Tape Reading and Active Trading

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A COURSE OF INSTRUCTION

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IN TAPE READING AND ACTIVE TRADING j . ^

C O P Y R I G H T 1932

R ICHARD

D. WYCKOFF, ON E

Niw York.

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TABLEOF CONTENTS P -“

~.

1

1

INTRODUCTION

2

2 2

1 3 4-A

JUDGINGTHE IMMEDIATETRl#fD Buyingand SellingWaves Wave Chart of the Leaders

2-A

1

BUYINGAND SELLINGWAVES - PART II

5

1

3

1-A

HOW TO LINK THE WAVE CHARTWITH THE STOCK IN ‘WHICHYOU TRADING A VerticalLine Chart and ContinuousLine Chart

4 4

1 3-A

TRM)INGAREASAND HOW TO PROFITBY THNM TradingArea of AuburnMotors

5 5

1 8-A

THE TAPE READINGCHART Tape ReadingChart of J. 1. Case

6

1

iWE

HOW TO SPOT THE BUYING AND SELLING POINTS WITHIN A SMALL FRACTION

(“

7

1

JUDGINGSTR$NGTHOR.W3AKNESS

8

1

HOWTO KEEP PERCENTiiGEIN YOUR FAVOR

9

1

TRADINGON INITIALACTIVITY

10

1

mGING

11

1

THE BEST STOCKSFOR ACTIVETRAI)lNG

12 12 12 12 12 1: 12 12 12 1$? 12 12 12 12 12

1 2 ~ 3 4 4 4 5 6 7 8 9 9

STOP ORDERSAND OTHERVITAL POINTS Jud@ng XQur Ftficimcy Tradingin UniformLots Dow-Jone$Averagefl Tradingon Paper Tradeat the Market Put a Time Limit cm Your Trades Qualifications of a SuccessfulSpeculator lhvmrAsk Advice Fallacyof Averaging CapitalRaquired How Prc)fits Accumulate Where to Trade Choiceot Brokers Studyyour Losses

10 11

THE MARKETBY TESTSAND RESPONSES

Copyright1934 by RichardD. Wyckoff,Inc.

SEC.

P.

12

12

Cs

1 1

w Cs Cs Cs Cs Cs

3 5 7 1?

PractiaePersistently CHARTSTUDIES

Amwriad Telephoneat Bottomof Reaction AmericanTelephoneat Top of Rally AlliedChmical at Bottomof Reaction Allied Chmicd at Top of ~ly J. 1. (laseat Bottomof Reaction AmericanCan Combinedwith Five Leaders

SUMMARYOFTHE RICHARD D. WUXOFF 00URSEIOFINSTRUCTIONIN TAPE READINGAND ACTIVE TRADING.

J@du Ction. section1.

Generalprimiples involvedin tradingto take advantageof the minor fluctuations. Basing judgmenton impartialanalysisof avai.lab~e factg insteadof ill advisedimDUJPeSa How to internrettam actio~and learn to make YO1.W OWll with a high degreeof accuracy.

&Q&3mn cknt d%$cidon~

How to constructend~terrm%

a Wave Chart.

The selectionof’stocksthat refli]ct .loadorshin and have LtYL o=Q~~~~ c CIIWAI. How to detectthe minor price surgesand estimatetheir significance. How to recognizethe symptomsof a reversalof the trend. UMiM the #Mlrt section3.

●

How to employthe barometricquality of the Wave Chartin judgingthe trend of the individualstockwhordnyou are trading. How to operatein harmonywith the Law of Supplyand Dwand.

Trading &QML% section4.

The general significanceof c,tradingarea and the exceptional tradingopportunities it may offer. How to judgewhethera stockin a tradingarea becomes b~~ ish OX’bearish. How to decidewhen to trade close to the dangerline with relativelysmallrisk.

Tane Reading gi&$.i&

~.

Correlationof price movement,volumeand time. How to interpretthe fractionalprice changesand the variationsin volumeduringminor fluctuations. The logical1imitatims of risk and readjustmentof stop QZ!@Xk How to recognizeconditionswhermlnderthe risk maY be 1Lmited to a $Mlaufr~ction.

cop~igllt1932 by RichardD. Wyckoff

--2-. and EQJFJdU

How to so~.tthe buyingand sellinglevelswithina small fraction.

Section6.

How the marketis _nun&y who COIlgoad the ~ a HoW to avoid over$tx How to WQ

MD Y@+lra

1

Eivinrinformatia~to those

the market. d what to do at the turningpoints.

Recognizingthe evidencesof technicalstrengthor weakness.

iiwmiml

Whet constitutesa normalrally or rco.ction, and why.

or

Section7. How you may @NelQn Your jUMment so thnt accumulatingsymptoms of strengthor weaknessbecomerecordsof subconsciousmemory rad resultingd~ciaons are V’htud.lY intuitivcl, How to ld.mi~, roducqand elhinatq the risk. How to Lnsur@Your PM’ its, How to developa tradingpolicywhereinrisks are consistent with probableprofits. The generalsignificanceof incrensedLctivitY. How to interpretchangesin the degreeof activity. S63ction 9. The imnortanc e of volume wxzes in tradingzonesand followingth$ formationof an apex. HOIJthe operatortests the technicalconditionof the market. section

10.

How the individualtradermay secure,withoutexpense,the benefit of the large operators tests of the market’sstrength. Lines of resistane e; how to recoznize them and profit o..ccordingly. How to observewhen the marketis in an overbou~htor oversold condition. How to recognize evidenceof manipul~tion. The significnncc of the market’sresponseto news items having the elementof surprise.

Best Stocks

How to selectthe best stocksfor fictive trading.

For Active

Trading, Section11.

Recognitionof changingleadership. The importanceof uverngeprice r:mge md flo:~tingsupply.

Copyright1932 by Ri.chmd D, Wyckoff

its relutionto

-3-

The advantage of familio.ritywith the chief characteristics of leadingj active issues. Use of Stop Orders. Section 12.

HOW and when to use stop orders. The scientific location and road.jus+,ment of stop orders. Substitutes for stop orders.

Miscellaneous Vital Points. Section 12.

Judging your efficiency. Consistent trading policies. h’lh?rr)r~t~t~on

of the averages.

Testing your trading ability without monetary risk. ~b~arket orders vs. limited orders. Limiting the duration of a trade. How to avoid the dangers of ill-advised ad~ice and tips. Dangerou~ pitfalls and

kiov~

to avoid them.

HOIWto select your broker and judge his efficiency. Chart Studies.

Tape reading charts of leading active stocks and tP.eir interpretation. Typical trading maneuvers illustrated, wiih comentsj suggestions and explanations. How to recognize the termination of a reaction, and the subsequent buying signals. How to recognize the termination of a rally, and the usual indication of impending reaction. How to use the combination trading chart and wave chart of barometric letadcrs.

Copyright 1952 by Richard D. Wyckoff t

TAPE READING AND ACTIVE TRADTNG

For the three to five-point moves with risk limited to one-half to one-point

The majority of those who follow our Method devote an hour day,

more or less, to studying and planning their campaigns. But we

have learned that an increasing number wish to trade in the market continuously, either in their brokers’ offices or in private offices of their own, equipped with a ticker and other facilities. From these traders we have received many requests for further detailed information on Tape Reading; and as the technique of active trading from the tape is different from that outlined in the first part of our Course, we have prepared the following to meet the requirements mentioned. This Division of our Course of Instructionj like the First Division, is based on judgment of the technical position: Supply and demand -support and pressure. No news, earnings or other corporate or fundamental statistics are considered; we use only tho~e which relate to the factors: Price Movement, Volume and Time. The active trader who is a Tape Reader is concerned only with

Copyright 1932 by Richard D. Wyckoff

TR Section 1

Page 1

the immediate*rendof the smallmoves in the murket. This trend can be detectedby thisMethod soon a.i%er~hc openingof the Stock Exchangeat ten o~clockdai~g

It may changefrom bQUsh

to bmrish, or vice versa$

and reverseitselffrom one to three times duringe.wh day’s session. We instructsuch tradershow to followthese trends,changing or reversingtheirpositionsas often as the marketaffordstradingopportunities. In most instancestradesare closedout the same day they are made, but i??thereare strongreasonsfor carryingany stockovernight, this may be done. Detailedinstructionsare given as to the best stocksto choose and the exact time to make commitments,based on methodsformulatedand successfullyemployedfor over twentyyears of tradingand advisorywork. Stop ordersare placed on every

trade,from one-halfto one point

away from the buyingor sellingprice. These stopsmust be constantly watchedsnd moved as quicklyas the marketpermitsin order to reduce risk,then protectprofits. This form of tradingdisregardsthe long trend of the market, as well iisthe intermediatetrends. It takesinstantadvantngeof the technicalralliesand reactionsthat promiseto yield a profitin the same stockmarketsession,on eitherthe long or the short side of the market. -M

*

*

Tape Readingis tho art of determiningthe immediatecours~or trendof pricesfrom the actionof the marketas it appearson the tape of the stock ticker. It mims to detectthe mows Copyright1932 by RichardD. Wyckoff

that

are Lik@y to occur

TR Section1 Page 2

in the next few minutes or hours;

gettingin when they beginand getting

out when they culminate. It requiresactivityand flexibilityof mind; readinessto change or reverseone’sopinionquickly;slso nerve,poise,decision,promptness, courageand absoluteindependenceof judgment. Its purpos~is to derivean averageprofitfrom a seriesof trades. By keepingthe risk down t~ a minimumand constantlystrivingto reduceit; by clevermsmipul.ation of stop orders,a net profitover comiwission~, taxes and lossescan be realized. All commitmentsare temporary-- theirdurntionis usuallylimited to hours. They are intended

to take advantage of the small,imm@i-

ate fluctuations.

with this Method you, as a trader, (andwork for your profithare and ~--

search for your opportunit.ies

today. In mo~;tcasesyou will

preferto go home with a clesm sheet -- with no commitments orI either side of the market.

Thus v:hen you start

trading

nuxt morning your mind

your judgmentis unbiasedby reasonof your is clearfor new impressions; neutralposition. At each mo.rningls openingyou make a swiftanalysisof the market; sensethe trend;’ decideon the best stock,and if conditionsare favorable, you make your commitment. Then you watch the marketfor a confirmationor contradiction of the correctnessof your position. il.1.so ical. moment for noving stops, the market price

for the psycholog-

closingtrades or crowding stops so close

to

that you leave the way open for n furtherprofit,or you

are closedout on stop at a smallfractionfrom the extremehigh or low. Tradingthus, you are afforded several times as many opportun-

Copyright 1932 by Richard D. Wyckoff

TR Sectior~ 1 Page 3

ities in these small swingsw you would have if you wz~ited for the more importantswingsof ten to thirtypoints. If a tradedoes not make good at once,you closeit out, whether it standseven or at a smallloss.

You will never tradewithouta stop,

for your risk must be kept down to a minimum. You will never take a big loss. You will

never be tied up.

You can claanhousein an instant.

And you can stay away from the tickeras often tandas long m you wish. This form of tradingis entirelydistinctand dlffcrentfrom

that describedin the otherMvi.sionof our Method,which aims to secure profitsfrom the ten, twentyand thirtypoint swings. It meets the requirementsof thosewho wish to trademore or less

constantly.

Includedin this Divisionof the Courseis a plan for charting the detailedtransactions in certainstocksas they appearon the tape, by which you can sense

the immediatetrend;figurethe exactpointsfor

placingyour stop ordersand where ta move them to reducerisk when the marketgoes in your favor. It showsyou how to C1OEWyour tradesthe same day at the most advantageousmomentsby watchingthese Tape Reading Chart indicationsand gettingout near the extremepointsin the advancesand declines. Under tlzisMethodyou might take new positionsfrom one to three times a day, dependingupon the activityof the market. It is the nearestappronchyet devised,so far as I know, to tradingon the floor of the StockExchange. But the most importantadv,ontage of a combinationof Tape Reading

end tradingfor the longor swingsis that it will aid you in

increasingyour profitsin this way: Sections11 and 12 of the First Divisionof our Courseshow how to determinewhich stocksshouldmove Copyright1932 by ~chard D. Wyckoff

‘i%SectionL Page 4

three tc five pointsin a certaindirection. You apply the Tape Reading Methodin makingyour trade :ltthe most favorablenoment,and the poGition you then take with a smallrisk of one-halfto one point may later developinto Position2 on the long side,or Position4 on the short side,and in{dicute a run of ten, twentyor thirtypointsin your favor. By thus tradingwith a fractionor a point originalrisk and letting your profitrun into the many pointsindicatedin your forecastof the probabled3.stance in points,you will greatlywidenyour marginof profit. For this reason,theseTape Readinginstructions,combinedwith our lcmgerswingplan will materiallyenhancethe profitpossibilities in both Divisionsof the Course.

Copyright1932 by RichardD. P?yckoff

,

JUDGINGTHE IMMEDIATETREND.

