PSY (Preliminary Support): During the PSY sub-phase, the price action tends to fluctuate in a tight range, often forming a base or a bottom. This phase usually occurs after a significant increase in price, where traders and investors are looking for a potential reversal in the trend. To identify the PSY sub-phase, look for a consolidation period where the price remains range-bound with little volatility. Additionally, trading volume should be low during this phase as traders and investors are unsure of the direction of the market. During this sub-phase, the smart money and institutions may start accumulating positions in the market, taking advantage of the low prices. As such, a breakout above the consolidation range can signal the end of the PSY sub-phase and the beginning of the BCLMX sub-phase, where the market experiences a significant increase in trading volume and positive price momentum.
BCLMX (Buying Climax): This sub-phase occurs when the market reaches a peak, often breaking through a key resistance level. The BCLMX is typically accompanied by high trading volume and positive price momentum as traders and investors rush to buy into the market. However, smart money and institutions often use this as an opportunity to start offloading their positions, causing the price to reverse soon after. To identify the BCLMX sub-phase look for a sharp spike in trading volume, a breakout above a key resistance level, and a subsequent reversal in price action.
AR (Automatic Rally Down): During the AR phase, the market experiences a sharp and fast move down in price, which retraces some of the gains from the Buying Climax (BCLMX). This move is often accompanied by high trading volume and positive price momentum. To identify the AR, look for a rapid price decline after the BCLMX, often in the form of a long red candlestick or a series of red candlesticks on a chart. The decline should occur on higher trading volume than the previous candles. The AR often retraces a significant portion of the gains from the BCLMX, but it does not typically break through the previous low established during the PSY.
ST (Secondary Test): During the ST phase, the market will typically retest the resistance level that was established during the BCLMX. The ST phase can provide valuable information about the strength of the market. If the ST fails to break through the resistance level, it can confirm the validity of the resistance level and signal a potential trend reversal. Conversely, if the ST breaks through the resistance level, it can signal continued strength in the market and potentially lead to higher prices. In terms of volume, the ST phase is often characterized by lower trading volume compared to the BCLMX and AR phases. This can indicate that there is less interest from market participants at this level, which can make it more difficult for prices to break through the resistance level.
SOW (Sign of Weakness): The SOW is a phase that can occur after the the Secondary Test (ST) and Last Point of Supply (LPSY) phase and indicates a significant downtrend. It's characterized by a sharp and sudden decline in price, often accompanied by high trading volume. During the SOW phase, price often breaks below key support levels, indicating a shift in market sentiment from bullish to bearish. You can identify these levels by analyzing the chart and identifying significant price zones where buyers have previously stepped in.
****SHAKEOUT: The shakeout phase typically happens before or after the UT (Upthrust). It is a period of market activity characterized by increased volatility and uncertainty. During this phase, there is a lot of buying and selling as traders try to take advantage of the market movement. The shakeout phase usually follows a accumulation phase, where smart money accumulates shares at lower prices. The smart money creates a range-bound market by buying low and selling high. During this phase, the price range is tight, and there is little volatility. In the shakeout phase, market participants test the support and resistance levels created during the accumulation phase. The price breaks through these levels, triggering stop-loss orders and causing panic selling. The smart money takes advantage of this situation by buying shares at lower prices. To identify the shakeout phase look for an increase in trading volume and a breakdown of support levels. The volume during the shakeout phase is usually higher than during the accumulation phase. You can also use the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) to identify the shakeout phase.
UT (Up Thrust): The UT phase is a false breakout above the resistance level established during the Buying Climax (BC) and/or Secondary Test (ST) phase. It's a trap set by smart money to lure in late buyers before starting a significant downtrend. The UT is often characterized by a sharp and fast move up in price on lower trading volume compared to the Buying Climax (BCLMX) phase. This lower volume indicates weak buying support and often precedes a sharp reversal to the downside.To identify the UT phase look for a spike in price that breaks above the previous high from the BCLMX phase but fails to sustain that level.
UTAD (Up thrust after Distribution): During the UTAD sub-phase, the market may experience a final push up in price that breaks through the key resistance level established during the distribution phase. However, this breakout is often short-lived, and the market quickly reverses direction, signaling a potential trend reversal. The breakout may also occur on lower than average trading volume, indicating that the buying pressure is not sustained. The reversal is often accompanied by an increase in trading volume and a decline in price momentum. Other indicators, such as an oversold relative strength index (RSI) and moving averages, can also provide additional confirmation of the UTAD sub-phase.
LPSY (Last point of supply): The LPSY sub-phase typically occurs after the UTAD sub-phase and signals the end of the distribution phase and the beginning of the markdown phase. During the LPSY sub-phase, the price attempts to rally, but it meets selling pressure from the smart money and institutions who are still distributing their holdings. This results in a lower high in price and a decline in trading volume. The LPSY is usually the last opportunity for the smart money to distribute their holdings before the markdown phase, where prices will experience a significant and sustained decline. To identify the LPSY sub-phase, look for a lower high in price on decreasing trading volume, often forming a descending triangle or a bearish flag pattern. Additionally, price action should show a series of lower highs and lower lows, indicating the shift in the trend from bullish to bearish.
