Wyckoff's market cycle theory, there are four phases of the market:
Accumulation.
Markup - an upward trending movement.
Distribution.
Markdown - a downward movement.
Each phase determines when large players set the market direction.
Each phase consists of five cycles based on the psychological reaction of retail investors to supply and demand for an asset. For example, in the case of accumulation, when an asset tends to stabilize and rise after a sharp price drop, the five cycles include:
Selling Climax (SC) - a strong downward movement that occurs when the market reaches oversold conditions, often accompanied by high trading volume and large candlesticks.
Secondary Test (ST) - a downward movement that occurs after the selling climax. A successful secondary test is usually a sign that the market is ready for further growth.
Spring - a phase that sometimes occurs at the end of the Secondary Test. It includes "Springs" and "Shakeouts," which are types of price movements that allow large players to check for supply and acquire additional assets at favorable prices.
Last Point of Support (LPS) - a price level where the market stops after the selling climax. LPS often serves as a strong support level for future growth.
Sign of Strength (SOS) - a price increase with higher trading volume that occurs after the spring. SOS consists of three consecutive candlesticks forming a "V" shape. It is a strong buy signal.
Accumulation.
Markup - an upward trending movement.
Distribution.
Markdown - a downward movement.
Each phase determines when large players set the market direction.
Each phase consists of five cycles based on the psychological reaction of retail investors to supply and demand for an asset. For example, in the case of accumulation, when an asset tends to stabilize and rise after a sharp price drop, the five cycles include:
Selling Climax (SC) - a strong downward movement that occurs when the market reaches oversold conditions, often accompanied by high trading volume and large candlesticks.
Secondary Test (ST) - a downward movement that occurs after the selling climax. A successful secondary test is usually a sign that the market is ready for further growth.
Spring - a phase that sometimes occurs at the end of the Secondary Test. It includes "Springs" and "Shakeouts," which are types of price movements that allow large players to check for supply and acquire additional assets at favorable prices.
Last Point of Support (LPS) - a price level where the market stops after the selling climax. LPS often serves as a strong support level for future growth.
Sign of Strength (SOS) - a price increase with higher trading volume that occurs after the spring. SOS consists of three consecutive candlesticks forming a "V" shape. It is a strong buy signal.