For this purposewe use a Wave Chart,made up of the price of five of the most activeleadingstocks. The pricesof theseare added togd+her,and plottedon a sheetof cross sectionpaper,with the time scaleat the bottomof the verticallines, and the price scaleat the left, corresponding with the horizontallines. Specimensheetfollows. All movementsin the marketare made up of alternatingbuying and sellingwaves. We judgethe strengthor weaknessof the market by the distancein pointsand fractionsrecordedby thesewaves;we combinethis distancewith the lengthof time each wave takes to run its course. In studyingthe distanceand durationof esch wave, if the buying waves are longerin durationand travelfartherthan the selling waves,we get an indicationthat the immediatetrendis upward. If the sellingwaves exceedthe buyingwaves in time and distance,the immediatetrendis downward. Wheneverthe buyingand sellingwaves seem to offseteach other ond no material. strengthor weaknessis indicated,the immediatetrendis in doubt. Our positionshouldthen be neutral. Selectthe five leading

stocks. At the openingof the market

add the pricesof their first sales,includingthe fractions,which shouldbe addedin eighths. Put a mark at the price representingtheir total at the properplace on the price scaleand on the 10 otclockvor-

Copyright1932 by RichardD. Wyckoff

TR Section2 Page 1

ticalline. Next wretchfor eithernn upward or downwardswing to exhaustitself.When it smns to stop,put u dot on the chartat the propertime and price leval. Xf the marketthen reverms tion

this

prows

that

tiw

its

direc-

po$$tionof the dot is correct. If it goes

on in the sa@@ direction,chmmgethe dot until the movementagain hesitatesand sh~w~ siguoof a reversal. Them watch the new wave until it seemsto cam to an end. Place the dot, TM marketwill confirmcm contradictyour estimateof that turningpoint. And so on until you are thoroughlyfomilinrwith judging and recordingthe start,durationand finishof each successivewave. The ~mmediatotramdis Lndicatodas soan as one buyingand one sellingwave havo been complwtmd. You then know on which sideis the most power -. the buyingor the sailingside. And all you have to do is to go with that tiido. But you must alwayshe on the lookoutfor a changein this immediate trad.

It is likelyto chmge its directionfrom one to three times

in n singleEMZlswion. Thio is how you datectthe change: In an up trend, when the selung wavoa begin to increasein time and distancesor the buyingwavw mhorten. E$$heror both will be an indicationof a change in the immediatetrend. Apply the sam reasoningto a dom trend. Watch closelyfor these chamgesfor they tell you when to buy and sell;when to get long or short;when to closeyour presenttrade and reverseyour position. IhU’ther detailsare on thQ chart,Page 4-A. Rmmber

market-- d.thar

you have nothingto do with the other trendsof the the long trend or tlw intermediateswingsof 10 to 30

points. The latterswingsare the basis of the First Divisionof this Coursein Sto@kMarket Sci.anca and Technique. Tradingfor such wings is .anentirelydiff’orent proposition,reqwiringless time and attention, Copyright1932 by Rial%mxl D. Wyakoff

l% Sect&on2 Page 2

but havh$

uatmg 2 m Wtv$eC1’kmr’t AJtht$qgh the buying

or

tl’m

mmdag

WLWQB &ay

M

$nmic$snt

on

certaindays to carry the marketin e certaindirectionuntil th~ close, this does not man that it

will

eontimm

do%n not fnmn that yOU $hotidWLmy any Tomorrowf

8

trendwill dofim

to

dc so the next day. And it

tmdtxi

overnightfor this

its~f in the same W~.

rmwn.

Lnd it is best not

to go into tommrow~B ses$iomwith any stockson hand unlem threeis acme extrmrdintqf

reason

in

the

action

of the market.

Such a rcmon would be,

for example,a strongdmmkapmnt of power Mar the beginningof what looks like an %mportAntbull or km volm

swing,$mlicated~ increasingactivityand

in a @ten direction~with scamdy

ralb$ or reac$im$ ZM the mm

any pointsof llesitntion, or

may be. In such instonces,a long pmition,

for exmpla$ might be allow$xi to run with R frequentraisingof stops so that a tmdo originallymd~ with a half to one point stop might run into mvmal

or many pointsand thu$ ixmrmso the net averageof profiton all

yo@ tra$wlfor the month. Full advantageof such a situationmy be takenby them who understandcw IWthod of +awUnfg for the largarstings and cm forecm% the probablemmiimr of

points

certainstocksshouldmove.

anc$Ba tradeis Xnadoon $dW Str(wagth of dimctiarm hmd.n, and its price @A$ well may from the startingpoint, and imdicate&,accmding to the othatMvisim

of our Methodsthat it will probabLydmmlop a move of

M to 30 pm!.ntse the traderU.owflhia profitto run accordingto instructiOXiS,

and lmg#!profitsshouldrm~t. The Wawo Chart twdwm

a while,you ~

not need it.

Tape Reading. Afteryou have used it for Yom aye and brainwill seo and record

Copytight1932 w E4idmrdD. Wgckoff

TR Section2 Page 3

the

wave CM&t too quicklyand do not mpoct intuitionto come until

you have

had long wpmienca and much practice. ***

Tho five leaders$hculdalwaysbe repr~sentative of tho market. At timeswhm a leading

rail hu~ considerableeffectit shouldbe in-

cluded. At other timesa ut$ll,ty, like ConsolidatedGas, might coae to the front;it shouldtak~ the place of somo otherleaderso long as this ColditicmLmate.

Selwtion of tlwse leadersmay btilikenedto ob-

sm’wingtho pullingpower of a &oup of five horses: If you ware driving t?nwh a

groupamd you naticmione horse laggingin tae tr~aeasnd another

[email protected] ahead of the rw$t,you would at once decidethat the fcx’mr shouldba [email protected] that the Iattw is the real leader. Apply this roason$ngin Ice@ping your fivm leaders all

amcmg tho most reprosmtative

of

the stock~in the mark~tin their abilityto influencethe rest of

the list. Keep weiglxtng the$Q from day to day.

Wood out poor ones,

which mmns those that haw lost theirinflucance, or have becometoo inactiveto be included. **-W

Chart of the previousday shouldbe beforeyou when so that yw get the relationof todaytsmarketto that of ywterday.

Copyright193$? by Fti.chwd

D. Wyckoff

TR Section2 Page 4

-4

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BUYINGAND SELLINGWAVES (’IhelVave Chart-PartII)

In the First Divisionof our Courseof Instruction,Section 4, we presentedPart I on the use of the Wave Chart. The materialin Part I di~cussasin somowhatgreaterdetailthe instructionsset forth in TR Section2 of the Second Division;therefore,it may be substitutedfor this last-namedSection. Or, if you prefer,you may remove Parts I and 11 from theirpresentbindersand place thornin a separate loose-leaffolder. You will then have a completetext book on the theory of the Wave Clurt as I have developedand expandedit.

On pages 7 to 9 of Part I, I showedyou how to interpretthe Wave Chartfrom the standpointof pricemovement,durationof each buying and sellingwave, and comparf.i.tive supportor pressure. The following illustrationwill show in more detailhow to apply the additional factorsof volumeand activityto your analysisof the smallwaves.

Copyright1934 by RichardD. Wyckoff,Inc.

TR Section2-A

Page 1.

In this illustration(Figure1), it will be seen that volumeand activity both shrinkto very smallproportionson the littlebuyingand sellingwaves from 10 olclockto 1:40 P.M. The day starts with a smallrallywhich is promptlyfollowed by a smalldip. Bulls and bears are evidentlywell matchedat this point. After the firstdip (Period2), the bulls try to put pricesup, but they fail to attract a following,as shownby the failure < of activityto increase. Demandpeters

Fl 335

FIG.1

340

out aroundthe 11:00A.M. top. A small dip in the fourthperiodbringsout very littlestock on the downside,however,and thisencouragesthe bulls to try again. Qncc more they fail to attrscta following. Note how the rally in period5 dies

out aroundthe two previoustops. So now, the bears endeavorto break the deadlockby offeringstocksdown (Period6) until 1 ofclock. This maneuver meetsno bettorsuccess. Activityfails to increaseon the downside, however,and a tentativelybullishsignalis given by the evidence of supportaroundthe morninglow. At this point the markethas come to a completestandstill. Everythingnow dependson the abilityof one side or the otherto rouse a following,eitherby breakingdown the supportlevel or by pushing pricesup throughthe forenoontops. When the bears fail at 1 o!clock, Copyright1934 by RichardD. Wyckoff,Inc.

TR Section2-A. Page 2.

it is the bulls~turn to try their strengthagain, This time,dexmd is a little stronger. Prices rise a littlebit above the previoushighs and activityincreasesa trifleas they advance. If we are tradingfor the short swings,this is our cue to prepare for action. If activityfalls off on the next sellingwave,we may expectthe bulls to becomeaggressive.We do not have long to wait. Prices sag a

bit

in

the next fifteenminutw but the activitydies out

completelyon the dip. This is the cue we have been waitingfor. It tellsus that the supplywhich held the bulls back on previousrallies has been absorbedon the small earlierreactions. Therefore,T7e step in with confidenceand buy. We are promptlyrewardedby a sharprise in Period 9. Any questionas to the validityof thisupwardmove is settled by the sharpincreasein activityas pricesrise throughthe previous tops. Shortlyafter 2 o~clock,the bulls rest momentarilybecause,at this point,the averagehas risen to a level where stocksencountered supplyon the precedingFridayand Saturday. (Notshown.) Evidently this supplyhas also been disposedof, becauseactivitypromptlyshrinks on anothertemporarysell-off, Since there is obviouslyno pressureyet and few offeringsto be takenat this level,we stay long and wait for the bulls to push on again as they try for a higherobjective. This they attainjust before the close. In this and the exampleon page 7, Part I, we have considered the Wave Chartisusefulnessprimarilyfrom the standpointof shortswing tradingoperations. For your analysisof the intermediateand longerterm movements,you will find it helpful. to constructa OXV+

Copyright1934 by RichardD. Wyckoff,Inc.

TR Section2-A. Page 3.

point figure chartfrom the Tape Readings. This will permityou to bring all of the principlesset forth in Sections10-12-14-16and 17 of the Main Divisionof our Courseto bear upon your analyses

of the Wave Chart, The charts,pages 5 to 8, with ex-

planatorynotes,make clearhow this is done. The additionalillustrations on pages 9 and 10 show how to mount the daily Wave Chartsto form a continuousrecordso you may comparethe actionday by day with [email protected] indicationsdevelopingon the one-point figurechart.

Copyright1954 by RichardD. Wyckoff,Inc.

TR Section2-A. Page 4.

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*LLtNci LINE

SKiF4AL :

PENETRATED

SUPPORT .

“~

PENETRATION

xxx Xx%x

3s 5ss

w

SMALL

FRACTION

AND

~:,NiTuRtoF 0?4

LIGHT

“vCJLUI% INDICATES

PURELY

.

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LEVELS

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SUPPORT

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RESUME

APPEARING

CREATES

OVER - 60WSPT

ADVAhJCE

Ri50vE

( SEE PAGE

AFTER

PREVIOUS IO FOR

CONDITION, iNIXJC!NG 30%{ NORMAL) TECHNICAL REACTION NORMAL CORRECTIVE REACTIOF+ lNDtCATES WEAKNESS.

330-335

cONTifVUOus

8ASE LINE

CONST?7UTES

CHART

OF

ACTION

BULLISH AT

THfs

SIGNAL POINT.

AND )

SPREADS

W5

TO 350

OR{ GINAL

xxx 3i5mmXY

xx xx x.x

x

345

xxx xxx

xx xx Xxxx

X63XX Jcx xxx %xXx ‘5a

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,

x

Xx xxx Xxx xxx xx@xxx

xx

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390 f“lo1’4. AuG,28

385

Tl+u. AuG .24

Illustratingzone of distribution:inabilityto absorb supply and deveJqment of weakness. (Comparewith one pointfigure chwt

at A,

page 5).

Copyright1934 by RichardI).Wyckoff,Inc.

TR Section2A, Pnge 9

o s’ Cdg; 0. o 0

On

--’-711M F’”T”z’ 1

1

TUES.OCT.31,

1933

THLJR. NOV2,1933 I

WE D.NCIV. I, J933

Illustratingzone of support,abilityto absorbofferingsand developmentof strength. (Comparewith one point figurechartat K, page 8).

Copyright1934 by RichardD. Wyckoff,Inc.

TR Section2A, Page 10.

HOW TO LINK THE WAVE CHARTWITH THE STOCK IN WHICHYOU ARE TRADING.

