Here’s a follow-up to my earlier post on trading the Wyckoff Trading Method off the 4-hour chart.
Although the Wyckoff Trading Method does not integrate the various time frames in its analysis (it uses the P & F Chart for the higher time period), the weekly, monthly and other higher time periods can shed a lot of light on the anticipated next move of the market. It was due to the higher time periods (weekly and monthly) that we were looking for the weakness seen there to continue to materialize on the lower time frames (daily & 240-minute). And, it did.
A few days ago, we were looking for volatility to expand, the market to fall and run down to retest the recent trading range lows (2410 level), and perhaps go lower.
On Monday, the market rallied a little higher than expected to 2447.50, then fell after upthrusting recent daily highs at around 2440. The market tested the trading range lows and then rallied smartly up.
This is how volatility works. The narrow ranges of the previous week open up into good trading as volatility goes from contraction to expansion.
Keep in mind that volatility does not provide direction, but it does provide an indication of good trading ahead. This is the primary reason why I track it.
After reaching the supply line at about 2445, the market fell swiftly making new lows (2402.75).
Today so far, the market found resistance at the 2428 area.
Wyckoff Trading Method For Next Week:
Pay careful attention to how the weekly chart closes this week. Both the weekly and monthly are revealing weakness. We anticipate the weekly closing the week on the downside.
Early next week, we would anticipate the 2430 area to provide resistance. Pushing through this area could lead to a test of recent highs and negate my current bias to the downside. Holding the 2430 level, if tested, would then likely produce lower prices. Look for the 2390 area to provide at least initial support if price gets there in the next couple of weeks or so.