Wyckoff Campaigns Post #4 - Accumulation or Distribution?

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By Jack Corsellis Content Contributor at wyckoffanalytics.com - 4 July 2019

This post will focus on key giveaways the CO and Institutions leave behind during trading ranges. Successfully identifying these will help us determine
whether an accumulation or distribution structure is forming.
Do you notice the subtle difference between these two price structures? What can the Composite Operator (CO) and Institutions not hide?

If you said where significant selling and buying takes place to the first question, well done. If you said volume to the second question, doubly well done.

Let's go into the detail for some of the key giveaways that we can use to decipher whether an accumulation or distribution trading range is
unfolding. Firstly, Gildan Activewear (GIL), where a yellow Institutional Value Zone is shown. Why is this an Institutional Value Zone?
 As the price sharply decreases into the Selling Climax (SCLX) we see the synchronicity between effort vs result changing. The final down-bar has little
downward result yet the highest effort (volume) so far. This tells us that demand is present and beginning to absorb and overcome supply. The large
demand tail on this final down-bar is another giveaway. After the SCLX we continue to see above average volume and a steep rally into the Automatic Rally
(AR). Due to this continued high-volume signature we determine the CO is still actively buying shares.
 The Secondary Test (ST) in Phase B of the SCLX has increased volume again and at a similar price level we saw the CO buying before.
 Notice what happens to the volume in the rally to the Upthrust Action (UTA) in Phase B. On the whole, it is below average. What does this tell us? The CO
is most likely not participating in the rally nor are they actively selling. We'll compare this action to the distribution structure Upthrusts (UT) shortly.
 On the decline from the UTA to Phase C where we see the Last Point of Support (LPS) and Test, note the volume signature. On the whole, again,
unremarkable. There was not, like we'll discuss in the distribution structure, 'selling off the top' by the CO.
 In Phase C, as the price returns to the Institutional Value Zone, we see the largest volume signature within the whole trading range so far and a
synchronicity between the effort vs result - i.e., large demand and price increases circa 25%.
 During Phase D note the Sign of Strength Bar (SoS Bar) with a large demand tail. Comparing this to other analogous price areas such as the ST high in Phase
B and the UTA in Phase B there is increased participation by the CO at higher price levels - i.e., the CO is supporting the rally and potential breakout.
 Following the SoS Bar we see a successful Sign of Strength (SoS) as prices are able to close above the top of the trading range. Following this there is a
Backing Up Action (BU) on decreasing volume with several demand tails. This would indicate the CO is not selling significant amounts of shares at these
levels, if any. Of course, there is likely to be minor profit taking by several Institutions and weak hands.
 After the BU we see a successful reversal as the share price continues to make all-time highs.

Moving onto the second structure, which is Apple's distribution trading range in 2015, below are the key differences to note (it might be worth printing off
the charts to compare side by side):

 The structure begins with a climatic run on increasing spread into the Buying Climax area (BCLX).
 There is consistent selling into the Automatic Reaction (AR) as can be seen by the sustained high-volume signature, meaning the CO is selling on the way
down too.
 The first Upthrust (UT) in Phase B moves the share price above the BCLX and is followed by the largest volume signature so far within the trading range
(TR). There is a synchronicity in this effort and result as the price closes significantly lower. We could also refer to this as 'selling off the top' - i.e., the CO is
distributing shares at the top of the trading range.
 Note the Sign of Weakness (SoW) in the latter part of Phase B and the increasing spread and volume to the downside, this would suggest the CO is
selling. The resulting rally to the Last Point of Supply (LPSY) in Phase C is on comparatively weak volume to the SoW.
 Price fails to close above the BCLX high in Phase C and we see another 'selling off the top' action by the CO as they distribute remaining shares before the
eventual Major SoW (MJR SoW) in Phase D and Phase E.

What are the key points to take away from this post?

 When labelling your trading ranges see if you can identify the presence (footprints) of the CO. Are they 'selling off the top', or accumulating at the bottom
of the TR? Drawing coloured channels may visually make this easier for you.
 Looking at specific candlesticks and the associated volume bar will help you determine distribution and accumulation characteristics. At the bottom of the
trading range do you see downward movement halted on increased effort, perhaps demand tails are shown too and this would indicate demand is able to
absorb the available supply. Or, when the price reaches the top of the trading range does the price action and volume indicate an urgent need to sell by the
CO?

Follow the Footsteps,

Jack Corsellis