The Wave Chartbeing based on the actionof the five leading activestocksis completein itselfif you wish to trade in all five at once and whenevera turn is indicated. But in the beginningit isbest to trade in only one stock. Observewhich of thesefive leadersappearsto followmost closelythe mings on the Wave Chart;or perhapsthere may be some other stocknot includedin your five leaderswhich,by observation and experiment,you find is betterfor this purpose. This will depend upon the kind of stocksthat make up your five leaders. You might,for example,includeAuburn,which would give the groupa differentaspectthan if it were not included;or a rail like Union Pacificwould again chmgc the textureof your averages. When you find a stock suitedto your purpose,study closoly its behaviorunder all conditions;watch the characterof its manipulation. Duringthe studyperiodmako differentkinds of charts of it, such as a verticalline chart,a continuousline chart,(seo Page 1-A) and a combinationof figureand volume chart,whichwill be describedin anothersection. Any and all of thesewill aid you in becomingacquaintedwith the peculiaractienof that stockso that you can trade in it to betteradvantage.

Copyright1962 byl?ichardD. Wyckoff

TR Section3 Page 1

i

A VERTICAL LINE CHART and A CONTINUOUSLINE CHART

?s

I

‘1

may Copyright

volume

in Thousands

of shares

June 1932 by

~Ch&rd

D. Wyokoff

TR Section

3

Page 1 A

for studyor @real practim, plot its moves on the

WMtlm Wve Ck%

TM price scaleQf this #rtmk shouldbe entmed on the

right side af tha sheet;cm tk left the pric~ male of the five 141MMMPB. Mow studytk action of your one stockin combintktioa with the ahangwi b YOU

th

trend as slum on tho Wave Chart.

find that $t is d$##@@m~its trend -Ctly

iwy

averagm ckwqe. and add. it.

imwlievte

when ti

If this colMJl%MM,you will!know $lst whezlto buy

But you may f’iudit is working exactly tha @ppo@it@:

wham the Wave Chart turnsupwardyour stookmy begin to get weak. Trti@ acmmdimlgky.Or you q kming

olwmm

that your 6tcmkraacbeaits

pointsbeforeor titer the tivw atoclmIn tkm mmm@s.

You

do mot care w)mt it does DO long as you Ieam its habitsand turn them into profits. Now thatyou have the idea, it dopmk studyand praaticeyou put inta it. is the WO-@ a moving

out of the h3W

Of

*PP*

Mm

?lhwtyou see on tha Wave Chart and Demand. ‘fk$t(?=

~S

pict~reof a cross sectionof the market,designedby me for

this very purpose-- to help Y($U @ tape.

cm the amuuntof

tallRo$t

~~fit~

QUt of **~

*

*

of yoqr Oppor’tmiti!m.

TR $eetion3 Page 2

TRADINGAREASAND MOWTO FROFZTBY THEN. From observationyou know how ofton stocksget into periods of mu’row rangesof 3 to 5 points.

These are timesof discourage-

msnt for most peGple who um on the wrong side, or who are looking for Mg profitswhen the marketaffordsonly mall profits. There are many short swingsto one long one.

Let us seo how we can derive

profitsfrom the 3 to 5 point moves. Keep Q verticalline chart showingthe dailymovementsof any of the well-khownaveragws,such as Dow-Jones,SthndardStatistics, ?kw

Iork l!ime$, New York Herald-Tribune .. whicheveris publishedin

ycmr local daily newspaper. Use those to indicztewhen the marketis in a trading@ea or whetherit is movingto anotherlevel,upwardor Clownwmd.

You do not care which way it goes,or when; but you need

theseavorage$for a broad pictureof the market-- as an indication of the variouacurrentsend eddies.The currentsare the small,intermediateor lo~g trends. The eddieBam the tradingareas. In streams th~seare the whirlsor the quiet water betweenrapids. Your vwtical line chart of theseaveragesshouldalso show the volumeof the day$s trading— the total salesfor the day.

This is

very importat becauseit aids in formingyour judgmentof the prevailing trend. Your individualstock chart should. also show the volumeof the day?s tradingin that stock,50 that you may observewhetherthis volumeinw’emawsor decreaseson the advancesand declines. Increases W~ght

1932 by R&chmrdD. Wyokoff

TR SectiOn4 Pago 1

swve

to [email protected] the bullishnessor bearishness.Decreaseswarn

you of R probablereversalin direction, I could elnborateon this -mite a b~ok> in fnctjht there it

iS

iKI

~

nutshell. Do not let its

brevitydisguim its value. When you see the runn?agcw! workingback and forthover a trading area,you till genmnlly find your individualstockdoing the same. Not always,however. All stocksdo not move alike,ss you know. Your zavarage~ may be in a tradingzone und other stocksmay have small,medium or wide wings withoutaffectingthese. Your stockmay not be included in the+averaga$;whetherit is or not, rememberyou are tradingin q X

and not in the averages. The upper and lower boundariesof thesetradingswingsrepresent

the points (at the tops) where supplyovercomw demandand (at the bottoms) where demand exceedssupply. Unless the actionof your stockindicates (by method$we shall. explain)that it is goingout of its presenttrading range,youm purchasesshouldbe mado aroupcl the bottomsof these short swingsand your sales~long or shart~around. the tops. This seems a simplething,but very few peoplecan do it.

That is becau8ethey have

not had the properinstruction,or thqy have not studiedand practiced it. We will showyou how to do this accordingto our Tape ReXiingChart — the most perfeatmethodthat, ao far an we know, haa ever been dwised for thosewho trade from

the

tape, in an office,or on the floor of the

StockExchange. If one is a mmbcr of tho Exchangeand cun tradefrom the tape on thtifloor,thiswill be found ,allthe more valuable. It is qlained in Saction5 of this Divisionof the Ccur8e. Mmntinc conaidorthe positionof a singlestockwith its movements plottedon the !&we Chart,and in connectionwith its location

Copyright3932 by Riahmd D. Wyckoi3?

TR SQctlon& Page 2

in

area.

it#3 trading

lf

it

it3 0-

b@tVJW#Ek

30

@Ud

35 ~

ShC@d

glvs incmcu!k%g atlmtiom to its bwy$mgopportawaitim a$ it approaches m it n8arS 35.

30, and its su~

‘lhidtdcms not mean that you are

to buy or EoU at or near $hcm paints, Imt that you are to watoh out for CMUMMM for profit WaveCkrt,

inticati

ax@ on the Tapa Ramiing Chart referred

know, when a atmk appmacbw rangs vkthar,

this

poaition

you have all

frm

by the action of your atmk on the

until

time,

to above.

the upper or lower level$

it will

go on through;

the f’mts

awmmbhd,

You nevar

d’ a trading

so you do not take a i.Q.,

transferred

tha tape to yaur Wave Chart and your Tape Reading Chart.

*

*

or Mttom is

a small

turning point,

and even a small

one maydevelop into one that is important.

Cop~ght

1932by Ftidmd D. W@koff

TRSIWtion~ Page3

TRADINGAREA OF AUBURNMOTORS DURINGMAY AND EARLYJUNE,1952 ILLUSTRATED IN LINECHARTFORM SHOWINGACCUMULATION IN PRWARATIONFOR AN ADVANCE. CONFIRMATION OF TREND X INDICATED BY THE CORRESPONDING TAPEREADINGCHART

w

50

APRIL

/WA

Y

Copyright 19$52 by RichardD. Wyckoff

~UfVE

TR Section4 Page3-A

THE TAPE REAl)UWWART.

It iEltwanty-fivayears since I firstbegan to fmocaW

the

owing movemmts of the mrket from its own actionas it appearedon #* tape of the stock ticker. M&ny mmorendawere mcessary at the bqinnirig,

duced q

bwt

as I developedef’f’ioimcy in this art, I graduallyre-

notm and chartsto a minim,

wheneverI found sim@ifica-

tim possible. It &$ one thing to learn to read the tape and to develop md intuition,and another to teachother

therefromonors $@mnt

peoplehow W do it, makingeverythingperfeotlyclear and practical. I have dooid~dthat tho ~wsiestway form

to teachand for you to

learnTape R8adingis by mmns of the Tape ReadingChart whichis dmw’ibed

bdOW.

This Chart CQIUIXLIMW the three Vohm

wkttil

fttctow

PriceMovexmmt,

and ‘l%m in moh a ww that a tradercan see at a glancejust

what a certa$nstockis doing?howit aats on the rallies

tions;the valumeof-a;

and

retac-

the progressof the advancesand de-

cldmm?;the proportionof tha ralliesad rmotdms to previousswings) the lines M6MUM

of!

mpply and dmand; the best locationfor stop orders;the

of d63C$dillgwhen to U!OV9 stops

how far, etc. This Chart,in’

fact, combimm, on one page, most of the indicationsrequiredby the Tape Reader. It cm be oblomgin (33p&i#rt

kept

on

a sheetof cross ewtion paper. If this be -- of th five leadersand of a TR t%ctin 5 PqB 1

single

stick-- can be kept on the same sheet,so that a complete

pictureof the marketmay be had in combination

with tho Tape Reading

Chart. If severalindividualstocksare charted on separatesheets in this form, the WavQ Chart can

be

recordedon a sheetof transparent

paper,half this sire, so that It can be laid over any individualstock chartin oral@ to see how that stockis actingin comparisonwith tha haders.

five

Let UEIstudy the Canstrnctionof this Tape ReadingChart from the specimen~heetwhich follows. This dmuld be takenout of the binderand kid besidethis text in order fully to understandthe explacations. Tho Chart has a price scaleat the left. The full figures are in one column and the fractionsin the next. The figuresrecorded

in

the

chartare the totalnumberof sharesdeslt in

at

each fractional

price, When the price chsnges,the volumeat the newprioe is filbd in at the proper level on the chart. WNn a prhe is skippeda cipher is @nt@redat the fract$onwhere thre

were

no sales. Now watch this

point very carefullybocau$eon it dependsyour gettingthe right start in makingW9

kind of a chart;it is simpleenough,but ifycnado not

get it clearlyinto your mind your chartwill not be correct. After a sale at a certainprice,you enter the next sale in the w #are

_

u

18 blank space at the pH3pW level,above or below,in that same

if that spacesabove or below,be filled,you make the

Cohmn.

But

Imtz’$”at

the next vacant space~~-.

This will b~ perfectly

clearwhan you go over the folkowingdetailedexplanation. Your Chart,recordingthe movementsof J. I. Case beginsat 10 A. M. with total saibsd’ ’300sharesat 4.0, This %)0 mi$ht h8Ve been made up og severallot~; so long aa scalescontinuedat that price

Cqlymq$lt 1932bYRicbiIwd m

wpkm

TRSecti43m5 Paga 2

thay were added togetherand recordedall at once men the mice than~ed, Not until tnen do you know that tharewill be no uore salesat that price for the moment. The ne$ctsale is 100 at 40-1/4. As thcxwwere no salesat 40-1/8, a cipheris enteredat the 40-1/8level,and the figure1 is enteredon tha 40-1/4I.inB.Now you have three figuresin the first column— 9 on the 40 level;O on the 1/8 level and 1 on the 1/4 level. The nsdctsale is 40-1/8,only 100 shares;next 200 at 40. These two figuresmust go in the secondcolumnas the first column5.sfilled on those two levels;next sale 40-1/8 (100);then 200 at 40-3/8 (O on the 40-1./4 level);then 100 at 1/2; no salesat 5/8; a totnl of 2100 at 40-3/4; none at i$o-’7/8~ 200 at 41.; norm at 41-1/8;200 at 41-1/4;200 at 41.-3/8. All these item@ were recordedin the third columnbecausethe advance continuedstre4.ght up to 4.3.-3/8 withouta singlefractionalreaction. The next tremmction is 100 at Q, so in the fourthcolumnwe must anter O on the 41.-l./4 and 43.-1/8 levels. Next s~.e 100 at U-U8* As the space above the previoussoleis alrencly occupiedby u cipherwe must enter thib in the next column,and when the followingsale takes pkaca at u it goes just below the previoussale -- in the same column. with that exphnation as to how to startkt?cping & chart of’this kind~ which is redly Q l/8-pointfigurechart,combiningvolumeand price movoment}I WW

proceedwith the instructionsas to how this cmt

shouldbe used in actualtradingand forecasting. On JaKNW’Y19, 1932, Case opens at 40. Our positionis neutral. We wish to make n trado on eitherthe long or the short side as soon r-s

Copykight1932 by RichardD. Wyckoff

TR Section5 Page 3

stock

the

sham a tendency.

Wave Chart sow wait until

after

tlds

Let us as~ume that the indications opining

the stock itself

were bullish,

but that we wish to

has givsn some sign of a definite

There may be an opening bu%ge M.rt this

may not be its

00 we shall

are definilm

wsit until

the indications

on the

tendency.

true direction, enough to promise

a worth while swing. We allow1/2 a point for commissionend taxes,so it

is

best not to go into

points.

a trade that dots not promisethree to five

If we had the backgroundof the previousdsyls trading,we

wouldknow be~terjust whare this stockstands;but startingfrom scratch, We must wait ~til the stocktells US what it is probablygoing to do before we make a commitment. In learningto read these charts,it is best to cQverwith a sheetof paper most of the chart,sxposingone columnat a time ~ drawingthe sheet“t the right. In this way there is 10ss temdamcy on the chart. to form judgmqptson the basis of what alreadyap~)ears This Methodnqy be followedin a studyof all forms of charts,care being takennot to see the goncralformationin detailbeforestudy is begun.

