
me-tested
i
nsi
ghtsareasv al
i
dt o
dayast heywe r
ewh enfirs
tar ti
cul
ated.

Thi
sar
tic
lep r
ovidesanovervi
ewo fWyckof
f'stheor
eti
calandpracti
cal
appro
achestothemarke
ts,
i
ncl
udi
ngguidel
in
e sfori
denti
fyi
ngt r
adecandidat
esande n
teri
nglon
gandshortp
os i
ti
ons
,anal
ysi
sof
acc
umul
atio
nan ddistri
but
iontradi
ngrangesandane x
planat
ionofhowtou
sePointandFi
gure
ch
artstoi
dent
ifypri
cetarge
ts.Al
thou
ghthisar
tic
lef
ocu
sese
xclu
siv
elyonstoc
ks,Wycko
ff'
s
meth
odscanbeappli
edtoanyfree
ly-tr
adedmarketi
nwhi
chl
argein
sti
tuti
onaltr
ade
rsoper
ate
,
i
ncl
udin
gcommodit
ies,bo
ndsandcurre
ncie
s.

AFi
ve-St
epAppr
oac
htot
heMar
ket
TheWy
ckoffMet
hodi
nvo
lve
saf
ive
-st
epap
pro
acht
ost
ocks
ele
cti
onan
dtr
adee
ntr
y,wh
ichc
anbe
su
mmari
zedasf
oll
ows
:

1
.Det
ermi
net
hepr
esen
tpo
sit
ionan
dpr
obabl
efu
tur
etr
endo
fth
emar
ket
.Ist
hemar
ket
co
nsoli
dati
ngo rtren
ding?Do esyouranaly
sisofmarketst
ructure
,suppl
yan
dde mandi
ndi
catet
he
di
recti
onthatisli
kel
yint h
en earfuture?Thisas
sessmen
ts h
ouldhel
pyoudec
idewheth
ertobei
nthe
marketatalland,i
fso,wh et
he rt
ot akelo
ngo rsh
ortposi
ti
ons.Usebot
hbarchart
sandPoi
ntand
Fi
gurechartsofthemaj o
rmar ketindic
esforStep1.

2.Sel
ects t
oc ksinharmonywi t
ht hetren d.Inanuptren
d,sel
ectstoc
ksthatarestro
ngert h
ant he
market.Forinstance,l
ookf o
rsto c
ksth atde monstr
ategreaterper
cent
ageincreas
est h
ant he
marketdu r
ingr all
i
esands mall
erde c
re ase sdur
ingreacti
ons
.Inadowntren
d,dothereverse–c h
oose
sto
ckst h
atar ewe akerthanthemar ket .Ifyouarenotsureaboutaspe
cifi
ciss
ue,dropitandmo ve
ontothen exton e
.Usebarc hartsofindividuals
tockstocomparewit
hthoseofthemostrelevan
t
marketindexf orStep2.

3.Selectst
ockswitha“ cause”thatequalsorex ceedsyou rmini
mu mobj ect
ive.Ac ri
ti
c al c
o mponent
ofWy ckoff
'stradese l
ectio
nan dman ageme n
twash i
su n
iqueme thodofidenti
fyingpricet argets
usi
ngPo i
ntandF i
gure( P&F)p r
ojecti
onsforbo thlongands ho
rttrades.InWy ckoff'sfundame nt
allaw
of“CauseandEf fect
,”t hehori
zontalP&Fc ountwithi
nat radingrangere pre
se n
tst hecau se,whil
e
thesubsequen
tp ri
cemo v
eme ntre
p rese
ntst h
ee f
fect.Therefore
,ifyouar eplannin
gt ot akel o
ng
posi
ti
o n
s,choosestocksthatar eunderaccumu lati
ono rre-accumulat
ionan dhavebu il
tas uffi
cie
nt
causetosati
sfyy o
uro bjecti
ve.Step3r el
iesont heuseofPo i
ntan dFi
gur echartsofindiv i
dualstocks
.

4.Deter
minethes to
cks 'readinesstomo v
e.Ap pl
ytheninet e
stsf o
rbuyingorfo
rs e
ll
ing(des
cri
bed
bel
ow).Fori
nstance,inat radin
gr angeafterap rol
ongedr al
ly,doesth
ee vi
den
cef r
omt heni
ne
sel
li
ngtest
ssuggestth atsigni
fi
c antsu
p p
lyisenteri
ngthemar ke tandthatashor
tp os
iti
onmaybe
warrant
ed?Ori nanap pare n
tac cumul
ationtradi
ngrange ,dothen i
nebuyin
gtestsi
ndicat
ethat
supp
lyhasbeens u
ccess fu
llyabsorbed,asevidence
df ur
the rbyal ow-v
olumespri
ngandane ven
l
ower
-vol
umet
esto
fth
ats
pri
ng?Us
ebarc
har
tsan
dPo
intan
dFi
gur
ech
art
sofi
ndi
vi
dual
sto
cksf
or
St
ep4.

5.Timey ourc o
mmi tmentwi that u
rnint hes t
oc kmarketindex.Three-quart
ersormo reofindiv
idu
al
i
ssuesmo veinh armonywitht hegeneralmar ket,soyouimprovetheoddsofas uccess
fultradeby
havi
ngt hepowe roftheo verallmarketbe h
indit.Speci
ficWy ckoffpri
nci
pleshel
py o
uan ti
cipate
pote
n t
ialmar ketturns,i
ncludingac h
an geo fcharact
e rofpriceacti
on(suchasthelargestdown-bar
ontheh i
ghestvo l
umeaf teral onguptrend),aswe l
lasman i
festati
onsofWy ckoff
'sthreel
aws( see
bel
ow).Pu tyours to
p-lossinp l
aceandt hent r
ailit
,asap pr
opr i
ate,u
ntil
yo ucl
oseoutthep osi
ti
on.
Usebaran dPo intandF i
gurec hart
sfo rStep5.

Wy
cko
ff'
s"Co
mpo
sit
eMan
"
Wycko
ffpr
opo
sedaheuri
sti
cdevi
cet
ohelpunderst
andpri
cemo
veme
ntsi
nin
div
idu
als
toc
ksan
dth
e
mar
ketasawhol
e,wh
ichhedubbe
dthe“
Co mp
o s
iteMan.
”

“…al lt
heflu
ctuati
onsinthemar ketandinallth
ev ario
usstocksshouldbestudi
edasiftheyweret
he
resul
tofoneman ’
soperati
ons.Letu scal
lhimtheCo mposi
teMan ,who,inth
eory,si
tsbeh
indthe
scenesandman i
pul
atesthestoc
kst oy ou
rdisadvantageifyo
udon otunder
standthegameash e
play
sit;andtoyourgreatprofi
tify oudounderstandit
.”(TheRichardD.Wy ckof
fCourseinSt
ock
MarketScienceandTechniq
ue,se ct
ion9,p.1-2)

Wyckoffadvis
edr e
tai
lt r
ade r
stotrytopl
aythemarketgameast heComp os
iteManp layedi
t.In
fact
,heevenc l
aimedthatitdoesn
'tmatt
erifmarketmoves“arerealorarti
fici
al;
t h
atis,theresu
lt
ofactu
albu y
ingandsel
lingbythepubl
icandbonafi
deinv
estorsorarti
fic
ialbuyi
ngan dsell
in
gby
l
argeroperators
.”(Th
eRi chardD.Wyckof
fMe t
hodofTradin
gan dInv
estinginStocks,se
ction9M,p.
2)

Bas
edo
nhi
sye
arso
fobs
erv
ati
onso
fth
emar
ketac
tiv
iti
eso
flar
geo
per
ato
rs,Wy
cko
fft
augh
tth
at:

•Th
eCo
mpo
sit
eManc
are
ful
l
ypl
ans
,ex
ecu
tesan
dco
ncl
ude
shi
scamp
aign
s.