BCLMX (Buying Climax): This sub-phase occurs when the market reaches a peak, often breaking through a key resistance level. The BCLMX is typically accompanied by high trading volume and positive price momentum as traders and investors rush to buy into the market. However, smart money and institutions often use this as an opportunity to start offloading their positions, causing the price to reverse soon after. To identify the BCLMX sub-phase look for a sharp spike in trading volume, a breakout above a key resistance level, and a subsequent reversal in price action.
AR (Automatic Rally Down): During the AR phase, the market experiences a sharp and fast move down in price, which retraces some of the gains from the Buying Climax (BCLMX). This move is often accompanied by high trading volume and positive price momentum. To identify the AR, look for a rapid price decline after the BCLMX, often in the form of a long red candlestick or a series of red candlesticks on a chart. The decline should occur on higher trading volume than the previous candles. The AR often retraces a significant portion of the gains from the BCLMX, but it does not typically break through the previous low established during the PSY.
ST (Secondary Test): During the ST phase, the market will typically retest the resistance level that was established during the BCLMX. The ST phase can provide valuable information about the strength of the market. If the ST fails to break through the resistance level, it can confirm the validity of the resistance level and signal a potential trend reversal. Conversely, if the ST breaks through the resistance level, it can signal continued strength in the market and potentially lead to higher prices. In terms of volume, the ST phase is often characterized by lower trading volume compared to the BCLMX and AR phases. This can indicate that there is less interest from market participants at this level, which can make it more difficult for prices to break through the resistance level.
SOW (Sign of Weakness): The SOW is a phase that can occur after the the Secondary Test (ST) and Last Point of Supply (LPSY) phase and indicates a significant downtrend. It's characterized by a sharp and sudden decline in price, often accompanied by high trading volume. During the SOW phase, price often breaks below key support levels, indicating a shift in market sentiment from bullish to bearish. You can identify these levels by analyzing the chart and identifying significant price zones where buyers have previously stepped in.
****SHAKEOUT: The shakeout phase typically happens before or after the UT (Upthrust). It is a period of market activity characterized by increased volatility and uncertainty. During this phase, there is a lot of buying and selling as traders try to take advantage of the market movement. The shakeout phase usually follows a accumulation phase, where smart money accumulates shares at lower prices. The smart money creates a range-bound market by buying low and selling high. During this phase, the price range is tight, and there is little volatility. In the shakeout phase, market participants test the support and resistance levels created during the accumulation phase. The price breaks through these levels, triggering stop-loss orders and causing panic selling. The smart money takes advantage of this situation by buying shares at lower prices. To identify the shakeout phase look for an increase in trading volume and a breakdown of support levels. The volume during the shakeout phase is usually higher than during the accumulation phase. You can also use the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) to identify the shakeout phase.
UT (Up Thrust): The UT phase is a false breakout above the resistance level established during the Buying Climax (BC) and/or Secondary Test (ST) phase. It's a trap set by smart money to lure in late buyers before starting a significant downtrend. The UT is often characterized by a sharp and fast move up in price on lower trading volume compared to the Buying Climax (BCLMX) phase. This lower volume indicates weak buying support and often precedes a sharp reversal to the downside.To identify the UT phase look for a spike in price that breaks above the previous high from the BCLMX phase but fails to sustain that level.
UTAD (Up thrust after Distribution): During the UTAD sub-phase, the market may experience a final push up in price that breaks through the key resistance level established during the distribution phase. However, this breakout is often short-lived, and the market quickly reverses direction, signaling a potential trend reversal. The breakout may also occur on lower than average trading volume, indicating that the buying pressure is not sustained. The reversal is often accompanied by an increase in trading volume and a decline in price momentum. Other indicators, such as an oversold relative strength index (RSI) and moving averages, can also provide additional confirmation of the UTAD sub-phase.
LPSY (Last point of supply): The LPSY sub-phase typically occurs after the UTAD sub-phase and signals the end of the distribution phase and the beginning of the markdown phase. During the LPSY sub-phase, the price attempts to rally, but it meets selling pressure from the smart money and institutions who are still distributing their holdings. This results in a lower high in price and a decline in trading volume. The LPSY is usually the last opportunity for the smart money to distribute their holdings before the markdown phase, where prices will experience a significant and sustained decline. To identify the LPSY sub-phase, look for a lower high in price on decreasing trading volume, often forming a descending triangle or a bearish flag pattern. Additionally, price action should show a series of lower highs and lower lows, indicating the shift in the trend from bullish to bearish.
Comment:
Big economic new is typical during a shakeout phase. As you can see with the release of the recent Fed Interest Rate decision, price erratically moved, taking out buyers and sellers stop losses and confusing traders. Weak hands will usually fold here, and it is best not to trade in these areas. I am staying in my long trade as there is a imbalance around $26,260, that I believe needs to be recovered. If price reaches this area, it could go higher. But I will begin taking profits at $26,260.