After the opening — 900 Aares at 40-at @-1/~; 100 at l/8;

200 at 40; 100 at 40-1/8;

at 40-1/2;

of 2,100 at 40-3/4.

4=/4;

and a total

200 at &3/8

-.

R rise of 1-3/8

the

tape

shows 100

200 at 40-3/8;

100

Then 200 at &l; 200 at . from the opening. Tho re-

actionrecordedby 100 sharessellingat 42.marks for the presentthe boundaryline of that tradingrange of 1-3/8

for the day so far. We

do not wish to take a positionuntil the stock clearlyindicatesthat

it is goingout of that range. TO tradewithinit might not give us enoughroom to turn aroundin, and PW l/2-point Comght

1932 by Richard

D. Wyckoff

for overhead.

TR Section5 Pago 4

Next the tape records

10(3 at &l-1/8

j

100

at @;

300 at &l-1/8;

300 at 43.;300 at 41-1/8j 100 at 41-1/4;200 at 41-1/8;100 at 41-1/4. The tradingrangehas narrowedto 1/4 of

a

point;

we are still

in doubt.

Next sale is 3000 at 40-3/4-- a sign of weakness, becausetherewere

no salesbetwaen43.-1/4 and 40-3/4;this indicates@ thin market. Next 900 at 40-5/8;800 at 40-1/2;500 at 40-3/8;300 at 40-1/4. Those sales total

35OO shaxes,all takenwithinthe rangeof 40-3/4down to @-1/4.

Here is same a%rength,but it may mean only temporarysupport. The chart must tell us what the insidersare tryingto do with their stock. Are they supportingit becausethey want to sell at higherprices,or do they r@wXlywant to acquirea lot of the stock? They take 900 at 40-1/2,making@

aroundthat level; then 300 at 40-5/8;WO at 40-7/8;and 1000

at 43. That is 6,OOO mhareaon the way down to 40-1/4and up to Q.

That

doss not look Mke tnqhg for the sake of accumulation.If they really wantedthis stockthey wcWd not have bid up for it; they would have put it down. So here is our indicationthat the pool is tr@ng to sell and not to buy. We form a tentativelybearishattitudeand wait for the marketto confirm,cancelor reverseit. The biddingup proceeds~400 at 41.-l/8; 600 at 41-1/4;1.400at 41-1/2. Now the price stundsat a new high for the day which has the appearanceof an artificialbulge made by the pool in order to attract outsidebuying, It required8400 shams to be takenin order to advance the stockl-1/&points. This is not bullishbecauseof the way they did it; tkrefore, bearish. Unlessthis stockgoes on upwardand its volume increasesas it advancos$we are lookingfor a chanceto go short. The tape next records700 at &L-3/8and 400 at 41-1/2;then

(k)pyright 1932 by RichardD. Wyckd’f

TR Section5 Page 5

So far the rise

400 at &b3/8.

is

checked. Tk pool or someoneis

tryingto sell,for tha tape sqm $00 at 41-1/4;then 100 at Q

and

followingthe bulge from 400 at 40-7/8, Thisis a half-wayreactiorI

40-1/4 to 41-1/2. Thik reactionconfirmsthe checkingof the rise and narrowsthe tradingrange to 5/$ -- between40-7/8and 41-1/2. We shouldgo with the stockwhan it goes out of that range;that is, we shouldsellit shorton a bulge,andaworing to get as high a price as possibleso as to keep our risk dowm to a minimum. Remmber that we are tradingnow with a 1/2 to 1 point stop end it would be betterto lose opportunities, becausethere are plentyof them, than to be so eager to trade that we take an a risk largerthan the dove. There$s a rallyof 3/8 on a single100 sharesat 41-1/4. It looksllke a m@c-up ~

the specialist,or an odd lot house My#mg to

Won up. Another100 at 4&l/8, them 600 at Q. W

The stockis heavy.

look for a rally on which to sell. This is confirmedby the next

sale 700 at i&3/4, which is lJ8 under the previouelow; then MOO at 40-7/8j200 at Q; 100 at &l/8 -

w a

m _

Q M

-- decreasingvolumeon the rally.

~d we get & for it. we ~t a l-point

stop at 42 [in$icatedby an S) in the 42 space. 300 sharesmore are sold at that pkice~makingit 400, followedby 100 at 40-7/8snd 800 at 40-3/4. The chartnow has a slab-sideddownwardformation,made by several lemming tops.

A rally to 41.1/4 occurs

cm lightvolume,confirming

the prwious b$arishindic~tion. Someoneelse tries to sell.300 and gets Q

fox’it, folkowedby 100 at @-7/8.

at &l/8

The l/4 point rallywhich follows

is the weak~atya%. Then comes300 at Q; 200 at 40-3/4;100

at i@-5/8-- a now fractionallow on the down ting sinceit made 41-1./2, Mtt30 dwmnd at the low level. (lhddo

the stockis bid up 5/8 snd

1300 shareschangehands at 41-1/4. It looks artificial,particul.mly when a quick slump to 40-5/8follows. Now observe1/8 point rally to

4&3/4j a returnto the 40.5/8low on 100; anotherweak rallyup to @ (n lower top)3 then t!m real slumpbegins. When the stockreaches40-1/2we reduceour stop to 41-1/2-our risk is only 1/2 of a pointnow, for overhead. Thereis only one rally of 1/8 on 100 sharesat 40-3/8. Then a new ).OWat 39-3/4;anoth~rrally of 1/8 on 400 shares to 39-7/8;

then a new low at 39.1/2. Note that the volumeincreasedon the down side. There were only mall lots sold in the upper 40s. More substantiallots were sold mound 40 and under. Add the salesat 39-3/4 acrossthe page horizontallyand you find they are 4400 shares. But these takingsare not sufficientto absorbthe supply,as provenby a dip to a new low -- 11OG at 39-3/8. When this Ocxmrs~-QJ& *

to 40-1/$. The declinecontinuesanother3/4point with a totalof 2300

at 39, and a low level of 38-5/8,then 200 at 38-3/4;200 at 3~7/8; 100 at 38-3/4;600 at 3g-5/8;then a 1/4 point rally to 38-7/8. Note that offeringsare gettingvery thin here; that is, the volumemound this

levelis light. When the stockagaindips to 38-5/8,we bring our

stop down to 39, becausewe do not want it to rally even 1/8 above the

38-7/8levelwithouttakingour profit. It is gettingtoward3 otclock and we must not let that profitget awe.yfrom us if we went to go home with a clean sheet. Thereis a rally to 38-7/$on 100 shares;then 100 at 38-3/4;@O at 38-7/8and 500 at 39. This catchesour stop emd we have our profitfor th~ day. Our initialrisk was 1 point,or 1-1/2 allowingfor overhead.

Copyri@t 1932 by RichardD. Wyckoff

TR Section5 Page 7

‘dewere able to reducethat risk to 1/2 point,then reduceit to nothing-the flat pride (meaningthe price at whichit was sold);then to 40-1,/8 which assureda ‘7/8 grm!$ ptofit;then to 39, which was 3/8 from the day’s low, at which price the tradewas closodwith a net profitof 1-1/2 points. There is a littlestockfor sale on the closingrallybut we get no cue fnom it for the next dayls sassion;M

fnctjwe would

rathernot carryany impressionshone with us as we preferto have am unbiasedopinionwhen the marketopensin the morning. ***

Note: A numberof other chartsand interpretations of this kind will be foundin the Chart Studies,followingSection1.2. Additional studias will be addedlater on. Many detaihd instructionsin ChartReadingare includedin Mvision 1 of this Course.

Copyri&@t 1932 by RichardD. Wyckoff

TllSection5 Page 8

—.

——

—-—-

TAPE READINGCHART OF J. 1. CASE

JAN. 19, 1932

In FigureChartForm ShowingEach l/8 PointMow ‘WithVolumeat Each Price UNIT OF VOLUME= 100 SiARli3

i

HOW TO SPOT THE BUYINGAND SELLINGPOINTS WITHIN A SMALL FRACTION .

Numerousexampleeas to how this shouldbe done are foundin the explanations of the Tape ReadingC!harts.But thereare some fine pointswhich may be made a littlenioreclear.

One of theseis

this: V/emust learn to anticipatethe high and low spotsin the dayismoves by assemblingin our minds,and from the chart,all the factorsthat point to a certainconclusion,and if this conclusion is justifiedat what we believeto be the rightmoment,it becomes a commandto lx%de. Thus it will be seen that there are two important steps: makingthe diagnoaisand actingupon it. The marketis cdnt$nuallygivinginformationas to its technical.position. It does this throughthe Wave Chart,which fdrmsyour background,and forecaststho immediatetrend. It givesfurtherinformationas to the particularstockin which you are tradingif you will plot a Wave Chart of that stockon the sane sheetwith tha Wave Chart of the five leadingstocks. In additionto the above,you get all the littledetailoif you will keep the Tape ReadingChart of that stockon the same sheetas the two Wave Charts. With these threeand your eye on the tape you am well equipped. Thus fortifiedtherewill be no reasonto buy on bulgesand sell on wmk spots;for$ in this form of trading,theseare not opportunities

to m&e profitsbut to make lossQs. If you sell on weakness

with a short stopyou increaseyour chances of havingthat stop caught. Oopyright1932 by MoW

D. Wyckoff

‘1’R Section6 Page 1

But if you form a beariehconclusionand mit for z bulge on which to tie your position,the chancesfavor a profit. All such technique must be takeninto consideration.You must mieavor in everymy to increasethe percantagoin your favor. Ono of the nest importantways of doing this is to learn to do your buyingon what I call the drive down; that is, duringa selling

wave end at ju$t about a minutebeforethis wave ands -- while the pressureis on~ not wha you see it hesito.to, but a minutebefore that,beccuscit takesa minutefor your order to get into the crowd and be executed. (If it ttakos more than th:.~t on the average,your brokeris slow or he has too much businesson hand to give you the right executions.) Sellingon the driveup is just as important. Most of the bulgesin a stackare made by pools, specialists, manipulatorsand floor tradersto induceoutsidersto buy. If you lenrn to spot these play$,you have all thwe interestsworkingfor insteadof againstyou. Take advantageof the pl,ablicts tendencyto buy on bulgesand sell on wwkneas by doing the reverseof this. It is better to get out too soon than to overstay. The publicusunllyoverstays. Watch the Y?aveChart for your cue. If you expectto buy, and the five leadersare showingan up trendfor the time being,wait for the sellingwave. Look back and see how long the previousdown wave lastd;

judge~

that and the actionon the tape about how far this down

wava will go, Watch the Wave Chart of the individualstockycJuare trading in, almo the Tape ReadingChart for volumes,comparativestrengthor weakmss, and 41 the other technicalpointsmentionedin chartinterpretation. Learn to combineall thesevariousLndicationainto a sound

Copyright1932 by Fu.cmrd D. Wycdmff

‘Ill Seetion6

Page 2

conclusion,and when you hmve made it, time your stroke;that is, the momentwhen you give the order,just as you time your strokein order to hit a golf ball correctly. Watch for the pausesthat mark the end of the buyingand selling waves.

They indicatethat the forces

that

producedthe wave have

cmhaustodthemselves. For a mouentor two, even in a fairlyactive market,the tiokeris quiet. These are like periodsat the end of paragraphs;a naw phase of the tapetsstoryusuallyfollows. V?hena stockhesitatesit notifiesyou that it has lost its momentumin the directionin which it has been traveling.

YOU

should

then quicklymnke up your ruindwhetherit is advisableto buy or sell or move your stop order. Any halt may be the final turningpoint in that move. If you have studiedthe First Mvision of this Courseand know how to judge the distancewhich a stockshouldmove, you are well fortified;you can more easilydi6tin@sh the haltingplacesfrom the probableturningpoints. There are more haltingplacesthan turning points. The periodsof hesitationusuallyindicatea reversalof temporarytrend. They also oftenmark the beginningof a nsw trading

area.

Everymove startsat the end of a previousmove. If thereare indicationsth~t the comingmove will be important,take advantageof it. If thereare no such indications,let it pass. Alwaysbe expectinga change. Be constantlyon your guard and ready to closeyour trade at the first sign of danger. (Seeillustrationsin the Tape ReadingCharts.) Even WBen you have movedyour stop close to the marketprice for your ~tock,t~ to do betterby sellingon a strongspot or buying on w%ahmas if yow reallydesire to closeyour trede. Copyright1932 byltiohardD. Wyokoff

TR Sectian6

?age 3

When am upwardor dawnwwd move is losingaoraeof its forceit will be indicatedby a shorteningof the upwardor downwardthrustsas shownon the T@e ReadingChart. Never Xes,chfor a stock axceptin some caseswhereyou are pyramidingand have a substantialprofiton paper.