•Th
eCo
mpo
sit
eManat
trac
tst
hep
ubl
i
ctobu
yas
toc
kinwh
ichh
ehasal
readyac
cumu
lat
eda
si
zeabl
elineo
fshar
esbymaki
ngmanyt
ransac
tio
nsi
nvol
vi
ngal
argenumbe
rofs
har
es,i
nef
fec
t
advert
isi
nghi
sst
ockbycr
eati
ngth
eappear
anceofa“bro
admarke
t.”

•Onemusts
tudyin
divi
dualst
ockchar
tswit
ht h
ep u
rpo
seo
fju
dgi
ngt
hebe
hav
ioro
fth
est
ockan
dth
e
mot
ive
softho
selargeoper
atorswh
odo mi
nateit
.

•Withstu
dyan dp r
acti
ce,on
ec anacqu
iretheabi
li
tytoint
erpre
tthemo t
ive
sbehi
ndt h
eac t
iont
hat
achar
tportr
ays .Wyckoffandhisas
soci
ate
sbe l
ie
vedthatifon
ec o
uldunders
tan
dt hemarket
beh
avi
oroftheCo mposi
teMan ,o
n ec
oul
didenti
fymanytradi
ngandinve
stmentoppo
rtuni
ti
esearl
y
en
oughtopro
fitf r
omt h
em.

Wy
cko
ffPr
iceCy
cle
Accordin
gt oWy ckoff,themar ketcanbeu ndersto
o dandan ti
cipatedthrou ghde t
ailedanalysi
sof
suppl
yan ddeman d,wh i
chc anbeas certainedfroms tudyi
ngp r
iceac ti
on,vo l
u mean dtime.Asa
broker,hewasi nap osi
tio
nt oo bs
e r
vet heac ti
vi
tiesofh i
ghl
ys uccessfu
l i
ndiv i
dual
san dgr o
upswh o
dominatedspecifi
cissues;co nsequentl
y,h ewasablet ode c
ipher,viatheus eo fwhath ecall
edv er
tical
(bar)andf i
gure(PointandF i
gu re)charts,thefutureintenti
onso fthoselar geint
e res
ts.Anideali
zed
schematicofhowh eco nceptu ali
zedthelar geint
erests'preparationforan de xecutio
no fbulland
bearmar ketsisdepic
t edint hef i
gurebe low.Thetimet oenterlongo r
de r
si st o
war dstheendo fthe
preparati
onf o
rap r
icemar ku porbullmar ket(accumu l
atio
no flargelineso fstock),whil
ethetimet o
i
n i
ti
ates ho
rtpo si
ti
onsisatt hee ndofth ep r
eparationforpricemar kdown .
Th
reeWy
cko
ffL
aws
Wy ckoff'
sc hart-basedmetho
do l
ogyrestsonthreefundament
al“ l
aws ”thataffectmanyas pe
ctsof
analysi
s.Thesei nc
ludedet
erminin
gt h
emar ket'sandindi
vi
dualst
o cks'curren
tandp o
tenti
alfut
ure
dir
ec t
ionalbias,sel
ecti
ngthebeststockstotradelongorshor
t,identif
y i
ngthereadines
so fastock
toleaveat radingrangeandprojecti
ngpricetargetsi
nat r
endfr omas t
ock’
sbeh avi
orinatradin
g
range.Thesel awsinfor
mthean al
ysi
so feverychartandthesel
ec t
iono feverys
toc ktotrade.

1.Thelawo fs u
ppl yanddeman ddeterminest h
epricedirecti
on.Thisprinc
ipl
eiscentr
al t
oWy ckof
f's
methodo ftradingan di
nvesti
ng.Wh endeman disgreaterthansupply,pri
cesri
se,andwh ensupplyi
s
greaterthande man d,pr
icesfal
l.Thetrader /
analystcanstudythebalancebetweensup p
lyan d
deman dbyco mpar i
ngpriceandv o
lumebar sovertime.Thisl
awi sdecepti
velysi
mple
,bu tlearni
ngto
accuratelyevaluatesuppl
yan ddeman donbarc harts,aswellasunde r
standi
ngtheimpli
cat i
onsof
suppl
yan dde man dpatter
n s
,takesconsi
de rabl
ep r
ac ti
ce.

2.Thelawo fcausean def fecth el

psthet raderan dinv
estorsetp r
iceobjectivesbygaugingthe
pote
ntiale x
t en
to fat rende me r
gingfromat radin
gr ange.Wycko f
f's“cause ”canbeme asuredby
thehori
zon talpoi
ntc ountinaPo i
ntandF i
gu rechart,whil
ethe“e ff
ect”isth edist
ancepricemo v
es
corr
espon di
n gtoth epoi
ntc ou n
t.Th i
slaw'so p
e r
ationcanbes e
e nast h
ef o
r ceo faccumulati
onor
di
stri
bu t
ionwi t
hinat radingr ange,aswe l
lash owt hi
sforceworksi t
sel
fo utinas ubs
eq u
e nttr
endor
moveme ntupo rdo wn.Pointan dFigurechar tcountsareusedtome asureac auseandprojectthe
exten
to fitse f
fect .(
See“ Pointan dFigur
eCo untGu i
de”be l
owfo ranil
lust
r atio
no fth
islaw.)

3.Thelawo feffortver
susresultpro
videsane ar
lywar n
ingofap o
ssi
blec h
angeintren
dint h
en ear
futu
re.Divergen
cesbe t
we e
nv ol
umean dp r
iceoft
ens ignalac h
an geinthedirec
tionofapric
et r
en d.
Forexamp l
e,whent h
ereareseve r
alhi
gh -v
olume(largee ffo
rt)bu tnar
r ow-rangepri
cebarsaftera
subst
antialral
l
y,withthepric
ef ai
li
ngtomakean ewh igh(li
ttl
eo rnoresult)
,thi
ssuggest
sthatbig
i
nterestsareunlo
adingsharesinanti
cipati
onofac han geintrend.

An
aly
seso
fTr
adi
ngRan
ges
Oneobjectiveoft h
eWy ckoffmethodistoimprov emar ketti
mingwh ene stabl
ishi
ngap osi
tioni
n
anti
cipati
ono fac omingmo vewhereaf avorabler e
war d/ri
skratioe xi
sts.Tradingranges(TRs)are
pl
ac e
swh eret hepre vi
oustr
e n
d( upordown )hasbe enh al
tedandt hereisr el
ati
vee qu
ili
bri
um
betweens uppl
yan dde mand.Ins
tit
ution
san dothe rlargeprofes
sionalinterestsprepareforthei
rnext
bul
l(orbe ar)camp aignastheyacc umul
ate( o
rdi stri
bute)shareswi t
hintheTR.Inbo thaccumulat
ion
anddistri
butionTRs ,theComposi
teMani sac t
ivelybuy i
ngandselli
n g-t h
edi ffe
re n
cebe i
ngt h
at,i
n
accumu l
atio
n,thes harespurchasedoutnumbert hoses ol
dwhil
e,indistri
bu ti
on,theopposi
teistrue
.
Thee x
t e
nto fac c
umu lati
onordist
r i
buti
onde t
e rminesthecauset hatunfo l
dsinthesubsequentmove
ou
to ft h
eTR.

Wy
cko
ffSc
hemat
ics
Asucces
sfulWyckoffanaly
stmus tbeablet
oan tici
patean dcor r
ec tl
yjudget h
edirecti
onan d
magni
tudeofthemo veoutofaTR.F or
tunat
ely,Wy ckoffofferstime -te
ste dgui
deli
nesfor
i
denti
fyi
ngandde l
i
neatingthep
has esandeventswithi
naTR,wh ich,inturn,provi
dethebasisfor
es
timati
ngpri
cetarge t
sinthesubsequen
ttrend.Thesec o
n ce
pt sar eil
lu
stratedinthefol
lowingfou
r
sc
hematics
;twodepicti
ngcommonv ari
antsofac c
umu l
ationTRs ,fol
lowedbyt woe xampl
eso f
di
stri
buti
onTRs.

