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Bar by Bar

The document describes 10 different scenarios involving two consecutive trading days ("day a" and "day b"). Each scenario provides details on the price range and close for each day, and analyzes what the market behavior indicates about likely future price movement. In general, scenarios where day b closes lower or fails to surpass prior highs suggest further weakness, while scenarios where day b erases prior losses or sees strong rallies indicate potential strength. The last scenario represents the most ambiguous situation with little directional signal.

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461 views5 pages

Bar by Bar

The document describes 10 different scenarios involving two consecutive trading days ("day a" and "day b"). Each scenario provides details on the price range and close for each day, and analyzes what the market behavior indicates about likely future price movement. In general, scenarios where day b closes lower or fails to surpass prior highs suggest further weakness, while scenarios where day b erases prior losses or sees strong rallies indicate potential strength. The last scenario represents the most ambiguous situation with little directional signal.

Uploaded by

puneeth_ss3804
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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The size of bar a reflects ease of downward movement

and it describes what is meant by a large bar Since the close is in the
middle of the range, we assume buying emerged at the lower levels of the
day. On day b, the range narrows, thus reflecting no ease of downward
movement.The low of the day is only slightly below the low of day a as
the thrust shortens. Finally, the close is again midrange, indicating that
buyers were present at lower levels.
For two consecutive days, prices closed in midrange and the downward
thrust shortened. The market is displaying an unwillingness to move
lower.
Therefore, expect an attempt to rally on day c. If the rally exceeds the
top of day b, and prices then reverse below the low of day b, expect
further weakness

There is ease of downward movement on day a, and the


close at the low of the range reflects a total victory by the sellers. The
narrowrange on day b is more difficult to interpret. Does it mean the
sellers were unable to make much headway? Does it mean the buyers
made a stand and took all of the sellers offers? The position of the close
gives us a better clue. Since the close is on the low of day b and below
the low of day a, we infer the sellers are still in control. If the close had
been at the high of the range, the outcome would have tilted more in
favor of the bulls.
Given the position of the close on day b we tentatively expect further
weakness on day c. If there is little or no downward followthrough on
day c and prices rally above the high of day b, larger gains are likely.

Day a personifies weakness: ease of downward movement

and a close near the low of the range. A small gap lower occurs on dayb,
but the range narrows. The close on day b is near the low and below the
previous days close and low.
Although there was no ease of downward movement on day b, all of
the trading took place below the previous days low. There was no ability
to rally. In addition, the day ended with a close on the low. The sellers
remain in control so expect lower prices. Should price reverse above the
close of day aespecially after falling below the low of day ba
turnaround of some unknown degree would occur. This twoday
configuration is more bearish than #1 or #2.

The price range is narrower on day a, and the close is


near the low of the range. Thus, the sellers were seemingly in control at
the end of day a. On day b, price falls below the previous days low
and reverses to close above the previous days high.
The reversal action on day b is the classic key reversal. It tells us there
was no further selling interest below the previous low. The lack of selling
pressure created a vacuum and the buyers stepped in. Much of this
buying may have been short covering. But the strong close above the
previous days high suggests support has at least temporarily formed. One
would expect upward followthrough on day c. A reversal and close
below the low of day b would be very bearish. The low of day b can be
used as a stop point on any new long

There is ease of downward movement on day a and the close is


near the low of the range. On day b, a rally above the previous
days high fails to hold and prices fall back to close near the low.
The closes on the
two days are just about equal. Would you think the clustering of
these two
closes reflects strong support?
Because the rally on day b failed to hold and 99 percent of the gains

were erased on the close, we would expect further weakness on day c.


Here, we have two consecutive days of holding action, but the position of
the closes reflects weakness and an inability to sustain a rally. No, the
clustering of these two closes would not normally be viewed as strong
support. It looks more like temporary support in a downtrend.

Although there is ease of downward movement on day a, the


position of the close is well off the low and much nearer the high.
Day b is one of those inscrutable, narrowrange bars where prices barely
budge from the previous days close.
The position of the close on day a indicates buying appeared at the
lower level of the range. It has a bullish connotation. Day b shows a
total lack of movement. In the Wyckoff lexicon, this kind of day is referred
to as a hinge from which a larger swing may occur. In the context of
these two days, the hinge says prices have come to dead center. It alone
does not reveal direction, but it tells us to be very alert on day c for
something decisive.

As in the preceding example, there is ease of downward movement on day


a, and the close is near the high of the range. Day b,however,contains
a large gap between its high and the close of the previous day. The actual
range is narrow, and price closes near the low and below the previous
days low.
Although the actual range on day b is narrow, the true range
encompassing the gapis quite large. Here, we see all of the gains made
on day acompletely erased. The gap probably stems from bearish
overnight events or a preopening report. Notice how little movement
occurred after the gap opening. This reflects a bearish condition as the
buyers were unwilling to make any attempt to start a move on the upside.

Nor were the sellers eager to take profits. The selling pressure and lack of
buying kept prices depressed throughout the session. Expect further
weakness on day c.

Here we have the reverse of #7. We see ease of downward


movement on day a, with a weak close near the low of the range.
On day b, price gaps higher and rallies above the high of the previous
day; however, the close is on the low of the actual range and slightly
below the high of day a.
The true range of day b begins from the close of day a. Some
unexpectedly bullish news caused such a gap higher. The action on day
b is decidedly bullish as it erases all of the previous days weakness.
Except for the position of the close, it rates in bullishness next to the key
reversal in #4. One might be concerned about the weak close on day
b. But it is not weak when we consider the true range.

Both days a and b have narrow ranges and close near their lows. On
day b, price opens below the low of the previous day and stays below its
low throughout the entire session.
We see no ease of downward movement on either day. These two price
bars reflect a steadily eroding market in which the buyers are backing
away.
The volume is probably low to moderate. No wild, flailing, climactic action
here. Instead, we have two slow, steady, unobtrusive down days (slip
sliding away) with the few upticks most likely caused by light short
covering or a few foolhardy bottom pickers. Expect further weakness on
day c.

The range of day a does not reflect great ease of downward movement
and price closes in the middle. On day b, price rallies with some what
greater ease but closes well off the high of the day, below the high of day
a and only a fraction higher.
The midrange close on day a and the lack of a wide price spread
suggest
buying is present. At the end of day a, a rally would have seemed likely.
A robust rally occurs on day b, but the position of the close indicates
selling was encountered. The close of day b marks the midpoint of the
two days trading. We can assume trading has been brisk, possibly
volatile; however, little upward progress is achieved. The sellers still
appear in control; therefore, expect weakness on day c. Depending on
where day c opens, the information here could quickly fit into an equally
bullish or bearish story. Inmany ways, #10 represents the most ambiguous
situation

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