Even at such times there

is frequentlyan opportunityto buy on CLreactionafter a break through on the up sides or a rally followinga break throughon the down side.

Copyri@xt1932 by Ridmrd D. ?@kd’f

TsRSecWcm 6 Page k

JUDOXNGSl%WWTHORWSAKWWSBY

m w

WAY poINTS.

We do not subscribeto the thf30~ that actionand reactionare equalin the Stockmarketbecausev#Jhave rarelyfoundit to work out in a prmcticalway. Even if it were trne in the stockmarket,we do not see how one couldmake any money there~. But thereis advsntageto be gainedby watchingthe half-waypointson ralliesand reactionsas a basis for judgingst#engthor weakness. When a stockadvancestwo pointsand then reactsone point,it may be calleda normalreaction;but if it reactsless than a point,it givm us an indicationof strength. If it reactsmore than a pointP thereis sn indicationof weakness. Used in this ways with the halfway point

as a sort of measuring stick,

we can really

derivean advantage

This is provenby the numerousexamplesexplainedin the text acccmqmnying our Tape RaadingCharts. Other signswhich may be includedunder this head are those extreme caseswhere,after a movementof say threepointsin a certain

direction,Q reversemovementtakes place to the extentof all or nearly A all of the precedingmove. A stock advancesbecausethe buyingpower is greaterthan the sellingpower;but if it does not hold this advcwe: if it immediately reversesand loses all or most of what it has gained,this tellsus that ~omeoneet once took advantage of the strengthand sold the stockback to its were willing

co-t

starting

point

by offering

more shares than the buyers

tO accept.

%932 by FNdMu@

TRSa4#3n 7

Pa&&i1

‘

The saxw illustration may be appliedto a raid or drive down of say threepo$ntsmore or less, folhwsd ~

a recoveryof practically

tie same amount. This iB a sign of strengthbeoausethe reboundshowed that tharewas more Wam@h

than weakness. This sign is more bullish

than bearishbeqausethe sellers,hming spenttheir force,are met and ovwx%xneby the buyars,who, at the momentof completionof the recovery? ,., are in a comparatively strongpodtion.

They have takenall offerings

on the way down and whataverstoodin theirway on the advance. The floatingsupply~s thus reduced;unlessfurtherofferingsappearhigher up that they are not MJM.ng to take,the way is then open for a still further

advance. Study and learn all these technicalpoints.

Considereve~-

thhg that appearson the tape as an evidencaof supportand I.Mting power,or pressureand sellingpower. Continuallycomparethe strength of theseforces. Use all th~ judgmentand reasoningpower at your command. Endeavorto improveyour judgmmt by constantstudyand practice. Striveto lift your Judgmmt from commonplaceto good;from good to better;from betterto excellent. When your judgmentha~ becomeexcellentthroughyour own efforts mkwmbor that you can carryit to a higherpoint by trainingyour intuition;

so that

psycholckgiml

after a whileyou wLLl get the pulse of the marketand the momentfor tradingdown to such a fine point that you can

form conclusionswithoutconsciousreasoning. You can learn to act on theseintuitiveconclusionsamd tha go back and chackup your recsons in order to find out how good your intuition$@ becoming.

Copyfi$ht1932 by Riehatrd D. Wyckof’f

TRs&?ctiom7 Page 2

MM TO KEEP A PEWEMTAGEIN YOURFAVOR.

This is accomplishedchieflythroughthe IMtation, reducticm and

d.iillh~tiOtl

af risk. That swum: (1) You must immediately

place a stop order as soon w

eachn~ tradeis executed. (2) You

mast move thie stop to reduceyour risk as soon as the marketwill. permitwithoutendangeringthe life of your

trade.

(3)

You must

furthermove the stop so as to covor the price at which the trade was made, end (4) you must move your stop stillfurtherwheneveryou have a chanceto insure thme~

a part or most of your profit. These

four steps are vital to this form of trading. Unlessyou carry them out cold-bloodedly -- withouthope or fear -- and persistentlyand. with determination, you will greatlyreduceyour chancesfor success. Baaed on your intentionof tradingfor the swingsof 3 to 5 pointsthat occurin a dny!s session,or perhapstwo or threedays in succession,your risk is kept down to a smallpercentageof your prospectiveprofitby placingstop Orders1/2 to 1 point awey;but %fyou shouldfail to use these stopsin the way indicated,you are positively incraesingthe percentageof your risk. At 1/2 point r$sk and 3./2point for commissions

and other over-

head?you can bo wrong tw$ceout of threetimes if you realizeon the third trade a profitof threepoints. Your two losseswould be 1 point each, or a

tdal.

of 2 points,includingoverhead;the third trade would

carryan overhoadof 1/2 point,

making 2-1/2. Henceyour net profit

would be 1/2 point on the three trades~ On a W30ratical.1 point risk with a 5 point objective,if you are wrong twicefor 1 point each time, that would be 2 pointslost. Ii’your profit on the third tradewere 5 points,you would have to d+ duct the two losses (2 points)and the overheadon threetrades,which would total 14/2 points,making3.1/2 pointsdebit and 5 pointscredit; a net of 1-1/2 pointson the three trades;or an averageof l/2-point on each trade. We do not claim thatyou cen make cut and dried transactions like this, but we emphasizethe point that you must keep your los~es plus overheadin such proportionto your profitsthatyou will have a [email protected] the good. This whc)leplan for activetradinginvolvosbuying right and sellingright,and lettingtradesrun in your favoruntil you observetechnicalindicationsthat they have gone as far as you can reasonablyexpecton the strengthof your diagnosis.

Thus many a trade

whichyou startwith anticipationof a pc~intor two profitmay run into severalpointsand help your averageprofitfor the week or month. On the otherhand,your risk is strictlylimitedfrom the start; it is ~evor increased. It is frequentlydecreased. Many timesyou can plug a profitwith a stop order so that it cannotget away from you. Thereinlies your expectationfor success. You aim at n largerprofit than loss in everytrade. You keep a percentagein your favor. Rememberthat we have by this methodeliminatedall guessing; all tradingon tips, hopes,hunches,hearsay,news, information,statistic; snd that we are tradingon the basis of stockmarkettechnique which has its rootsin th~ law of suppQ and demand,the only real fundamental

on which a soundmethodmy be based.

copyright1932w Richard

D. Nyckoff

‘J%section8 Page 2

TRADINGON INITIAL

ACTIVITY.

Deciding upon the stock in which to trademay sometimesbe done tQ adventage by letting

the marketitselftell you that here is

an opportuni~. You watch the tqpe. You have no commitments.Your Wsve Chart of the five leadersis beforeyou, on a sheetof chart paper. You make mentalnote of the pricesthat are flowingacrossthe Tape or Translux. You

wait for impressions. Suddenlyyou noticea certainstockgettingactiveon the up

or down side. If it is movingin harmonywith the trendof the five leaders,you immediatelytake a positionin it, long or short,with a stop 1/29 3/4 or 1 point awqy. Then you go back over the tape and make a Tape ReadingChart of it from the openingor from some r@uonabh

dis-

tanceback. Ii’the high and low pricesare on the quotationboardbefore you, you ean mark theseon the left side of your chartas a guide to the dayts r≱then if you have a verticalline chartof that stock in your collectionyou cen see where it stands;whetherit is in a narrow tradingrange,or movingout of it on the up or the down side,heading towarda new level. Your incentiveto tradeis due to the fact that this stock which has been idlingalongin a very narrowrange and with smallvolume,is now becominga~tive. ‘l’his activitymmn~ that somebodyis gettingbusy in it and you infer that he may be in pomswmion of informationlikelyto

Copyri$lt1932 ~ RZchmrdD. Wydw)ff

!FRSection9 Page 1

sup$dy m dummd or that its t$dkmiml positionis suchthat

M’lLwrm

theyWlleve theyc-an moveAt to aao4#mxMval ad realisea profit. You, thereforq,hop m glnm%ng

the Imve.

th@ etm!kmd Ad% along with whoever

‘l!hw

iS en-

you hmre him workingfor you. You are tak-

ing a ride, M to spedq m a qmz%al train charteredand pUd for by mmane

@lse. Your Mpe ReadingGhartwill give you all tie details. You mu

judgenot onl# by what he does but & what he dom not do, for it must be yuur first precmut$m to see that he is not makinga falsemove %n the appositedirectiontowmd whid he intendsto melm his P*. ia$ he may be pl-

a down wing,

eo M

first

That

bids the stockup a

po$mt or twc in order to attracta followingof buyersto whom he can 13ella largerquantity-- -either on the my up or beginningat the top and mZIAng it back. If he intendsto bull tho stockhe may drive it dawn first so as

to CMMII

out the stop

ozdersbelow ond mcum

stockhc can find aroundthe 2017 kvel.

Hence

all the

you must be on your guard

tith your stop order for it ia ymr only protectionagainsta sudden revoraaland a big 10SS. If, hawever,the aperatm is reallybull$ngthe stock (or bearing it, ae the case my be) d startedit,

your

raullygoes on with the deal the my he

stop order is safe, so long aQ you do not gd it up too

close to the price of the @ock so that you are kickedout on a small reaction. Keep your stop at a safe distance- on the wl the bottom

aide below

of the last dip, and on the bear aide above the top of the

lad rdly$ until the timo uppmmlm Watchjnmr !l%p Re_g lmdera to mako sure *

-t,

for 404ng W

the trade.

watch th@ trend of the five

we not iticatimg a turningpdnt in the dayss

MmYri$kt 1932 by lMh@rd D. WyckMf

~

&3CtiiO13 9

pA&i

2

thn

Iwy bwk

again

WMIMWlws on the

Y@lM!”Im3aom

ttw

th$m *8 that

the

thwl

to

Cmb

on the d@Nrmry,ho wi2Aprdtdity

a~

buy h

@W his

C)permtor

will probably

not

con-

faaaof indlomt$ons thatthemarketis about to sell

#tQok

a suddan6*;

do just what I am tailingym

themsell. Out sll he Carl80 86 to

ZW3UW Ms line and thus providepurohming poworaroundthe low point

of

tha! Ooming dip.

Reading

Cha?t

You follow hi$

IM3W8

closdy and when your Tape

#!MlJV3 he $a bW@JI~ th#M bSCk, buy -6

baok.

These paintain tradingare bwed on standardpracticeamong

-pert floort@@Qrs, pml managersand other importantoperaknwwho knowthe game. If you expectto make money,you mustnot tradothe way thepublicdoes;yQU mwt wb marelybuy, sit and hope, @

$n

You must

and out at th right moments,tradingthe way warlmt tach-

nieiam do. It mwt be your codxnt

aim to refine and poli~ ywr jud~

mont w that you will be able to keep yourulndclearandunbiasedand

firm yet flexible+Hsverbacomoprejudicedin fmm

of

tie market, for if you do you will b like a ship that to &hwQ on high tido and is strandedthere.

vw to pqwxw

for tradingopportunities on initialc&Av-

@t yOUrOQMWUd a k??$erwmborOf V@l%iCC.~ ~ine ChWtS This does not moanthatyou willhaw to make the dmily Qntriea

on a

large

r’mmbn

yartmlf

al?

through

your .cmim?mt,

foryow

TR$$wlwm9

lhgs4

JUDGINGTHE WIKE1’BY TEGTSAND RESPONSES.

he tmtw

Next gat~

out Steel,

Tdepbne

or Can in tho sam

my.

He

some foULowingin Cam, a littlein Telephoneand nothiiig much in

Stiel. Them he triesout the utikL~ groupand gets a Mttie more emcourqp#m@ltOP the bull side, From $his seriesd? teatshe now knows that

he can b~st ad-

out the other stocks maxwe the marlmtby bullingCan. liefeell?l

that

sometimesr~spondti the loadarshipof Can so as to get help or at laaat supportfrom othor Bectionsof the market. He f2nds a little mbre

rmponse in other industrialsend wlwm he has these sizedup he

gcml

ahead and bulls the ones that show the N3st rwqxmse -- Want seem

most

to inflw$ncethe rest of the Lh3t. Olwwre

that he followsthe Une of least resistance. He

avoidsbullingthe rails Mcauao he would therehAve to play a luno hand.

He dm$ not want to take big ~OCk8

his way; Sonmlne

elm

am

40

that.

followed~

StO&@

I?hi&h

standin

He advamcss$ha ones that are easi-

est to put up while requitingthe mnlhst a while the mnallMl&s

Of

purchmes on MS part. After

which he has producedW MS testingopm’ations,

the mom activobiddingup of a Mm@@r numbarof stocks,m-

ccnlrege floor tradmraand the publicto get in on tho bull aide. Am ixmwasing

mwber of stiochadvame on expandingvolumeand a buU mlmg

of sub~tantialproportionsis under wqy. The C. O, furtherencowagaJsthis bullishness~ helphg along wharovorhe O*.