Ac
cumu
lat
ion
:Wy
cko
ffEv
ent
s
•PS—pr el
i
mi n
arysupport
,whe
resubs
tan
tial
buyin
gbe gi
nstopro
videpron
ounce
dsup
p o
rtafte
ra
pro
lon
geddo wn-mov
e .Vo
lumei
ncr
ease
sandpric
es pr
eadwiden
s,sign
ali
ngthatt
hedown-mo
vemay
beappro
achingit
send.

•SC—s el
li
ngcli
max,thepoi
ntatwhic
hwideni
ngs
pr e
adands el
l
ingpre
ssureu
sual
lycl
i
maxesand
he
avyorp ani
ckysel
l
ingbythepubl
ici
sbein
gabsorbedbylar
gerp r
ofes
sio
nali
nte
rest
satorneara
bot
tom.Oftenpri
cewil
lcl
osewello
ffthel
owinaSC,refl
ecti
ngthebuyi
ngbythes
elargei
nte
rest
s.

•AR—au to
mat i
crall
y,whi
chocc
ursbecaus
eint
ensesel
li
ngpre
ssur
eh asgr
eat
lydi
mini
shed.Awave
ofbuyi
ngeasi
lypus
hespri
cesup;t
hisi
sfurt
herfue
ledbysho
rtcov
erin
g.Thehi
ghofth
israll
ywil
lhe
lp
defi
netheupp
e rbo
undaryofanaccumul
ati
onTR.

•ST—s econdarytes
t,inwhi
chpri
cerevi
si
tstheareao
ft h
eSCtotes
tthesup
ply/deman
dbalanc
eat
th
esele
v e
ls.Ifabotto
mi st
obeconfi
rmed,vol
umeandpric
espre
adshou
ldbesigni
fi
cant
lydi
min
ishe
d
asth
emar ketap p
roachess
uppo
rtintheareaofth
eSC.Itisc
ommontohav
emu lt
ipl
eSTsaft
eraSC.

Note:Spri
ngsorshakeou
tsusuall
yoccurlatewithi
naTRan dal
lowthest
ock’sdomin
antplayer
sto
makeadef i
nit
ivetes
tofavai
lablesuppl
ybef o
reamar kupcampai
gnunfol
ds.A“spri
ng”takespri
ce
bel
owt hel
owo ftheTRandthenreversestoclos
ewithi
ntheTR;thi
sact
ionall
owslargei
nteres
tsto
mis
leadthepubli
caboutthef
u t
uretrenddirecti
onandtoacqui
readdi
ti
onalshar
esatbar gai
npri
ces.
At ermin
alshakeou tatth
een dofanac cumul
at i
onTRi sl
ikeasprin
go nsteroi
ds.Sh
akeo ut
smayal s
o
occuro n
ceapr ic
eadv ancehasstarted,wit
hr apiddownwardmo v
emen tint
endedtoinduceretai
l
tradersandinvestorsinl
ongposi
tio
nst osel
ltheirsharestol
argeo perat
ors.However
,springsand
terminalsh
akeout sarenotrequ
iredelements:Accumulati
onSchemat i
c1depict
sas pr
ing,whil
e
Acc u
mu l
ati
onSc hematic2showsaTRwi thoutas pri
ng.

•Test—Largeoperat
orsal
way stestthemarketforsupplythro
u gh
ou taTR( e.
g.,STsands p
r i
ngs)
andatkeypoin
tsduri
ngap r
iceadv ance.I
fcons
ide
rablesu p
plyeme rge sonate
st,themar ketis
oft
ennotre
adyt obemarkedu p.As p
rin
gisoftenfol
l
owe dbyo neormo rete
sts
;as ucc
e s
sfultest
(i
ndi
cati
ngthatfur
therpri
ceincreaseswil
lfo
ll
ow)typic
allymake sah igherl
owonl e
sservolume.

•SOS—si
gnofstr
ength
,ap ri
ceadvan
ceonin
creas
ings
preadandrel
ati
vel
yhi
gherv
olu
me.Of
tena
SOSt
ake
sp l
aceafte
ras p
rin
g,val
idat
ingt
heanal
yst
’si
nte
rpret
ati
onofthatp
rio
racti
on.

•LPS—lastpoi
ntofs
upport
,thel
o wpoi
ntofareactio
norp ul
lbackafteraSOS.Bac
kinguptoanLPS
meansapull
bac
ktosuppo
rtthatwasformerl
yre
s i
stance
,ondi mi
nis
h e
ds p
readandvol
ume.Onsome
ch
arts,t
heremaybemorethanoneLPS,de
spi
tetheo s
tensi
blysin
gularpreci
si
onoft
histe
rm.

•BU—“ back-u p”.Thiste

rmi sshor
t-handf o
rac olo
rfu lmetaphorcoi
nedbyRo be r
tEvans,o
n eofthe
l
eadi
ngt e
ac hersoft h
eWy c
ko f
fme th
odf ro
mt he1930st othe1960s.Evansanalogi
zedtheSOStoa
“j
umpac rossthec r
e e
k”o fpric
er e
sist
ance,andthe“ bac kuptothec r
eek”r e
pre se
ntedbothshort
-
t
ermp rof
it-takingandat estforadditi
onalsuppl
yaro undtheareao fresi
stance
.Abac k-upisa
co
mmo nstructuralelementprecedi
ngamo r
es u
bstantialpri
cemar k-up,andcant akeonav ari
etyof
f
orms,i
n cl
udingas implepul
lbackoran ewTRatah i
gh erlev
e l
.

Ac
cumu
lat
ion
:Wy
cko
ffPh
ases
Phas eA:Ph aseAmar kst hestoppi
ngo fthep r
iordo wn trend.Upt ot h
ispoint,sup p
lyh asbee n
domin ant.Theapp r
oach i
ngdiminuti
o no fsuppl
yi sev i
de ncedinp reli
minarysu pport(PS)an das ell
in
g
cl
imax( SC).Theseeventsar eoftenv eryobviouso nbarc harts,wh er
ewi den i
ngs preadan dheavy
vol
u mede pi
ctthetransfero fhugen umbe rsofs haresf romt hep ubli
ctolar gep rofe
s si
onalinte
rests.
Oncet he s
ei n
tensesell
ingpr es
suresh avebe enre l
ieved,anau t
o mat i
crally(AR) ,consis
tingofboth
i
nstitutionaldemandf orsharesaswe l
l asshort-c o
v ering,typi
callyensues.As u cces
s ful
s e
c o
ndary
te
s t(ST)i nthear e
ao ftheSCwi llshowl esssel
lingt hanp revi
ou sl
yan dan ar rowingofs preadand
decre asedv ol
ume,generallystoppi
n gato rabo veth es amep ri
c elevelast h
eSC.I fth eSTgo eslower
th
ant hato ftheSC,onec anan ti
ci
pat ee i
therne wlo wso rp r
olonge dconsoli
dat i
on.Th elowsoft h
eSC
andt heSTan dthehighoft heARs ett hebo u
ndar ieso ftheTR.Ho r i
zontalli
n esmaybedr awnt ohelp
fo
c usat tenti
ononmar ke tbe h
avior,ass eeninth etwoAc cumulationSc h
e maticsabo ve.

