Accumulation and Distribution Patterns Part 2

Accumulation and Distribution Patterns Part 2

The second chapter of the Accumulation and Distribution Patterns theory

4:49 – DISTRIBUTION PATTERNS

• Occur after an extended uptrend when price reaches a significant level of resistance.
• Important difference: Distribution normally occurs much quicker than Accumulation.

9:04 – 5 PHASES DISTRIBUTION PATTERNS

1. Phase A
2. Phase B
3. Phase C
4. Phase D
5. Phase E

9:14 - PHASE A

• PSY = Preliminary Supply
  • After an extended uptrend this is where ‘smart’ money begins to take profit on their longs and building shorts positions.
• BC = Buying Climax
  • Public get euphoric and keeps buying => generally in big profit, believing trading is easy money.
  • Smart money is using this interest to fill large sell orders.
• AR = Automatic Reaction
  • Sell-off fuelled by late longs getting rekt.
  • Generally with OI decreases or stays level.
  • The bottom of this selloff gives us the range low.

14:59 - PHASE B

• ST = Secondary test
  • Price retest the area of the BC to test the demand/supply at those prices.
  • Rally has to be on low volume and OI decreasing and each sell off to be on higher volume.
  • You don’t want to see more demand coming in.
• SOW = Sign of Weakness
  • Sell off which normally contains an increase in volume.
  • According to Daniel his statistics price doesn’t always has to take the low but can make a HL.
• UT : Upthrust
  • Rally from the range low to the range high.
  • Ending in a SFP or Failed Auction of the range high above the BC.
  • IF we breakout with increased volume and delta breaking above the BC we have to change bias and not take a short.

21:40 - PHASE C

• UTAD = Upthrust After Distribution.
  • Last and final move above the range high => stop out all early shorts.
  • Should occur with low volume and decreases in OI.
  • 42 % of the time we get this final push on BTC with an increase in volume and OI, creating trapped longs as the selloff continues.
  • UTAD will not always occur.
• TEST
  • A move back into the range with a test of the range high => resistance found.
  • The test will not always occur.

28:50 - PHASE D

• LPS = Last Point of Supply.
  • The last point where there was a major S/R flip.
  • Losing this strong horizontal resistance as support is a major bearish factor confirming the high is in.
  • Once lost this point should not be reclaimed again.
• MSOW = Major Sign of Weakness.
  • Final loss of the range low, 58 % of the time crashes with no retest.
  • If we do get a retest of the old range, it should not reclaim the then old range VAL.
  • Selloff should be on large volume.

PHASE E

• After the MSOW we get a large drop to the downside.