Discover the Event that signals the First Entry of Smart Money into the Market
This is the first Wyckoff method event that appears to initiate the Phase A stop of the previous trend.
In the case of accumulation schemes, it is called Preliminary Support (PS), which together with the Selling Climax (SC), the Automatic Rally (AR) and the Secondary Test (ST) produces the change in character with which it makes the price evolve from a downward trend environment to a lateralisation environment.
In the example of the distribution structures it is called Preliminary Supply (PSY), which in conjunction with the Buying Climax (BC), the Automatic Reaction (AR) and the Secondary Test (ST), puts an end to Phase A, stopping the previous upward trend and initiating Phase B, the construction of the cause.
As we know, the processes of accumulation and distribution require time and on rare occasions the price will develop a hypodermic scheme visually leaving a V turn. This accumulation process begins with this first event, with Preliminary Support and Preliminary Supply.
Before this event takes place, the market will find itself in a clear trend. At some point, the price will reach a level attractive enough for large traders that they will begin to participate more aggressively.
The observation of this event on the chart is generally misinterpreted as it is not necessarily necessary to observe a bearish bar with increased volume and expansion in the ranges.
It can also be seen on a set of bars with a relatively narrower range and a constant high volume during all of them; or even on a single bar with high volume and a large wick at the bottom. These representations in the end denote the same thing: the first relevant entry of the big operators.
Read morePreliminary Stopping