So
me ti
mest h
edo wntre
n dmayendl
essdramati
call
y,wi
thoutc
li
macti
cp ri
ceandvolumeacti
on.I
n
ge
neral,h
o weve
r,itisprefe
rabl
etoseethePS,SC,ARandST,asth
es epro
videnotonl
yamo re
di
sti
nctcharti
nglandscapebutacl
earin
dicat
ionthatl
argeoper
atorshavedefi
ni
tiv
e l
yin
iti
ated
accu
mu l
ati
o n
.
I
nar e-accumul
ati
onTR( whichoccu
rsduri
ngalonge
r-t er
mu p t
rend),t
hepoi
ntsr
ep re
senti
ngPS,SC
andSTaren otev
iden
ti nPhaseA.Rath
er,i
nsuchcases,PhaseAr e
s e
mblesth
atmor etyp
ical
lys
een
i
ndist
ribu
tion(s
eebelow).PhasesB-Egene
rall
yhaveas hort
e rdurati
onandsmal
lerampli
tudeth
an,
butareul
timate
lysi
milarto,tho
seinthepr
imaryaccumulati
onbase .

PhaseB:InWy c
ko f
fianan al
ysis,PhaseBs ervesthef un
cti
ono f“buil
dingac ause ”foran ewu ptrend
(s
e eWy ckoffLaw#2–“ Causean dEffect”)
.InPh aseB,inst
itut
ionsan dlargep rofes
sion
al i
nterests
areac cumul
atingrelativel
ylow-p ri
cedinventoryinan t
ici
pati
ono fthen extmar kup.Thep rocessof
i
nstitu
tionalaccumulatio
nmayt akeal ongtime( s
o meti
mesay earo rmo re)andi nvol
vesp u
r c
has i
ng
sharesatlowerp ri
cesan dche cki
ngadv ancesinpr i
cewithshortsales.Therear eu s
uall
ymu l
ti
pleSTs
durin
gPh aseB,aswe l
lasu pt
h r
u st
-typeac ti
onsatt heuppere n
do fth eTR.Ov erall
,thelarge
i
nterestsaren etbuye r
so fsharesast heTRe volves,wi
ththego alofac qui
rin
gasmu choft he
remaini
ngf l
oatingsupplyasp ossi
ble.I
nstit
utio
n albuyin
gan dsell
ingimp art
st hec h
aracteristi
cu p-
and-downp ric
eac ti
o nofthet radi
ngr ange.

Earl
yoninPhaseB,th
ep r
iceswin
gstendtobewideandaccompaniedbyh i
ghvol
ume.Asthe
pro
fessi
onal
sabsorbthesupp
ly,howe
ver,t
hevol
u meondownswin
gswi t
hintheTRte
n dstodi
min
ish
.
Whenitappear
sthatsuppl
yisli
kelyt
ohavebeene x
haus
ted,thesto
c kisreadyf
orPh as
eC.

PhaseC:I tisinPhaseCt hatthestockpri

c egoesthroughade c i
si
vet es
to fther emaini
ngs uppl
y,
all
owingt he“smartmo ney”operatorstoas c
e r
tainwhe t
he rt h
es tocki sreadyt obemar ke dup.As
notedabo ve,aspringisap ri
cemovebe lo
wt hes uppo
rtlev eloft heTR( es
tabli
sh edinPhas esAandB)
thatquicklyreversesandmo vesbackintotheTR.I ti
sane xamp leo fabe artrapbe caus
et hedrop
belowsup portappearstos i
gnalre
sump ti
ono fthedown t
re nd.Inr ealit
y,though,thismar ksthe
beginn
ingo fan ewu pt
r e
nd,trappi
ngt helatesell
ers(bear s).I
nWy c koff'
sme thod,as uccessf
ultes
t
ofsupplyr epres
entedbyas pri
ng(oras hakeout)provi
desah igh-pr obabil
it
yt radingopp or
tuni
ty.A
l
ow-v ol
umes pri
ng(oral ow-vol
umet estofas hakeout)indicatest hatt h
es tockisli
ke l
yt obeready
tomo veu p,sothi
sisago odtimetoinit
iateatleastap artial l
ongp os i
ti
on.

Theapp
e ar
an c
eo faSOSshor
tlyafteraspri
ngorsh
akeoutval
idat
esthean al
ysi
s.Asno
tedin
Accu
mulati
onSchemati
c#2,however,th
et e
sti
ngofsup
plycanoccurh
igheru pi
ntheTRwith
outa
sp
ringo
rs hakeou
t;whent
hisoccur
s,theide
nti
fi
cati
onofPhaseCcanbech all
engi
ng.

PhaseD:I
fweareco
rrec
tinou
ran
aly
sis
,whats
h o
uldfol
l
owist
heco
nsi
ste
ntdomi
nanceofdeman
d
ov
e rsu
ppl
y.Th
isi
sevi
denc
edbyap
atter
nofadvances(
SOSs
)onwi
deni
ngpri
cesp
readsand
i
ncreas
ingvol
ume ,aswel
lasreacti
ons(LPSs
)onsmallers
p r
eadsan
ddimi
ni
shedv
olu
mes.Duri
ng
Phas
eD,t h
ep r
icewillmo
veatleasttothetopoftheTR.LPSsi
nthi
sph
asearege
neral
l
ye x
cell
ent
pl
acestoini
ti
ateo raddtopr
ofit
ablelo
ngp o
sit
ion
s.

PhaseE:InPh aseE,t hes t

ockleavestheTR,demandisi
nf ul
lcont
r ol
andt hemarkupi
sobv io
usto
ever
y o
ne .Setbac ks,s
uc hasshakeoutsandmo r
etypi
calreacti
ons,areusuall
yshor
t-l
ived.New,
hi
gher-levelTRsc o
mp ri
singbothprofi
t-taki
ngandacqui
si
tionofadditi
onalshar
es(“re-
accumulatio
n” )byl ar
geo perator
sc anoccuratanypoi
ntinPhaseE.TheseTRsar eso
me timesc
all
ed
“s
teppings t
on es”ont hewayt oevenhigh
e rpr
icet
argets.

Di
str
ibu
tio
n:Wy
cko
ffEv
ent
s

PSY—preli
min
arys
uppl
y,wh
erelar
geint
ere
stsbegi
ntounl
oadshar
esinquant
ityaf
terapro
nou
nce
d
up-move
.Volu
meexpan
dsandpr
icesp
readwide
ns,s
ign
ali
ngthatachangei
ntrendmaybe
appro
achi
ng.
BC—bu yi
ngcli
max,duri
ngwhichth
er eareoft
e nmarkedincr
easesi
nvolu
mean dp ri
ces pread.The
forc
eo fbuyi
ngreachesacl
imax,withheav
yo rurgentbuy
ingbythepubl
icbeingfil
l
edbyp rof
essi
onal
i
nterestsatpri
cesnearatop.ABCo ft
encoin
c i
deswithagreatear
nin
gsr e
po r
to rothergoodn e
ws ,
si
ncethelargeoper
atorsr
equ i
rehugedemandf ro
mt hepubl
ictose
llt
heirshareswith
ou tdepress
ing
thesto
c kpri
ce.

AR—au t
omaticreact
ion
.Wi t
hin
tens
ebuy
ingsubst
ant
ial
lydi
mini
shedaft
ert
heBCandh
eavys
upp
ly
con
tinui
ng,anARtakesplac
e.Thel
owoft
hiss
ello
ffhel
psdef
inethelo
werbo
undar
yofth
e
di
stri
buti
onTR.

ST—s econ
dar ytest,inwhi
chp ri
cerevi
si
tstheareaoftheBCt otes
tt hedemand/
suppl
ybalanceat
the
sep ri
cel e
v e
ls.Foratoptobec o
nf i
rmed,su
pplymustoutwei
ghde mand;vo
lumeandspreads ho
uld
thu
sde creaseasp ri
ceap pr
oachestheresi
stan
cear e
ao fth
eBC.AnSTmayt aketheformo fan
upth
ru s
t(UT) ,i
nwh i
chp r
icemo v
esabovetheresi
stancere
pr e
sentedbyt h
eBCan dpos
sibl
yo t
h e
rSTs
befor
eq ui
c kl
yr eve
rsingtoclo
sebelo
wr esi
stance
.AfteraUT,p r
iceoftentest
sthel
owerbo undary
oftheTR.

