Wyckoff Take III: the floor gives way, back to where we started
Welcome to Phase D!
CME futures opened on the black line, and we pretty quickly dumped to the bottom of the trading range thereafter. This set us up for an obvious SOW (sign of weakness) dropping below trading range. So my previous sell zone on the way to a last 9K bulltrap turned out to be too optimistic, and any rebound we get now, after dumping 4 solid times from the UTAD ($600 down), is going to run out of steam. Leveraged longs have been liquidated too many times, bulls’ stomachs (and their wallets) have been hit too hard to sustain another rally. We should get back up into the Trading Range for one last bulltrap - but remain in the lower half at best. Too many bears salivating at selling 9K one last time, which ensures it won't happen.
In normal circumstances, after dropping out of a rising channel like we just did, I'd be fairly sure we would rise to kiss the underside of that channel floor -- but the only way I can see that happening is with a long wick up from this 8600 local bottom, not from a rally that climbs with hope to the edge.
Best hope for this rebound is to hit our head on the 0.382 fib with a quick spike - then pullback and curve up to try again - only to fail and form a bearish double-top. Then it’s on to Phase E and more dumps.
TP1 zone was hit $8520, landing on the median of this bear pitchfork perfectly, and also the level of our AR (automatic reaction) spike after the Buying Climax.
I have revised my dump path and targets, this will be more severe and straight down 5 impulse wave, I don't sense any hesitation in the bears or enough courage from bulls to "pause" the selloff bounces for reconsideration on the way down. TP2 and TP3 are now $8200 and $7800 (right back at the
previous stiff ceiling before the pump)
Props to @Divineraze who caught the highest possible short in this distribution range, $9200 the tip of the UTAD!
CME futures opened on the black line, and we pretty quickly dumped to the bottom of the trading range thereafter. This set us up for an obvious SOW (sign of weakness) dropping below trading range. So my previous sell zone on the way to a last 9K bulltrap turned out to be too optimistic, and any rebound we get now, after dumping 4 solid times from the UTAD ($600 down), is going to run out of steam. Leveraged longs have been liquidated too many times, bulls’ stomachs (and their wallets) have been hit too hard to sustain another rally. We should get back up into the Trading Range for one last bulltrap - but remain in the lower half at best. Too many bears salivating at selling 9K one last time, which ensures it won't happen.
In normal circumstances, after dropping out of a rising channel like we just did, I'd be fairly sure we would rise to kiss the underside of that channel floor -- but the only way I can see that happening is with a long wick up from this 8600 local bottom, not from a rally that climbs with hope to the edge.
Best hope for this rebound is to hit our head on the 0.382 fib with a quick spike - then pullback and curve up to try again - only to fail and form a bearish double-top. Then it’s on to Phase E and more dumps.
TP1 zone was hit $8520, landing on the median of this bear pitchfork perfectly, and also the level of our AR (automatic reaction) spike after the Buying Climax.
I have revised my dump path and targets, this will be more severe and straight down 5 impulse wave, I don't sense any hesitation in the bears or enough courage from bulls to "pause" the selloff bounces for reconsideration on the way down. TP2 and TP3 are now $8200 and $7800 (right back at the
previous stiff ceiling before the pump)
Props to @Divineraze who caught the highest possible short in this distribution range, $9200 the tip of the UTAD!
Trade active:
4H simplified view. The head of Pump the Magic Dragon is clearly visible, but this is one "bullflag" that does *not* resolve upwards 😉
Trade active:
rally out of the SOW came as expected, and the 0.382 fib stopped our momentum, as I mentioned earlier would be overhead resistance. Added to short $8872, will continue adding with every push up here, as this is the last best position I expect to see. I want my shorts filled by $8900, because I can't count on bulltrap to get us higher than the last selloff point, and $9000 would be too juicy to hope for.
Trade active:
close up on last chance for highest short position -- max I would expect is 8920 on a wave 5 reach. After that, it's dumpsville.
Comment:
We're about to have a $1000 "markdown" strong impulse run from here to $7800
Trade active:
Wave 4 corrected to 8750, and now we're starting the climb, should be about one more hour
Trade active:
shorts full at 8940, let the dumping begin
Comment:
today's homework for Phase D - "After testing support on a SOW, a feeble rally on narrow spread shows that the market is having considerable difficulty advancing. This inability to rally may be due to weak demand, substantial supply or both. LPSYs represent exhaustion of demand and the last waves of large operators’ distribution before markdown begins in earnest."
Trade active:
4H view following the pink zig zags perfectly, extended the lower leg to my expected target bottom
Trade closed: stop reached:
Pump whales pushed us up through top of correction channel, invalidating current scenario. Thankfully stops were set high and sufficient buffer to not be liquidated when market moves against projections. Going to see where bullish impulse takes us before setting new targets. Trying to short the breakout is just guessing, need structures define before that's safe again.
Comment:
Closed shorts, we're seeing the exact same kind of price action from whales as previous pushes, so I'm not about to fight that momentum. Taking a loss just $100 above my shorts price is completely worth it. Muuuuuuuuch easier to swallow a 1.2% hit than get stuck upside down in a bad position!
Trading lesson confirmed -- any leverage you use **must** be conservative enough to survive the price action moving totally against you. Set stops high enough to not get caught by fakeouts and whiplash, but tight enough to be caught by valid market movement before a 1% loss turns much worse!
Trading lesson confirmed -- any leverage you use **must** be conservative enough to survive the price action moving totally against you. Set stops high enough to not get caught by fakeouts and whiplash, but tight enough to be caught by valid market movement before a 1% loss turns much worse!
Trade closed: stop reached:
This breakout invalidates my corrective pitchfork and any assumptions about new lows from right here. We may ***still be inside a Wyckoff distribution range*** but my assumptions about the limits of the range and the timing of the selloffs were clearly wrong. The TP1 turned out to be a great long opportunity, and now defines the new bottom edge of the rising white channel. We are perched on the channel median, in position to grind upwards. This may have been just wave 1 of the new impulse move, so prepare for bigger movement next leg up!
Comment:
If we are still inside a Wyckoff distribution range, but with a longer timeframe (likely with selloffs coming after halving) --- then we were *NOT* at Phase D as I assumed earlier but are actually moving from Phase B to Phase C
school.stockcha...ts.com/doku.php?id=market_...
school.stockcha...ts.com/doku.php?id=market_...
Comment:
The bull floor has always been the final confirmation of whether we're going deep retrace. My Wyckoff model assumed we were *about* to plummet through it -- but the structures were invalidated and without breaking that floor, all projected targets are off the table. If you can't stomach a short in the sideways, because you're too leveraged, you're doing it wrong. Wait for breakout confirmation if you want safety. Maximum profit from *anticipating* a breakdown means there is risk!
Comment:
Next chapter:
![Shock, followed by Awe [follow the white rabbit fractal]](https://s3.tradingview.com/c/CZXkRyQH_big.png)
The *actual* rally started all the way back at 6750, and for most of it was pretty natural movement. Then we got crazy stuck underneath 7780 and went sideways, but all the while crawling up the bull channel median. then we suddenly popped with whiplash spike and whales drove us with relentless fat bids.
NOTE THE FIBS for this entire run, and how wiping out the final price pump *only retraces the whole rally back to 0.618! Doesn't seem so extreme now, does it? 😉