Maybe this near "full-stack" technical analysis using Wyckoff and Elliot Theory along with relevant indicators such as Moving Average and Cumulative Volume Delta (CVD) will puzzled some of the traders who used to have a simpler analysis on the market. But to those who curious this is something that is really interesting to know. The chart above is showing us how the two theories can be complementary to each other.
Lets analyze the chart above of BTC/USD in 4h timeframe from left to right comprehensively based on the Wyckoff phases of the 2nd accumulation model.
Phase A:
During the early November of 2022, BTC was under heavy sell-off after Binance dumping hard on FTX where the price crossunder 200 EMA and 100 SMA. The waterfall crash of BTC was printing a 5-wave of zigzag wave. We can see that the lowest point of wave 3 shows the highest selling volume in a single 4h HA candle and also act as Preliminary Support (PS) where then I put the 1st support line there. The sell-off continue to form the last zigzag wave where we can see multiple high selling volume bars and made a very deep negative cumulative volume delta in which it represents as Selling Climax (SC) in Wyckoff. A massive buying then occurred which immediately push the price back up to the wave 4 of zigzag wave area, which in Wyckoff we can name it as Automatic Rally (AR). By using these to extreme high of AR and low of SC we can draw a rectangle to have a better view on the consolidation area. After the dramatic push and pull of price, the market volume gradually decreasing followed by price having a contracting highs and lows, forming a classic contracting triangle, where we can see some of the lows are respecting the 2nd support line.
Phase B:
The end of contracting triangle followed by another zigzag wave of smaller degree, where it breaks the 2nd support line and creating the second lowest low which we can name it as Secondary Test (ST) that the selling volume is much smaller hence also creating a shallower negative CVD. Price then go up back to the 2nd support line and able to reach back to 100 SMA although still not able to candle close it on the first attempt but eventually able to close it on the second attempt. Price then going on a small rally creating an ascending channel of 5-wave leading diagonal and able to close above the 1st support line, the 200 EMA and even able to make a higher high. But the volume is still not enough to make a change of character breakout.
Phase C:
The mini rally is identified as the 1st wave of primary impulsive wave, so the reactionary move where the price breaking down the ascending channel, the 1st support line, 200 EMA and 100 SMA and going back down to the 2nd support line can be identified as wave 2. Most of phase C volume going under the Volume Mean Level, it is the lowest volume of all of the phases. Combination of multiple minor corrective waves creating a WXY wave and we can see the 2nd support line is holding the price quite well where it represents as Last Point of Support (LPS).
Phase D:
The volume and price gradually moving up and able to close above 100 SMA and 200 EMA, then going higher to 1st support line with higher volume to a point of Show of Strength (SOS) where a change of character breakout is formed and also breaking out from the box or the whole Trending Range. Phase D is the perfect time to make an entry. The identifying of the first two waves of an impulsive move also creating a high confidence that we are entering the wave 3 or we can also call it as the money wave.
Phase E:
Just enjoy the rally
This whole chart actually representing a very textbook Wyckoff Theory of the 2nd Accumulation Model and we can also see in this chart the transition between corrective wave and motive wave of Elliot Wave Theory. In Phase A and the early Phase B, the corrective wave is on its end, where the rest of the Phase B to E we can see how the scaffoldings of early structure of an impulsive move is constructed. making a consolidating of accumulation before going a strong trending move. Wyckoff explains this transition of corrective wave to a motive wave in a beautiful way and surely we can also use it on the transition of motive wave to a corrective wave using the distribution model. This is just one variation where we can use Elliot and Wyckoff hand in hand in order to have a much better technical analysis on the market and maybe this combined analysis that I made on the above chart could be the best scenario to apply for both theories.
Hopefully this helps to educate for anyone of you who read this post, thank you
Lets analyze the chart above of BTC/USD in 4h timeframe from left to right comprehensively based on the Wyckoff phases of the 2nd accumulation model.
Phase A:
During the early November of 2022, BTC was under heavy sell-off after Binance dumping hard on FTX where the price crossunder 200 EMA and 100 SMA. The waterfall crash of BTC was printing a 5-wave of zigzag wave. We can see that the lowest point of wave 3 shows the highest selling volume in a single 4h HA candle and also act as Preliminary Support (PS) where then I put the 1st support line there. The sell-off continue to form the last zigzag wave where we can see multiple high selling volume bars and made a very deep negative cumulative volume delta in which it represents as Selling Climax (SC) in Wyckoff. A massive buying then occurred which immediately push the price back up to the wave 4 of zigzag wave area, which in Wyckoff we can name it as Automatic Rally (AR). By using these to extreme high of AR and low of SC we can draw a rectangle to have a better view on the consolidation area. After the dramatic push and pull of price, the market volume gradually decreasing followed by price having a contracting highs and lows, forming a classic contracting triangle, where we can see some of the lows are respecting the 2nd support line.
Phase B:
The end of contracting triangle followed by another zigzag wave of smaller degree, where it breaks the 2nd support line and creating the second lowest low which we can name it as Secondary Test (ST) that the selling volume is much smaller hence also creating a shallower negative CVD. Price then go up back to the 2nd support line and able to reach back to 100 SMA although still not able to candle close it on the first attempt but eventually able to close it on the second attempt. Price then going on a small rally creating an ascending channel of 5-wave leading diagonal and able to close above the 1st support line, the 200 EMA and even able to make a higher high. But the volume is still not enough to make a change of character breakout.
Phase C:
The mini rally is identified as the 1st wave of primary impulsive wave, so the reactionary move where the price breaking down the ascending channel, the 1st support line, 200 EMA and 100 SMA and going back down to the 2nd support line can be identified as wave 2. Most of phase C volume going under the Volume Mean Level, it is the lowest volume of all of the phases. Combination of multiple minor corrective waves creating a WXY wave and we can see the 2nd support line is holding the price quite well where it represents as Last Point of Support (LPS).
Phase D:
The volume and price gradually moving up and able to close above 100 SMA and 200 EMA, then going higher to 1st support line with higher volume to a point of Show of Strength (SOS) where a change of character breakout is formed and also breaking out from the box or the whole Trending Range. Phase D is the perfect time to make an entry. The identifying of the first two waves of an impulsive move also creating a high confidence that we are entering the wave 3 or we can also call it as the money wave.
Phase E:
Just enjoy the rally
This whole chart actually representing a very textbook Wyckoff Theory of the 2nd Accumulation Model and we can also see in this chart the transition between corrective wave and motive wave of Elliot Wave Theory. In Phase A and the early Phase B, the corrective wave is on its end, where the rest of the Phase B to E we can see how the scaffoldings of early structure of an impulsive move is constructed. making a consolidating of accumulation before going a strong trending move. Wyckoff explains this transition of corrective wave to a motive wave in a beautiful way and surely we can also use it on the transition of motive wave to a corrective wave using the distribution model. This is just one variation where we can use Elliot and Wyckoff hand in hand in order to have a much better technical analysis on the market and maybe this combined analysis that I made on the above chart could be the best scenario to apply for both theories.
Hopefully this helps to educate for anyone of you who read this post, thank you