SOW—s i
gnofweaknes
s,obser
vabl
easado wn-moveto(ors
li
ghtl
ypast)t
helowe
rboundaryo
fthe
TR,us
uall
yoccur
rin
gonincr
easedspre
adan dvol
ume.TheARandthein
iti
alSOW(s
)in
dicat
eac h
ange
ofch
aracteri
nthepri
ceacti
onofthesto
ck:sup
plyi
sn o
wdominant.

LPSY—lastpointofsuppl
y.Afte
rtesti
ngsupportonaSOW,af eebler
all
yo nnarrowspre
adshows
thatth
emar ketishavi
ngconsi
derabl
ediffi
cul
tyadvancin
g.Thi
sinabi
li
tytorall
ymaybedu etoweak
demand,s
u bst
an ti
als
uppl
yo rboth
.LPSYsreprese
nte x
haust
ionofdemandandt helas
twavesof
l
ar geo
perators’di
str
ibut
ionbefor
emar kdownbegin
sinearnest
.

UTAD—u pthrustaf
terdis
tri
buti
o n
.AUTADi sthedis
tri
butio
nalcounte
r parttot
hespri
n gand
termi
nalshakeouti
ntheaccumulati
onTR.Itoccur
sinthelatte
rstageso ftheTRandprovide
sa
defi
ni
tivetestofnewdemandafterabr eakou
tabo v
eTRr esi
stan
c e
.An alo
goustospr
ingsand
shakeo
uts,aUTADi sno
tar eq
uiredstru
ct u
ralel
ement:th
eTRi nDist
ributi
onSchemati
c#1c ont
ain
sa
UTAD,wh i
l
et heTRinDi
stri
buti
onSc h
emat i
c#2doesn o
t.
Di
str
ibu
tio
n:Wy
cko
ffPh
ases

PhaseA: PhaseAinadistri
buti
onTRmar ksth es t
oppingofthepriorupt
re nd.Uptot h
ispoin
t,deman
d
hasbe e
ndo minan
tan dthefir
stsigni
fi
c an tevidenceo fsuppl
ye n
t e
rin
gt hemar ketisprovi
dedby
preli
minarysuppl
y(PSY)an dthebuyin
gc li
max( BC).Theseeventsareusuallyfol
lowedbyan
automaticreacti
on(AR)an dasecondar yt est(ST)o ftheBC,oftenupondimi n
ish
edv ol
ume.However
,
theuptrendmayal s
ot e
rminatewithoutc li
mac ti
cac t
ion,i
nste
adde monstratingexhaust
ionofdemand
withdecreasi
ngspreadan dvol
ume ;
lessu p wardp rogressismadeo neachral l
ybeforesi
gnifi
can
t
suppl
ye merges.

I
nar edi
str
ibu
tio
nTRwi t
hinalar
ge rdo
wn t
rend,Phas
eAmaylookmorel
ikethest
artofan
accumul
ati
onTR( e.
g.,wi
thcli
macticpr
iceandvolu
meac ti
ont
othedown
side
).Howeve
r,Phas
esB
th
roughEofar e-di
stri
butio
nTRc anbeanalyzedi
nas i
mil
armanne
rtothedis
tri
but
ionTRatth
e
markettop
.

Ph
aseB:Th
efu
nct
iono
fPh
aseBi
stobu
il
dac
aus
einp
rep
arat
ionf
oran
ewdo
wnt
ren
d.Du
rin
gth
is
ti
me,in st
itu
tionsandlargep rof
essi
onalint
er est
sar edis
posi
ngofth ei
rlo nginvent
oryandinit
iati
ng
sh
o r
tp osit
ionsinanti
cipati
ono fth
en extmar kdown.Thep o
int
sabo utPh aseBi ndi
stri
buti
onar e
si
mil
art ot hos
emadef o
rPh aseBinac cumulati
on,exceptthatthelargei n
te r
estsarenetsell
ersof
sh
ar esast heTRe vo
lves,withthegoalofexh aust
ingasmu chofthere mainingdemandasp ossi
ble.
Thi
sp rocessleavescl
uest hatthesuppl
y/deman dbalancehastil
tedto wards uppl
yinste
ado fdemand.
Forinstance,SOWsar eu s
uallyaccompanie
dbys i
gnifi
cantl
yincr
eas e
ds p r
e adandv o
lumetoth e
downside.

PhaseC:Indistri
bu ti
on,PhaseCmayr ev
e ali
tselfvi
aanu pt
h r
u s
t( UT)orUTAD.Asn otedabove,aUT
i
st h
eo pposi
teo fas pri
ng.Itisap ric
emo v eaboveTRr e s
ist
an ceth atqui
cklyreve
rs esandc l
osesi
n
th
eTR.Th isisat estofth eremai ni
ngdeman d.Itisals
oabu l
ltrap—i tappearstosignalthe
resumpti
onoft heu ptrendbuti nreali
tyisinte
nde dto“wr ong-foot”u n
info
rme dbreak-o uttrader
s.A
UTo rUTADal l
owsl argeintereststomisleadthep ubli
cabo utthef utur
et r
en ddi
rectionand,
subsequ
ently,selladdi
tionalshar e
sate l
e vat
edp ric
est osuchbr eak-outtradersan dinvest
ors
beforethemar kdo wnbegins.Inadditi
on,aUTADmayi nducesmallert r
adersinshortp osi
ti
onsto
coverandsur r
e ndertheirshare stothelargerinteres
tswh oh avee ngi
neeredthi
smo ve.

Aggres
siv
et rade
r smaywis
htoinit
iat
esh o
rtposi
ti
onsaft
eraUTo rUTAD.Theris
k/re
war drat
ioi
s
oft
enquitefavorabl
e.Howeve
r,the“smartmoney”rep
eatedl
ystop
souttrader
swh oi
nit
iatesu
ch
shor
tposi
t i
onswithoneUTafteranot
her,soi
tisoft
ensafertowai
tunti
lPhas
eDan danL PSY.

Of
tendemandiss
oweakinadi
str
ibut
ionTRt
hatpri
cedoe
snotr
eacht
hele
velo
fth
eBCorin
iti
alST.
I
nthi
scase,Ph
aseC'
stes
tofdemandmayberepr
esent
edbyaUTofalo
werhi
ghwi
thi
nth
eTR.

PhaseD:PhaseDar ri
vesafterth etest
sinPhaseCs h
owu sthelastgaspsofdemand.Duri
ngPhaseD,
pri
cetravel
stoo rt
hroughTRs u ppor
t.Thee v
ide
n cet
hats u
p pl
yisclearl
ydomin
antincr
easesei
ther
wi
thac l
earbre akofsuppo
r torwi t
hade cli
nebelowthemid-pointoftheTRafteraUTo rUTAD.
Thereareoft
e nmult
ipl
ewe akr all
ie
swi t
hinPhaseD;theseLPSYsr e
pr e
sentex
cell
entoppor
tuni
ti
esto
i
niti
ateoraddt opr
ofit
ables h
or tposi
ti
ons.Anyo
n est
il
linalongp os
iti
onduri
ngPhaseDisaski
ngfor
tr
o u
ble.

PhaseE: Ph
as eEdepi
ctstheunfol
di
n gofthedowntre
nd; th
es toc
kleavestheTRands uppl
yi sin
contr
ol.OnceTRs u
pportisbro
ke nonamaj orSOW,thisbreakdownisoftentes
tedwithar allythat
fai
lsatorn earsup
port.Thi
salsorepres
entsah i
gh-probabi
li
t yoppo
rtuni
tytosel
lshor
t.Su bsequent
ral
li
esdu ri
ngt h
emarkdownareu sual
lyfee
ble.Traderswhoh avetakenshor
tposi
tio
nsc ant rai
lthei
r
s
topsaspri
cedec
li
nes
.Aft
erasi
gni
fi
can
tdo
wn-mo
ve,c
li
mac
ticac
tio
nmays
ign
alt
hebe
gin
nin
gofa
r
e-dis
tri
buti
onTRorofac
cumu
lat
ion
.