If he w#s ca%ain stQckBor groupelsgging,he will

send a brokerinto those crowdsto bid them up. If wealmcssbrwdcsat anywhere,

he WJJJ1give support. As a good generalhe is alwaysemdaam-

ing to hold &

$ines agairwt

attaok

and to advauaehis front Mnes (tops)

as far as he @mm. @W%@t

1932 by RkWMWd IA Wywoff

TR Section%0 Pago 2

Supptase the bull $vting has now Wan runningfor severaldays and after d.%ingup

the

situation~ a

swi3s

of

tests,he finds that the

buyingpowerhas temporarilybecomesomewhatexhaustmd;that is, most of the peoplewho couldbo influcmcedto go in and buy imve done so; they csnnotwend that same money twicennd thereis a scarcityof other buyers Ho ho cxin

to take theirplaces. Demandhas shrunk. rlOQ#SU@i$?Y

Wi’WtWcX’

the marketwill take;hc

WIUS

fill

around the top of the swingand on the way down. If the rise

in the cwra~s

has amountedto 10 points,he may keep on sellinguntil

it has declined6 points;then he may begin to buy back what he has sold -not by biddingup thasQ stocksbut takingthem as they nre offered. Out of 1,000 sharesofferedat ,atort.nin pri,cehe may take 600 or ’700

l~i~v-

ing 300 stillofferedsnd the marketunchanged. His reaccumulation is

not apparent. Tho marketis stillhecvy althoughhe is buyingback on the reaction.

After a while he absorbsmost of the floatingsupplyat a level abouthalf way back from the top.

The sellingpower is now lessening;

in fact,he is unableto buy back all ho wants; so he drivesseveral stocksdownwardto weakenthe market so he can completehis purchases on the reaction. These drivesare also his txxjts.Whilo these stocks are weak, othorsadvancea littleas a resultof his raisingbuyinglimits. Thus the averagesare scarcelyaltered. Peoplewho are bearish point to the few weak stocksand decidethat the marketis goingmuch lower. They make some ventures

on the short

side.

These help the C. O.

to buy more. He takes theiroffarings. With the bears makingno progressand no more stockpressing for sale,

the market is now in a position

Copyright

1932 byl?iiahwd

l?. Wyckoff

technically’

known as Itsold out!!

TR Section10 Page 3

for 12M time being. AU the offerings

of thosewho sold on the way back

from the top are now absorbed;h@nce,for the n~t five pointsup -- on the averages-- thereis littleoppositionto an advance. The C. 0, thereforeadds to his limos,b@ng

as careM.ly as he can, to ae not

to advancepl?iCfi?S. After the averageshave recoveredabout3 pointsout of the 5 they lost, ha has replacedabout QIl the stockhe wants and beginsa rapidbiddingup of pricesall aroundthe room. The marketadvances to the levelof the previoustop. Here R lot of thosewho boughtat that time ,nndwho held throughthe reactionplace sellingordersso they can get out even or at a smallprofit. This makes a lot of activ. ity and narrow swingsaro~d the old top and chartobserverssay: Here is a doubletop; we shouldsell shorton this. But the C. O. finds that the long sellingcombhed with the shortsellingis not sufficient to stop the advanceof the market. Thereis a latentbuyingpower that appearsto intreaseon advunces. He bids certainstocksup to new highs in order to emcouragethis outsidabqyingpower. The strengthspreadsto other issuesand the market goes on throughthe old high for the averages;bears,findingthey are wrong, begin

to

cover;

their

stop~are caughtin many cases. BUUS who have

been holdingback come in and buy. The bull processionwidensand deqans -- more buyers,a greater

numberof stocksdealt in, a larger

volumeof tradingall throughthe list. And so the C. 0. continueshis operationson the bull side -with the characteristics of the marketin its variousphasesmuch like one anotherin principlelxztdifferingin detail -- until the bull wave has

Copyri&t 1934by Richard1).Vfyckotf

lusted

SO

long

and atendmd to

buyersthat the C. O. is his

stocks;

long

able

SO

WU’IY

stocksand broughtin so many

not otily to unloadeverylust shareof

hat, as his unloading

such a large 9upplyovercomf33

the remaining demand,he also beginsto put out a line of shortsall

throughthe &Lst. He keeps on sellinguntil all of the aemandat the high

level

i.s satisfied. The marketis now saturatedwith stocksend

thareis no buyingpowm left to lift that tremendousload whi.chwould have to be movedin order to advancepricesto a new Mgh lavol. The C. O. sees this situationand knows that tho time is ripe for a break. He bids up severalleadinghigh-pricedstocksto new high levc+ls, whiah causesthe publicto say: The nverugcsare up into Q new high. We shouldbuy xnora. Meanwhile

prices

he has been sellingso many other ntocksthat their

are tmgging under the weight.

He keeps on selling,gettingout

he is adding of the ones he bid up, and gettingshort of thornalso. No~j~ everyhour to the supplyof stocks. The reactionhas broughtthe public throughthe successivestagesof hesitationto cautionend then into a stateof fear. That is, they fear the marketis goingdown but they hope it will racaverenoughto let them out. This emotionalconflicton thb part of the public causespeopleto hang on and do nothing. The market goes lower and lowor becausothere are few buyersexcept occasionalshortscovering. Pricesare fallingof their own weight. Supplyis vastlyheavierthan demand. The C. O. has only to wtit to red.ize a big profiton his shorts,to be sdded to the great profitho has already gatheredon his longs. And with this vast sum at his commandhe knows that he can buy a tremendousnumberof stocksat the bottomof the dd.ine, paying greatlyraducedpricms comparedwith thoseat which he sold. NOW I hav~ explainedall this so that you will get a clearidea of .. Copyrightlq~~ by RkdmuwlD. Wyckoff

TRS43ctdJ3n MI Page”5 b

what is goingon under the mrfsce in the stocksmrket. There is no Compos$teOperator,but tha effectof the cmdxknedoperationsof bankers$ pools,la#$eopm’ators,floor

tradersand the pub~c is$ when

bcdhd down an the tape, of the same effectas if it were produoedby one men’s Opar’htiowl$. It is importentthat you observethe marketfrom this standpoint,end that your tradingoperationsare based,not on what you formerlyNgarded as t~ marketlscharacteristics but on the ftuxk meuatal law of @upplyand dmemd$ which is at the bottomof everymove that is made i~ eva~ stockin the marketat all times. Tlxislaw is workingand will continueto work alwaysand forever. There can bQ no gettingawsy ftom it. It does riotmatterwhetherthe bufingand the WLling$ or both,are gmuine or artificial;that is, manipulative; designedfor a purpose. Study m

apply thiB law in the way outlinedhere,by means of

tlw Wave Chartwhich showsthe comparativestrengthof the Supplyand the Demand;by the Tape ReadingChartswhich are a micro~cop$creproductionof the sesm Iaw$s operations;and from the actionof the market as it appearson the tape of the Stock Ticker. All theoecan be turned to your advsmtsgeif you will followthe methodexplainedin this Cour8e, con@antly studyingand practicingit so that you will.becomehighly efficientin due time. ***

The manketis QUJO oontinul,ly

being testedby the variousnews

items and developmentsaffeoting$Znglestooks,groupsreprasemtingindustries,the fdmncial or businesssituation,etc.

A test of the

stm$ngthor weaknessof my stock,or any kind of a market,is frequently affordsdby thase. For example, thwe were rumorsin June, 1932, that Copyrigh%1932 hy RidMWd I).W@coff

TR Section10 Page 6

both AlliedChemicaland AmericanCm would pass theirdividends. 30@ Allied

stockswere heavy.

Chabxl

made a low of 43-5/8em hour or so

baforethe divid~d was announced,and whn the reportcame that the r&piLardivi~md had been declared,therewas a half-heartedrallyto 47, a good pm% of whichwas quicklylost. This affordedQ test of the timperof the market,which WLM bearish. Bullishnews had only a momentary effecton Ws

stockand littleor none on the rest of the list. The

tape readerl $ cue wmld have been to sell eitherthis stock,or others that respondedpoorlywhUe the strengthstillappearedin AlliedChlemical. One more word abmt these tests$ No matterwho me.kmithem -the CompositeMan,

a

pool manager,large operator,or a big floor trader,

the resultof the tewts show immediatelyon the tape. You, sittingat the ticker,@n observ~at onca whetherthese testsbring a bullishor lmzrishrespanse;and you are just as free to act upon them m if you M

made th-yourself.

Therefore,never fail to observetheseand

othar detaildin Tape Reading. You can never Wll what thay nwy lead

to, or Bighi$. I have darivedsome largeptofitsfrom tape ix@Lcationswhichwst people owerlookad. you to be hi@ly observant.

copyright1932 ~lMLdW’d D. V@dWM’f

CSll

dO

the Sm%

Whi31!l YOU

learn

BEST STOCKSFOR ACTIVETRADING.

For this purposethere are two chiefrequirements:(1) Wid& daily swings${2) A closemarket-- tit enablesa traderto get in and out close to the last sale. A third md less importantadvantage is in a larg# volumeof shareslistedin a stock;this is sort cd?a guarantee‘tMt wham activitybeginsa largenumber of investorsand traderswill participatein the campaignand thus aid in maintoAninga C1OW

market. Wide daily swingsare vital,for withoutthem thereis little

chanceto buy end sell,pay overheadtand. realizea profit.A stockwith a daily averageswingof only a point would be of no use for our purpose, for in order to realizea half pointnet profitwe would have to buy at the bottomeighth,sell at the top eighthand deducta half point for commissiam, etc.

Such stocksshould,therefore,be avoided. As

the daily swingswiden,a stockbecomm more attractiveas a trading madium. A clowemarketin a stockis greatlyaided by its activity becausethis attractsa largenumberof tradersin the officesand on the floor;competitionis keen; fhor traderstry to get their bids end offersahead of the rest of the crowd so

as

to benefitby fractional

moves. AU this keeps the marketvery close to the last sale. By %mrketf? I mean the combinedbid and askedprice at the moment. The last sale is not the market;thnt is markethistory.

Copyright193$?by Mdaixrd D, V&ckoff

TR Smtion 11 Page 1

Most of the prinaipa,l dailypapercthroughoutthe countrycarry in theirMonday editions

a completelist of transnctlonsfor tho prevf.ouo

mx!k. Such a table showsquicklywhic!hstockhad tha widest SWin&l

and

the grwatestvolumeof trading$ These were the loadersfor tho pretious mwk.

This flheet cun be premrved as your wdcly recordand the f’iveor

ton leadersn$arked with a black or coloredpencil. Leadershipis constantlychanging. Past rtico~ds aro no guarsntee far ths future. It is best to take off’a list of the leaderseach week in order to hmne them beforeyou for the comingweek but this is only your background. Tha tape will constantlyt~ll you which stocks are affordin~the best tradingopportunities.Of coursethere are many stocksout$iduthe lo:~dera which have closenarkets. Watch for these. Belov#isa Wxil@ion of the averagedaily rango (difference betweenhigh and low) of five l~adingactivestockshatingclosemarkets duringfour mnnthsin 1932:

!wsdQL

AA&4uMu

&k?AwL

Q#uaAil

.Mi!aL

March

3

2-5/8

2

l-3//4

l-3/4

klpril

2-3/4

3

2-3/8

~

1-1/2

May

2-1/4

2-3/8

l-7/8

L-718

1-3/8

June

u&%!Q

-Ma

4Mos. Average

2-3/4

2-5/8

2-1/8

1-7/8

1-1/2

The dtily range of these stockssometimesamountedto from 4 to 7 points,which mnde tradingoperationson thosedays more profitableif a tradm were on the right side. The dove averageshouldnot be consideredan inucation of the future,but just e.comparison. Duringthis periodthcuwwem many days on which the nest active

Copyright193$! by RJ.chmd D. V&ckoff

TR Section1.1Page 2

of these,Tclaphone,quieteddown to a point and a smallfraction. The sameis trw af the other $tocks;some at timeswere dovm to less than a point betweanhigh and low for the day. But on the averagethesefive gave pbnty of activity-- enoughto enabletradersto get in and out, oftenmore thqn once on tha same dtny,with a profitabove ovdmad. Auburnhas not been includedin this groupbecauseit is in a clast3 by it~ekt. At timesit has a fairlyclosemarkut-- in its periods of preparationfor importantmoves,or in its restingBpells. But one never can tell whan the next sale is going to be 1/2$1, 2$ 3 or 5 pointsaway fron the last sale. It has the reputationof being a dang@rous stock to tradein. I considerit no more d.nngerous than any other if you Understandits peculiarities and regul.ato your tradingto fit them. The stockmerelyrequiresa differmt techniquefrom the other leaders. Everyone+ is not qualifiedto tradein it. We cannotadviseanyoneto do so withoutmuch practiceon paper. He will thus bwome accu~tomedto the erraticchangesin tkds stock.

