What’s been happening

1 - In the middle of November 2021 the following ultra high volume bar appeared on the weekly chart with the SOW 121 indicator appearing. This indicated that supply was present and sellers were beginning to take profits from earlier buying, which is what caused the supply to enter the market.

2 - In the first week of February 2022 this high volume bar appeared on the weekly chart with the SOW 26 indicator box. This appeared just after weakness had been seen on previous bars and confirmed the selling that was taking place.

This signalled the stock’s impending decline for the following reasons:
• The volume is the highest seen for many months
• The range or spread is the widest seen for nearly a year – it’s a very wide spread bar
• The bar closes in the middle

The next week the stock dropped from £2900 to £2650. Then there was a false breakout because the market maker was trying to hold it up but the professionals have already sold so there’s no demand.

3 - In the last week of March 2022 the confirmation low volume bar with the SOW 145 No Demand indicator appeared. No Demand is a very common indicator to appear after selling has taken place in the background. This is why we ask you to look for the weakness in the background to confirm that the sellers have taken control. When the indicator appears there is now no interest from the professional sellers who have already sold.

After it apears you want to wait for the next sign of strength to appear to confirm that buyers are trying to come back in on lower prices.

4 - In the middle of June 2022 the Federal Reserve FOMC announcement of the largest interest rate hike since 1994 only exacerbated the weakness on the Nasdaq Composite and after the announcement it continued to freefall with the weakness in the background.

Gavin’s strategy with this stock

Background:investment or long-term position, traded it on and off over a 20-year period

Why he likes it:Well-known stock, very liquid, trades on the Nasdaq, innovative company always developing new things, moves very quickly on good or bad news

What he did:  He shorted the stock as well as buying a PUT option on the instrument.

Summary

In a downtrending market you get increasing volume on down bars (price bar that closes lower than the price of the previous bar and you get decreasing volume on up bars as the market continues to run out of energy. 

When the market is trending down, check the volume thermometer, the medium-term trending tool and the short-term trending tool and make sure they are all red in multiple time frames for total trend alignment.

Here we find one of the apparent contradictions in Wyckoff VSA because we ask you to look for weakness appearing on massive-volume up bars and confirm it on low-volume up bars. It confuses people but it’s true because selling has happened in the background and the market maker tries to hold the price up but there is now no interest from the professional sellers. These patterns repeat themselves consistently year on year because the market is moved on supply and demand.