Su
ppl
yan
dDeman
dAn
aly
sis
Anal
y s
iso fs u
p pl
yandde man do nbarc harts
,th roughexaminationo fvol
umean dpr i
cemo veme nt
s,
representso neofthec en t
ral pi
ll
arsoftheWy ckoffme tho
d.F orexamp l
e,ap ricebart hath aswide
spre
ad,c losingatah ighwe llabovethoseoft h
ep re v
iousseveralbar sandacc omp anie
dbyh igher-
th
an -averagev o
lume,su ggestst h
ep r
esenceo fdeman d.Simil
arly,ah i
gh-vol
u mep ricebarwi thwide
spre
ad,c losingatal owwe l
lbelowt h
elowso fpriorbar s
,suggestst hepresenceo fs u
pply.These
si
mplee xamp lesbeli
et hee xt
e ntofthesubtl
e t
iesan dn uan
c esofs uchanaly
sis.F o
ri ns
tance,labeli
ng
andu nde
r standingtheimp li
cationsofWy ckoffe v
e ntsandp h
as esintradin
gr an ges,aswe l
las
ascertai
nin gwh e
nt hepriceisr eadytobemar ke du pordown ,i
sbas edlargelyo nthec or
r ec
t
assessmen tofs u
pplyan dde man d.

Wycko ff
'sfi
rstandthi
rdlawsde scri
bedabov e(Supp
lyandDe man dandEffortversusResult)embody
thi
sco r
eap p
roach.Conven
tional wis
do mofmu chtechni
calanaly
sis(andbasiceconomictheory)
acceptsoneoftheobvi
ousinsightsoft hel
awo fSupplyandDe mand:whende mandtobu yshar e
s
exceedssel
lordersatanytime ,pric
ewi l
ladvancetoale v
elwh eredemandde cr
easesan d/orsupply
i
ncreasestocreatean e
w( tran s
ient)equi
li
brium.Theconver
s eisalsotru
e:whens e
llorders( s
upply
)
exceedbuyorders(demand)atan ytime,equ
ili
briu
mwi l
lbere st
or e
d( t
emp o
raril
y)byap r
icede c
li
ne
toalevelwheresuppl
yandde man dareinbalance.

Wy c koff'
st hi
rdlaw( Eff o
r tver
su sRes ul
t)involvesidentif
y i
ngp rice-volumec onvergencesand
diver gencestoant i
ci
p atep ote
ntial t
ur n
ingp oin
tsinp ricetr en
ds .Fore xamp le,wh envolume(Eff
ort)
an dp ri
ce( Resul
t)bo t
hi ncreasesu bstantiall
y,theyar einh armon y,sugge sti
ngt hatDe mandwilll
i
kely
con ti
n u
et opropel pr
iceh igher
.Ins omei nstances,howe ver,volumemayi nc rease,po ss
ibl
ye v
en
subs tanti
ally
,butt hep ricedoesn otfoll
o w,producingo nl
yamar gi
n alchan geatt hec l
o s
e.I
fwe
obs ervet h
isprice-vol
u mebe haviorinar eacti
ont os u
pp ortinanac cumu l
at i
ont radingrange,th
is
i
n dicatesabs or
ptiono fs uppl
ybyl argein terest
s,an discon si
dere dbulli
sh .Simil
ar l
y,hugevolumeona
rallywithmi ni
mal pri
ceadv anceinadi stributi
ont radingran gede mo n
s t
r atesas toc k'
sinabi
li
tyto
rallybe causeofth epr esenceofs i
gnificantsupply,alsofro mbigi nsti
tution s
.Sev eralreacti
onsi
nt h
e
AAPLc hartbe l
owi l
lu
st ratetheLawo fEf fortversusRe sult.
I
nt hi
sc h
artofAAPL,wec ano bse
rvet hepri
n ci
pleofEffor
tve r
susResul
ti nthreep r
icere act i
ons.I
n
thefirs
t,weseepricesfall
i
ngo nan umbero fwide-spr
eadbar sandvolumeincreas i
ng.Th i
ss uggests
ah armonybet
wee nvolu
me( Effort
)an dthede cl
ineinpri
ce(Resul
t).I
nthes econdr eacti
on ,price
decreasesbyasimil
aramo untasinRe acti
on#1 ,butonsmall
erspreadsan dlowerv ol
ume ,indicati
ve
ofr e
ducedsuppl
y,whichinturnsuggeststhepotenti
alforatleastashort-termr all
y.InRe ac t
ion#3,
theswingsi
zedecreases,yetvol
umei ncre
as es
.Ino t
herwords,theEffo
rtin c
rease swhil
et heRe sult
decreases,
showi
ngt h
ep resenceoflargebuy e
rsabs or
bingsuppl
yinantici
pationofac ont i
n uati
onof
therall
y.

Co
mpar
ati
veSt
ren
gthAn
aly
sis
Wy ckoff'
ss t
oc ks el
ectionp r
ocessal waysin cl
ude danan alys
iso fco mp arativestrengt
h .Toidenti
fy
candidatesforlo ngpositi
on s
,helooke df orstockso ri ndustr
iest hatwe reo utper
formingt hemarket,
bothdu ri
ngtre ndsandwi thintradi
n gr ange s
,wh ereas ,withshor tp os
itions,helookedfo r
underperforme rs.All
o fhischarti
ng,i ncl
udingbaran dPo i
ntan dF igurec har t
s,wasdo nebyh and.
There f
ore,hec onductedh iscompar ati
v estrengt han alysi
sbe twe enas t
ockan dthemar ket,or
betwe enas t
oc kan do t
hersinitsindu s
t r
y,byp lac i
ngo n echartu nde ran other,asinthee xample
belo
w.Wy ckoffc ompar eds u
ccessi
v ewav e sors wingsine achc hart ,examin in
gt hestr
e ngthor
weakn essofeac hinre l
ationtop ri
orwav eso nthes amec hartan dt oth eco rresp
o n
dingp oi
ntsonthe
comp ari
sonchar t.Av ari
at i
onoft hi
sap pr
o achist oide nti
fysignifi
c anth i
gh sandlowsan dn ot
ethem
onbo thcharts.On ecant hene v
aluat ethes trengtho ft hestockbyl ookingati tspri
cer elat
ivetothe
p
rev
iou
shi
gh(
s)o
rlo
w(s
),do
ingt
hes
amet
hin
gont
hec
omp
ari
sonc
har
t.

I
nt hesec hart
so fAAPLan dtheNASDAQc omposi
teindex( $COMPX),AAPLismaki ngal owerhighat
point#3( rel
ativ
et opoi
nt#1 ),where
asthe$COMPXi smaki ngah i
gherhighatth atpoint.Thi
ss h
ows
thatAAPLi sunderperfo
rmi ngthemarketatpoin
t#3.Th ep ict
urechangesinFebr uary:AAPLis
startin
gt ooutperformthemar ketbymakingah i
gherhighatp oi
nt#5an dhigherlowat#6r elati
ve
toth emarke t
,wh i
chismakingal o
we rhi
ghatpoint#5an dal owerl
owatp o
int#6.I nhi
ss toc
k
sele
c ti
on,Wy ckoffwoul
de nterlongpos
iti
onsi
nstocksth atshowedsi
milarstrengthr e
lativetothe
mar ket,assumin
gt hatth
e secandi
datesme to
thercrit
er i
aaswe ll
,asdiscusse
di ntheNi ne
Buying/Sel
lin
gTe sts
,below.
Moder
nWy ckof
fp racti
tionerscanutil
i
zetheRelati
veSt
re n
gthRati
obe t
weenasto
c kandamarket
pro
xytocomparep oi
ntsofstrengthandwe akn
ess.I
nfact,useofth
eRe l
ati
veSt
rengthRat
iocan
moreeas
il
yeli
minatepo t
en t
iali
naccuraci
esduetotheexi
stenceofdif
feren
tpri
cescale
sbetwee
na
st
ockandit
srelevantmar ketin
dex .