These

are

clue

to its small capit~8.

of bid and amod ptice is the real m@rkW.

Tkks combination

Do not Comfwe this With

the I.@stALiBJyou cannottrade at the last sale but only on the bid and aakod m@k@% ptiO&

For theserewnm,

it is beat to allow a part

of your overkeadto cover the imvM.ble 1/8. ++**

~

If a tradeonce goes againatyou, it proves

your judgmentwas wrong when you readsit. To averagathe trademeana thatyou inm$stupon being more wrong than you were in the firstplace. Co-@t

1932 hy Rl@ard D. Wgckdl’

TR Section

32

Page 7

Your profitd~es net dopkticm any one trade,but on the net aVEWage of Q long Suqwmim

of trades. W

average.

***

UnlQssyou have a steadyincomefrom your busirmss,pruf%ssionor your investxwnts,it is best to providein advamoeand qot asideyoux livingexpensesso that in trdingyouwlll not be ccmcenne(i with thio vitalmutterand your jud~ent thereby impaired. It is a mistakoto attemptto make money bocausoyou need it, or Mve $o have it for some specialpurpose,for in such cases your judgmentis nwar~ 03ways@o biumd by your necessitythat you do tha wrong thing. It i8 betterto trade on paperuntil you are in such ftnencial conditiontJW your mind 2s properlypoised. Itis betterto test your judgmentwith 10 $harelots of actualstocksratherthan larger lots if you have to use mqm+y requiredelwxdwre. Allow for the pcmlbility af sevemiicqsecutive losses. When you find that you have made many paper tradesand establisheds successfulrecord,beginin a smellway makingactual trades,but, If you continueto make real money on these,do not be misledinto irmreasingtha si%e of your tradestoo soon. You are buildingfor the future;therefore,make each step with caution,particularlyin the matterof incrwwing the sizo of your trading. When you mah monay,do not put all of your profitsinto your tradingfund. Use only half of thmj with the otherhalf pay yourself baok your ori~mil capitaluntil your tradingftmd is sll.velvet. Followthis idea continuallyso thatyou will alwqm have a reserve over the monqyyou are using as margin. *** Copyrkght193? My Makrd

D. V&@knf’f

TRs@ctioll32 Page 8

QC9W

mm’ ts

wa~

If you can realizean averageprofit

of $50 on 100 aharcmper d~y, the totalwill amountto $1,000in 20 tradingdays. I mentionthis in order to show that when you are trading continuously, you do not need to secureve~ large profitsin order to make your eftortapay. Eut thereis no reasonwhy you should come out with wuch a smallaverageprofitas 1/2 per day if you continue to study,practice,Wain your judgwentend dewlop your intuition.

This ?&Mod gets awqy from the big profitidea and teachesyou

to roll up snwllnet profitsuntil they aggregatea large sum. The way to increasothe averagesise of your profitswill be foundin that part of our Courseof Instructionwhich explainshow to trade for the 10P 20 and 30 point moves. With that includedin your tradingMnowledge~you can use the presentinstructionsin tuki.ng your positional.md, whom indicationsfavor,hold thosepositionsfor the ilnportunt swings. Your originalrisk of 1/2 to 1 point taken on the basis of Tape Wading Ohartindicationsmay thus resultin profits which are Iar@e in proportionto your risk. When you are able to judge the approximatenumberof points that a stock @houldtravalin a certaindirection,it givesyou the courageto go in, ~ramid ad hold on until that stockmalws good, or warm

fap

will

you ?@@ it will mot. And this one factorof knowing‘thow do

xore to increaseyour averageprofitthan any other.

That part of the Coursealso givesplans for pyramidingat certainlevelsand under certainconditions,by which you can derive more net profitsout of some moves than the totalnumberof points from high to 30W. WMre,to ,-

As soon as you can arrangeit, have a little

privateoffic~of your own where you can installa tickerand a private oopyright193’2~ M&lsa’dI).WyOkoi’i’

TR Section12 Page 9

tdephane to your brokerl~ordor clerk. It is best not to let your friendsknow where they can find you so they will not botheryou dur$ng the day and you cm concentrateon the tape in brder to get the best results. If yQu ccnnotdev~teall your time to the tape duringmarket hours,perhnpsyou can have a young man or woman assistantkeep your chartsfor yau so that you can go in at convenienttimesduringthe day and find Wf@@lin~

up to date. You will find this nrr,nmgement very

helpfulin gattingthe best results. If tl&eamountof your tradingwarrantsit, your brokerwill probablybe glad to provideyou with a smallprivateoffice,ticker and telephonq. If not, you can make a startin his customers room, end, as you WJd

up your accountyou will undoubtedlyfind it profit-

able to get into a sacludodplace whereyou will.not hear the board room gossipand will not he botheredby peoplewho want to give you tips and so-aalledin~ormation.Of course,that sort of thingmay not confhe you but it is a handicapto most people. Keep as many chartsas your tima will permit,or your assistant con keep for you. The largerthe numberof’charts,the greaterthe varietyyou have to selectfrom, and the more opportunities you can take advantagoof if you have the necessaryworkingcapital. This is particularlyadvisablewhan you are tradingon paper. Ten chartswill give you far more practicoand experiencethan one chart,and one hundredchartsten timesmore than ten. ***

Ch~i(wa of broker~

Your brokershouldbe able to give you

Copyright1932 by RichardD. Wyckoff

TR Sectioq12 Page 10

promptand satisi!a&ry mecu~on of orciem,within one or one and a half minutesfrom the tisw you place the8e orders. Executionstaking longerthan this mmtimo$ xwsul.t from congestedconditionof the floor, or

on wLres w telemos

duringvery activemarketswhen everyonewho

Mndkea your ordersis mmmawded

with MAness.

In ordinarymarkets,

however,a mimte or ao ix time enoughunleusyou huve sufficientconfidencein yaw brokerb let Mm use his judgmnt in waitingfor fracWmsUy

bettirmkats

b@forehe tradesat the bid or askedprice.

Adv5m your Mokor just how you are trading. Let him undmstandyour raquimmmts.

You trade activdy, p&y mauy cmmismions and

am, therefore,worth mora to Mm than sevmal clientswho get in and out only occqlli#nally* Ho shouldbo wiUing to give you specialattention. You cm a&Msa Mm when your ordem come throughby hatingthe ordain clerkmmtion your wame when ho plmms the order to the floor.

All them litKieS&ran-a

will add much to your prcfitsin the long

run. *2** All

of your tradesshouldbe based on a

line of reaso@ingwhich ia mom or les~ settledin your mind —

a set

of reasonsWh&ch have bemn te$tedand tried~ you, so you lmow as a rule

which wQl work and -oh

so &md

YOU

will not. When you find resultsnot

shoulddudy amd loam why; pmhqm

you are experimenting

too much with nm ideas. If m, go back to the ones whichyou have promn. Controlyour loismaand your profitswill take care of themselves. Have a spacein your Recordof Msults showing,in each case of losingtrmie$,tha causeof that loss. Copyright193&lby Riohard1).W@koff

TR SeCtioll 12 Page 11

You may, especially

in the beginning, or even after you are

well started, find yourself running into a series of losses. Do not let that discourage you.

Go back to trading on paper.

Depend on the law of averages

and your well-tried practices

to yield a profit over losses. Never be concmrned about any one unsatisfactory trade.

It is

the net result.that counts, oad after a long series of trades. You will learn more from your losses than from your profits; those tell you what not to do.

-%

*

%-

Practice Persistently. The more time you devote to stock trading, the more profits you should derive from it.

If convenient,

keep your charts in a pocket-size book and study them in spare moments.

Ask your broker for the tape after it comes off the trans-

lux; take this home and study it.

It will enable you to review the

dayts trmsactions, and to observe small details that you might have missed. Practice on paper With other stocks than those in which you are trading. Dull markets give ample opportunity for this. Continually absorb all the information you can on this subject. Read all available books for valuable sidelights.

*%’*

Copyright 1932 by Richard D. Wyckoff

TR Section 12

Page 12

CHART STWIHS.

Amer&mn Tdephone & ‘Ie@raph At Bottom d’ ReactionJuno 2, 1932. Note: In theso@x@Q@es~ wa will $14u@rat@ what CS31 be done with avera~eJudgmwmt,Qmo with 6wuxUleatjudgmant. No one can tell just what we would have donq~undm th~ ciroums$sncss~ but ~ damonstrat,i~g wbt might have been done, we can learn how, @ *o* ctndsantpractic~inareaseour efflcienoyo This Tape RqadingChsrtbeginsabout2:30 P. M. on Jum

lst,

with the StOfJk at %-3/8 m the downwardswingfrom 91-3/8on the prewiou~day. The ahart @Iowsthat thereis littlesupportfor this snd carryit overstock. ht US assumethat we have a shortpofiition night. At W

close ther$is a rally of only l/4point at &5-1/8.

On June 2md the stickopwmd with 3100 sharesat 84,-1/4 -down 7/8 of a point ovwn$ght. Thereis not so much stockpressing but thero still seemsto bo lack of support. Two riil.lies of 1/8 point each are the only onos until the price hits 83-1/4;then there are two of l/4 each ~d a line indicatingslighthesitationat 83-3/8. Anotbwrdeclineta 82-7/8end a 3/8 point rally occurs. The trading*one $.snow confinedto tb 3/8 between$2-7/fl and 83-1/4. The stockbeginsto get a little~upportthere. MOO is taken at 83, then 300*ML

Two smalldips on light volumeand 1700.83 100.1/8 600.83

3oo.1/4 700.34! 600.!s3100.1/8. At and under 83 we find trsnsactionshave totalled6300 @harew. The stockhas twicerei%sedto go below 83$ and the sale at WAJ,/4gave the up signal. Stop on our short

Copyright193$!byl?ichardIl.I&oknff

TRs’ecti@nC$ Page 1

stock (if any) shouldnow be broughtdovm to 83-3/8

and a long position

takenif the price touchesthat figure. That mums a doublebuyingstop at 83-3/8. The price touches83-3/$. This coversour short stockand puts us long at that pricewith a stop 1/4 under the low of 82-7/8;ViZ.

,

82-5/8.

Telephonenow workflin a 1/4 point rangein smalllots Cxcopt 1,400.83-l/2. The supportline is now 83-1/4and only smalllots come

in

at that.

FollowingUXL83-1/2, the stockbreaksthroughon the up -.

side end makes 8A. W3 raise our stop to 83--1/8. Soilingis clear to 84-3/4,then a littlereactionto 84.

Supportjust above Q is much

strongerthan pressure. The sellingdriesup again and the stock

pops

up to 85-1/4. Meantimewe have raisedour stop to 83-3/4. At 85-3/4therois littledemandand a reactionsets in; a 5/8 dip to 85-1/8,then a rally of 1/2 to a lower top, 85-5/8. This formation above 85 does not indicateany seriousdecline. A recoveryof nwu’ly~ pointscalls for about 1-318 reaction,but it falls 1/8 shortof this and the dip ends at 84.-1/2.Pressme on the decl&e is neitherlightnor heavy; it is a normalreaction. The reactionwears itselfout.

Demandovercomessupply. The

stock soon sellsabove85 and continuesstraightup to 86-1/2.

ThiS

is new high ground;we raise our stop to 8&l/4 .cndawait furtherdevelopments. The 1600.86-l/2bringsa 3/8 dip to 200.1/8. On the next upward surge the stockonly gains 3/4twith 500.86-7/8.The upwardthrustsare shortened,incticating anotherrcnction. So we pushour stop up to 86-3/8. Addingthe sal~sabove that figurewe find that 10,000 shareshave come into the markethere and as we are in the last hour of the trading,we may decideto Bell.at the market. If we do not,

our stop is caughtend we have

the followingnesult: Bought83-3/8. Sold 86-3/8. Profit3 points~loss 1/2 point overhead;2-1/2 pointsnet for the dtay. Copyri#lt1932’byRichardD. Wyckoff

TR SectionCS Page 2

,

Amrkcan Tel@phone& Telegraph At !fO~ Of Rally Jum 1%%6, 1932* This @hartbeginsat 86-1/4on the upward swing from 81 On

June gth. our Wave Chart at the opening gave us an upswing. nothing until the chmrly

WMwd

U.M

Me do

of supportunder the light

pressureat $&5/$ and 3/4 tells us to go long dth

a stop

1/4 to 1/2

below #Q bot$m of the dip to 86-5/8. If we put our order in when the stockis ~t or close to its low, we probablywould pay 87 for it, and mm stop dmild, therefore,be made 86-3/8-- a risk of 5/8. The stockworks out of this rangeon the up side and on a raactionto 87-1/2meets mppart amouutingto 2500 shares. On the further1/2 p~int bulge to 88, observe

the increasein supply--

1400.8793/4 300:7/8 1700,88. The ga$n over the previoustq at 87-3/4iB

only 1/4

point,@d the remtim

to 87-5/8i~ 3/8 with

1000.87-5/8at the bottomof that dip. A rully

of 3/8 to 88; another

l/4point dip? highersupport;then a snap up to 88-1/2on very light volumewith 5(M)at the top and an immediateracemion of 5/8. The tmdimg zone i# maw 87-7/$to 88.1/2.