Ni
neBu
yin
g/Sel
li
ngTes
ts
Wh er
e asthethreeWy ckoffl
awsp ro
v i
deabig-p i
ctur
ef o
un dati
onfortheWyckof
fme th
od,theni
ne
buyi
ngan dsell
ingtestsareas etofnarrower
,s p
ecifi
cprincip
lestohel
pgui
detradeentry.The
se
te
s t
sh el
pde l
in
eatewh enat radi
ngrangeisdrawingtoac l
o seandan e
wu pt
rend(markup)or
downtrend(markdo wn)isabouttobegi
n.Inotherwords,then i
netes
tsdefi
netheli
neofleast
resi
stanceinthemar ket.Bel
owisalist
ingofthen i
nebuyi
ngt estsandni
nesel
li
ngtest
s,incl
udi
ngthe
refer
e nce
st owhichkindofchartshoul
dbeu sed.

Wy
cko
ffBu
yin
gTes
tsf
orAc
cumu
lat
ion
1
.Do
wns
idep
ric
eobj
ect
iveac
comp
li
she
d–P&Fc
har
t

2.Pr
eli
min
arys
upp
ort
,se
ll
in
gcl
i
max
,se
con
dar
yte
st-Baran
dP&Fc
har
ts

3.Ac
tiv
itybu
ll
is
h(v
olu
mei
ncr
eas
eso
nral
l
iesan
ddi
min
ish
esdu
rin
gre
act
ion
s)–Barc
har
t

4.Do
wnwar
dst
ridebr
oke
n(t
hati
s,s
upp
lyl
i
neo
rdo
wnt
ren
dli
nep
ene
trat
ed)-Baro
rP&Fc
har
t

5.Hi
ghe
rlo
ws-Baro
rP&Fc
har
t

6.Hi
ghe
rhi
ghs-Baro
rP&Fc
har
t

7
.St
ockst
ro n
gerthanth
emarket(
thati
s,s
toc
kmo
rer
esp
ons
iveo
nral
l
iesan
dmo
rer
esi
stan
tto
r
eac
tio
nsthanthemarketi
nde
x)-Barchar
t

8
.Bas
efo
rmi
ng(
hor
izo
ntal
pri
cel
i
ne)–Baro
rP&Fc
har
t

9.Es
timat
edups
idepr
ofi
tpo
ten
tial
isatl
eas
tth
reet
ime
sth
elo
ssi
fth
ein
iti
als
top
-lo
sswe
reh
it–
P&Fandbarc
harts
Wy
cko
ffSel
li
ngTes
tsf
orDi
str
ibu
tio
n
1
.Up
sideo
bje
cti
veac
comp
li
she
d-P&Fc
har
t

2.
Act
ivi
tybe
ari
sh(
vol
umede
cre
ase
sonr
all
i
esan
din
cre
ase
sonr
eac
tio
ns)-Baran
dP&Fc
har
ts

3.
Pre
li
min
arys
upp
ly,bu
yin
gcl
i
max-Baran
dP&Fc
har
ts

4.
Stoc
kwe ake
rth
anthemar
ket(
thati
s,mo
rer
esp
ons
ivet
hant
hemar
keto
nre
act
ion
san
dsl
uggi
sh
onral
l
ies
)-Barchar
t

5.
Upwar
dst
ridebr
oke
n(t
hati
s,s
upp
ortl
i
neo
rup
tre
ndl
i
nep
ene
trat
ed)-Baro
rP&Fc
har
t

6.
Lowe
rhi
ghs-Baro
rP&Fc
har
t

7
.Lo
werl
ows-Baro
rP&Fc
har
t

8
.Cr
ownf
ormi
ng(
lat
eral
mov
eme
nt)-P&Fc
har
t

9.
Est
imat
eddowns
idepro
fitp
ote
nti
ali
satl
eas
tth
reet
ime
sth
eri
skf
ori
fth
ein
iti
als
top
-or
derwe
re
hi
t-P&Fandbarchar
ts

(
Adaptedfr
omPr
ude
nH(
2007
)Th
eTh
reeSki
l
lso
fTo
pTr
adi
ng.Ho
boke
n,NJ:
Joh
nWi
l
ey&So
ns,I
nc.
;
p
p.136-37
)

Th
eAAPLc
har
tbe
lowi
l
lus
trat
esBu
yin
gTe
sts2t
hro
ugh8
.
Thedo wntrendi nthi
se xamp l
eo fAAPLc onclu
deswithPr eli
minarySu pport(PS),aSe ll
ingClimax( SC),
anAu tomaticRal l
y(AR)an daSe condaryTe st(ST),wh i
chc o
mbi netos ati
sfyTe st#2.Vo lume
contractsthro u
gh outth
et radingran gean dp ri
cesstarttomakeh igherhighsan dhigherlows–t h i
s
showsade cre asean dabs o
r pt
ionofs upp l
yan deaseofu pwardmo vement,despitede creasi
n gdeman d.
Onces uppl
yh asbe enexh austed,pri
cec anr iseonlowerde mandt hano nemighto therwiseex pec
t.
Suchac ti
vi
tyi sbu l
l
ishan dsatisfi
esTe st#3.Th edown wards t
r i
dean ddo wntrendc hannelhav ebeen
brokenan dp ri
cec onsol
idatesint h
et radingr ange–Te st#4iss atisf
ied.InFebru ary-April2009,
AAPLmake shigherh i
ghsan dhigherlows ,allofwhic
har es t
rongert hanth emarke t.Thissatisfi
es
Tests#5,6an d7 .Thesto c
kh ass pentsixmo nthsconsol
idati
ngan dh asbu il
tac au s
es uffi
cientfora
substanti
alfu tureadvan ce.Thebas eisf ormed,sati
sfyingTest#8 .
Notethattes
ts#1and#9cou
ldo
nlybeme
tthr
oughth
euseofP&Fc
harts
.Guide
li
nesf
orh
ori
zon
tal
co
un t
inginatradi
ngr
angear
edi
scuss
edi
nth
ef o
ll
owi
ngs
e c
tio
noft
hisart
icl
e.

Wy
cko
ffPo
intan
dFi
gur
e(P&F)Co
untGu
ide
Wy ckof
fdevel
opedauni
quel
ye f
fecti
veme t
h odtoidenti
fypri
cetargetsf
orbo thlo
ngan dsho
rt
tradesusi
ngPoi
ntandFi
gure(P&F)charts
.Th i
sme th
o dembodi
esWy ckof
f'sfundamentall
awo f
CauseandEffec
t,wher
ethehoriz
o n
talP&Fc ountwit
hinatradin
gr an
gerep r
esentsth
eCau seand
thesubseq
uentpri
cemove
me n
to utofthetradin
gr angerepres
entstheEffect
.

TheWyckof
fCou
ntGuidesho
wsthetr
aderhowtoc
alc
ulat
ethecau
sebui
l
tduri
ngatr
adi
ngr
anges
o
astobeabl
etopro
jec
tf u
turep
ricet
arget
s.Th
eproc
esscon
sis
tsoft
hefol
l
owi
ng:

•Us
eabarc
har
tan
daP&Fc
har
ten
comp
ass
ingt
hes
amet
radi
ngr
ange
(s)an
dti
mef
rame
.

•Choos
eanap p
ropri
atebo
xsizeforth
eP&Fc h
art:e.
g.,forl
ow-p
rice
dstocks,thebo
xsi
zec
oul
dbe
0.
5to1poin
t ,wher
easforhi
gh-pri
ced(>$200)stocks
,abo xsi
zeof5poi
ntswo u
ldbemor
e
appr
opri
ate.Theboxsiz
efortheDowJonesIndust
rial
Av e
ragecoul
dbe100p o
ints.

•Afteri
de ntif
yingasi
gno fstr
engt
h( SOS)t
owardstherightsi
deoftheTRo nthebarc har
t,loc
ate
thel
astpointatwh i
chsupportwasmeto nareact
ion
—t helastpoi
ntofsupp
o r
t(LPS).Locatethi
s
poi
ntonyourP&Fc h
artalsoandcountfromri
ghttolef
tatt hepri
celeve
loftheL PS,t
akingyour
mostcon
se r
v ati
vecountfi
rstandmovingfur
thertotheleftasthemoveprogres
se s
.These
i
ncrementsinc o
untssh
o u
ldbebasedo nphas
escorresp
ondingtospec
ifi
cWy ckoffeventswith
inthe
TR.

•Inmo vingtot heleft

,t u
r ntoy o
urbarc h
ar tanddivi
detheareao faccumulati
onint
ophases,addi
ng
onecomp l
etep haseatat i
me .NotethatP&Fp hasesareNOTt hesameasPh asesA–Eu sedinthe
analy
s i
soft radingrangesde scri
bedinprevi
o u
ss ect
ionsonAccumulati
onandDistri
buti
on.Neveradd
onl
yp artofaP&Fp has etoyo urcou
nt.Volumean dpric
eac t
ionwil
lu s
uall
yshowwh er
ethep h
ase
beganan de n
de d.Forinstance,thefi
rstphasec anconsi
stoftheP&Fc ountf
r o
mt heLPSbackt othe
sp
r i
ng,whilethes ec
o ndph as
ec over
st h
ec ountfromthesprin
gt oac l
earl
yde f
inedST.

•Inthecas
eo falonge
r-ter
mcounti
nvol
vi
ngmu
lti
pl
eP&Fph
ases,t
heLPSoft
enappe
arsatth
e
or
igi
nall
evelofpr
elimi
narys
upp
ortorth
eSC.Whenth
eLPSocc
ursate
ithe
rofthe
selev
els
,th
is
t
endstoval
idatethecoun
t.
•Aspri
ngmayal
sose
rveastheLPSfr
omt heper
spec
tiv
eo ft
heP&Fcou
nt.Us
uall
yasp
rin
gis
f
oll
owe
dbyanSOS,andt
helo
wo fthereac
tionf
oll
owi
ngthatSOSi
sal
soavali
dLPS.

•Ast hetrendprogresses,youwi lloft

e nseepr
iceconsoli
datio
n ,o
ran ewtradingr ange,formi
ngata
hi
gher(or,i
nado wn tre
n d,lower )lev
el.Veryoft
en,thiswil
lproducea“stepp i
ngston econfi
rmi
ng
count
”o ftheori
ginalP&Fc o
u nt.Thus,ast h
enewTRf or
ms ,youcanoftenge tatimingindi
cati
onby
watchin
gt h
eac t
iono fthes t
o ckast hep ote
nti
alcountbeginstoconfi
rmt heo r
igi
nal co
u nt
.Inoth
er
words,asthepri
cet arge tprojec t
edf romthestep
ping-stoneTRap p
roac h
e sthato fth
eo ri
gin
alTR,
th
eu pwardo rdo
wn war dt r
en dmayber e
adytoresume .

•Be causethepri
ceswingswith
intheseste
pping-ston econ
soli
dati
onsaretypi
call
ynarro
werthan
th
o s
ei npri
maryaccu mul
ati
ono rdis
tri
buti
onTRs ,i
ti spref
e r
abletouseasmalle
rbo xs
izeto
measureP&Fc ount
swi t
hintheformer.F
ore x
amp le,long-t
e r
mc ou
n t
sonthree-poi
ntandfi
ve-po
int
chart
sar efreq
uentlyconfi
rmedbys ubs
equentmi n
o rc o
untsusi
ngao ne-p
oin
tc har
tinre-
accumu l
ati
onTRs.

•Forlonger
-termpricetar
gets,youshouldaddth
eP&Fc ountt
otheexactlo
wo fthet
radi
ngran
ge
i
nwh i
chthecounti
sbeingmeasured,aswe l
lastotheh
alfwaypoi
ntbetweenthel
owandthepr
ice
l
evelofthecou
ntli
ne.Youwill
thusbeu si
ngt h
emostcons
e r
vati
vecou
nt (
s)asaguides
oasto
es
timatemorereal
ist
icmini
mu mpricetargets.

•Pricetarget
sderi
vedfromWy ckoffP&Fc o
untsrepr
esentpoin
tswhereyousho
u l
d“sto
p,loo
kand
l
is
ten.
”Th esetar
getssho
uldneverbelookeduponasexactpoi
ntsofwhereatrendwil
lchange;
i
nste
ad,u seth
emasp r
ojecte
dp oi
ntswhereat u
rncoul
do ccur
.Addi
tion
all
y,youcanusethebar
ch
artt oobser
vethepri
ceactio
nan dvol
umeast hes
ep o
intsareappr
oached.

•Inc
aseo
fth
ree
-po
into
rfi
ve-p
oin
tch
art
s,t
hes
amec
oun
tli
nes
hou
ldbeu
sedasf
oro
ne-p
oin
t
ch
art
s.

Belowisanex ampleofho r
izontals
t eppi
ngs ton eP&Fc oun tsf ortheDowJo nesIn
dustr
ialAverage
(DJIA).Thebo xsizei
s1 00po i
ntswith3-bo xr ev ers
als.Th erefore,tocal
cu l
atepric
etargets,tal
ly
then u
mbero fcolumnsatt heleveloft h
ec o u
n tlin
e,mu lt
iplyt hatsumby1 00(theboxsiz
e)an d3
(therev ersalmetri
c),thenaddt hi
spr oduc ttot hec o
untl in
e( produci
ngth emaximumprice
objective),th
el o
wo fthet radi
n grange( minimu mpr i
ceo bjec ti
ve)andtheh al
f-waypoint
.Th e
max i
mu mP&Fo bject
ivesfort heDJIApr ojectapo tenti
als toppingandconsoli
dati
ngacti
onar oun
d
thetar getareas.
Co
ncl
usi
on
Thepioneer i
ngwo r
ko fRichardD.Wy ckoffintheearlyt wenti
ethc entur
ywasc enteredar oundthe
real
izati
o nt h
ats tockpricet r
endswer edr i
venpr i
mar i
lybyi n
stit
ut i
onalan do therlargeo per
at o
rs
whoman ipulates tockpri
cesi nthei
rfav or.Man yprofessio
nal t
rader stodayu s
eWy ckoff'smethod,
buthisov erallapproachisstil
lnotwide l
y-foll
owedamo ngretailt
rader s,ev entho u
ghh is
educati
on aleff or
tswer eintendedtot eachthepu bl
ict h
e“ realrul
eso fth egame. ”No nethele
ss,his
stoc
ks electionan dinves
tmen tmet h
odo l
ogyh asstoodt hetestoftime,lar gelydu etoitsthorough,
syst
emat izedan dlogicalst
ru ctur
ef oridenti
fyi
n ghi
gh -probabil
it
yan dhighlypro fi
tabletrades.The
dis
cipl
in
einvol
vedinthisapproachallowstheinvesto
rt omakei n
formedt radingdec
isi
onsunclo
uded
byemo t
ion
.UsingWy ckoff'
smeth o
d,o necaninvestinstoc
ksbyc apital
i
z i
ngo nthei
ntenti
onsofthe
lar
ge“ s
mar tmoney”inter
ests,r
at herthanbeingcau ghtonthewrongsideo fthemarket.Att
aini
ng
profi
ci
encyinWy ckof
fan aly
sisrequir
e scon
siderablepracti
ce,butiswellwo r
ththeeffort
.