On tho last dip

1100 came in at 88-1/4;threw WQSno demandat 1/8 or $8. Weakness. Vh now push our stop up to 87-5/8for we are suspicious Of t~

long

side,and we decideto sell on the next bulge,or raise our stop further. The next bulgeia to $8-1/4.

We raise

our stop to 1/8 under

the last low, whi.chwas 88* ad when thereis anotherbulge on light volumeto 88--3/8, we raise the stop to 88-1/8and doubleit; that is, we #en twice as much as m

are long.

This givesus a shortposition

at 88-1/8. m immediatelyput a 1/2 point stop on our shortwhioh EMIMS

copyright193ZIby ~Ch&Pd

~.

Wyckoff

TR SectionC6 Pa$e 3

the 8tOp 88-5/$. Net profiton long trade,5/8. The volmmei,snow very light,and a tebnical reaction

at least

is indicated.

There is a dip to 8“?-1/2j anotherto 87. The ralliesme fractioml at fir@j 12hm a 3/4mUy

from 87 with Voltiepeteringout at

the top. A 5/@dip and a 1#4 ri%ly have

the stockat 87-3/8with 800

sharesat the &osel and as the indicationsare bearish,we lower our etop to 88 amd mrzy the tradeovernight. Next dqgls opening,June 16th, is at 87-1/2and the stock imdiately redumm its decline. The very light volumemakesus suspicious of & rally ao m

tell our brokerto cover on a 1/2 point rallyfrom any

new low. At %6-1/4a rallyof 3/8 follows;thm later extendsto 3/4 and catchemour S*. All but l/8 of this rallyis soon lost, but highersupportappecrs-at first

1/8 atmve the previouslow, then at 3/8 above. l?ohm!iS light.

It looks

like a furtherraUy.

We do not go lang becausethe indications

are beari~h. Wm merelywish to sidestepmore of a rally and pmh.apmget a new and high= rollingpoint. We wish to see how the stockacts on the next bulge -- whetlmrit haa power to go through, well above 8!3, orif supplytill ommcocnedmand agein above that figure. OUr #JtOpthat W~S caughtat %-’?figave us 1-4/4 point grow prof!kt. Volumeincreasesslightlyon this furtherbulge:600.88 400. L/8 200.8$

700.87-7/8.

But itis

now 2 PM mdtith

the tradingquieting

down, it seemsunlikelythat therewill be activityenoughto give us a good swingin the next hour. So we Btmd pat for the day, with 3/4 pointnet to our credit. We might have covereda littlelower on that second morning dip from 87-1/8

to 86-1/2,

or pushed our stop down further

ao as to gain an additionalfraction.

Cop@@t

3932 by Ri@m?d D. Wyckoff

TR Section

CS Page 4

b

!!

w . *

Open

close

‘-”-w

I

Down

on

dune

27

Allied

Chmical

At Bottomof’Reaction June 2, 1932, This stockhas come down from 51, and at 2 P. M., June lst, it standsat Q.

It dips 3/S below that,and jumps7/8 point on one sale

of 1200.48-1/2.‘hen some 1/4 point Wrigglesbet~eexl 1/2 ~d 3/4~ a dip to 600.4.#-l/8, and a rally on smalllots to 48-7/8where it closes. The opening,June 2nd, is 1-1/4wints down,~th 1300at 4’7-5/$; then 900.l/2 400.5/8 UOO.3/g 100.l/4 500.llg 400.47. A rallyof 3/8 and a dip to 47 mskes a 3/8 tradingrange. We retch

to see wMch

way the stockwill go out of this ranget The first signalis bullish-100.47-1/2,3/3 higher. Next supportat 47-3/8;anothergain of 1/8; stillbullish. l/4 point range3/8-5/8Sthen a l/4 point ~P be~.~~ that to 47-1/8;higher supportthan the formerlow. If it does not go on through47, this indicationis bullish. 500.47-1/4 100.1/2

makes a gain of 3/8 after 1/2 point dip -- stillbullish. When the price recoversto 47-1/2,we have a forecastof a breakingout of this range and decideto go with it eitherway. We place ordersto go long cm stop at 47-3/4or shortat 46-3/4.Our long stop is executed;this cancelsth~ sclllngstop. We immediatelyenteran order to sel$ 100 on stop at 1 point down, which happensto be also at 46-3/4. Thie is intendedto limit our risk on our long trade to 1 point. The break throughon the up side makes 48-3/8. AU but 1/8 of this recoveryis lost, but anotherrally startsfrom 47-1/4.There have been frequentskipsof 1/S to 5/8; these coming

at

(hpyright

TR Section

1932 by RichurdD. Wyckoff

the bottomof the re-

C.!S Page 5

cemt decline3Mic,ntea lightening

pressure. ‘l%isis bullish. From

47-3/4the n=t sale is 500.48-7/8,then 400.1/4 100.1/2. Now look back over the past few swingsand note that the last bottomwas rntade on 100 shares3/4 point down from the previoussale end the followingdip wus 400 at 5/8 down. Then after1/2 point rally on 100 share lots tharoiH anotherdip of 200 $haresat 3/4 down from the last sole, Someone is evidentlytryingto mark this stockdown in order to bring out fresh selling. This means tha~ t!aeywant the stock. Buyingis betterthan the selling. There is a bulge to 49-3/4and a dip back to 49 where 1300 share~are taken. Than the price snaps straightup to 50-1/4,then 50-3/8. we raise our stop to 48-3/4on both lots. Volumeenoughcomes in to bring a reaction

to 49-5/$but the stockclosesstrongat 50-1/4

within1/4 of its top. Inoreadxqjindicationsof strengthhave led us to carrythe trade overnight. Our stop is raisedto 49-3/8assuringa profitof l-5~8if the stop is executedat that exactprice. Of course, thereis never any assuranceof this,especiallyin a stocklike Allied ChemicalWhiCki, that

M

the chart shows,has numerousskips,indicatinga market

is not at all close. The activityof this stock,however,compensates

for this additionalfactorof risk.

Copyright1932 by Richardt).Wyekoff

TR SectionCS Page 6

Allied

A-L

Ghernicu7

Bottom

dune

Of

Reaction

2,

/932

—

5/ Up

to

53~

—.

Ju77e 3-- f

50

-— -,-.

T 3 25

620

000/0/0

4t3v

) -.

00

Copyright 1932 by Richard D. Wyckoff

,’s

Lonfg

TR Section CS

Page 6-A

AlliedChmical At Top of RaUy June 15-16,1932.

On June 10th this stockmade a low of 4“/,then ralliedto 54-1/2cm Jwne Uth, reactedto 50 on June 13th and closedat 53 on June I-4th.It opensJune 15th at 53-3/4.

Our positionis neutral.

The first Mying wave in this stockamountsto 5/8. The next down wave wipes this all out. Then an up wave of 3/4 and a norml half way dip pictureis bulli~hso far, becausethe stockhas worked of 3/8. ‘l!h@ out of its 3/4 point range on the up side. We give an order to buy smd get it at 54-1/4. Our stop iS 53-1/2. Next a rally to 5&5/8.

The upward wing is not very vigorous.

It is a driftingupward;littlepower under it. The gains are slightand the volumeis small. Above 55, the formationbecomeshorizontal. A 1/2 point CUP to 54F3/4bringsin a little support;it indicatesauaother bulge,and the stock runt up to 55-1/2jwith two 900 sharelots at 1/4 and 1/2. On two sales100.55-1/8and 200.54-3/4the stockloses nll the rally-- n sign of weakness. We must get out on the next bulge. Then 1.200.5570iU/4

200.3/8. We @ve an order to reverseour position

(i.e., C1OSQ out our long commitmentand sail shortan equal quantity, ) and get 55 for one and 5%1/8 for the other. We place a 5/8 stop at 55-3/4on our shorttrade. The formationis now pointedlike an arrowhead. The stockhas coma to a balancewith 55-1/8formingthe point. It shouldpass out of that rangeon the down side,unlessit contradicts its sign of weakness. The tradingrmgo narrowswhen the stockdips to 54.7/8and

Copyright1932 by RichardD. Wyckoff

TR SectionCS Page 7

mllies to 55-1/4, Note the dip of 1/4 point belmw the critical 55-1/8level and tlm ral.~ of only 1/8 above that. This delicate wile

shows

that

the

bnlame of pmmr i~ stillon the down side.

A furtherdip to 54-3~8and l/2 poht rally;then the stock. sdd.fi

at !$4 m two mlo$.

It x?all$mtQ 54-9/$;th~ tie$ a trting

rtmgo 54-1/4-5/8. Hem we bting w

stop down to 55-1/8(our sell-

ing price)amd carrythe $mde ovmxlght. Havingrd.liedfrom 47 on

200.54the formatiomlmxmes wmdgs-$haped, with the point around54.,We bring our @tip down to ~-X/4 as protectionagaimt a rally and this stop is oxeoutedat 54-1/2- & net profitof 2/8. Now we am neutm+l,aweit-

The ml,ly

contixnum

to buildup end we watoh to see whetherthe

up swinghas power enoughto go in%o new high ground,above 55-1/2. Two rallies,the first to 54-7/8ml the secondto X&l/4S =e betiate~ wiped out -- weaknessagain. Mow we look for a chanceto sell on a bulge. On the next Upwardsurgeit mkec$ 55-114 tigain, 54-3/4. Supplyis greaterthsm tm demmd.

tbn

reactsquioklyto

We put in a short selling

order snd get 5&l./2for %t, Our stop is 55-1/2. The steadydecline continuesand the stock closeswithinl/8 of the dayts low, tith 500.53-5/8. WQ bring

our stop down to our Bellingprice (54-1/2)and carry the short

The mall sectionof the VerticalLine Chartindicatesthe sub-. sequmt actianof the stook,which declinadto 43 on June 27. The action on the two as

dmcr$bed in tho Tape ReadingChartwas, therefore,a

fair exampleof a turningpoint for a normalreactionwhioh developed into a substmtial dQwn swing. Copyright1992 by RichardD. l?y~koff

IT’SectionW

Page 8

56

~hemicu? At Top c3#’ RuhJ dune /.5- /6, /932 ##17ied

32

z

Per 4!ict37 line S

Chart

how~ngthe Tip *

Detuiled

Z3elou.

—

,.4 ‘.

J. I. CASE Reactionof!darchJJ$,1932.

This stockopens at 37-1/2,declinesto 37 and immedhtely recoversall but 1/8 of the decline. It then dipo to 37-1/8and the next sale i~ 37-1/2. All this is an indicationof $Wx@h tbo abilityto recover;next,

the 3./4Pint dip ad ~.~

the openingprice. Thereis more streqgth* W

-- first, recovew to

weOkn@WOW

@ long at 37.3./2 with a atop at 36-3/4. A tr~.ding zone

37-1/2to 3/4 is @stabli#h@d,and after a dip of 1/3, the price moves up to 37-7/@,1500 being taken there. Another1/8 dip and 1300 mcm are taken at 37-7/8,followedby a straightrun up on substantial. to

volume

38-3/4. A reactionof 1/8, than one of 1/4; 1/8 rallyand another

dip of 1/4, makinga tradingacme 38-3/8to 3/4. Note the dullnessbetweenU A. M. and noon -- a bcwlsh sign on a rally. As the trading stringsout to the righton the chart,we find that Q con~iderablevolume horizontally, wc is comingin on this bulge. Adding the transactions note that 8400 shareschangehanda at tho 38-3/8level and above. On the first run up we *we movod our stopup to 37-1/8,then to 37-3/4. Wo now cbngo it to a doublestop at 38-1/4,for if this 8600 share~is not followedup ~

furtherpurchases,we expectthe price

to decline. And if it bxwks even 1/8 below the 38-3/8support,we want to get out of our long stiock and go short. The prico touches38-1/4,which givesus a not profitof 1/4 on our long stock and puts us shortat that figure. Our stop on the short tradeis 39. Copyright1992 by Richard D. Wyckoff

TR

&@iOKk

CS Page 9

In a t%w mlos nfterthat, the entiregain for the day is lost; the price touthos37, the low point of the qmning clip. This iS 1-3/4 down from the top and cane for a 7/8 rd.ly;

but the rally falls l/8

shortOf half wqy. TM volumeis light-- bowiah. Our stop is first mowad down to 38-1/&,axM3When the rally beginsto fade out, we make it 3’?-7/8.F~m thmt timelon,there is a succ~ssionof naw lows and weak rallie~, We keep movingour stop down -- first to 37-3/8;then to 363/4;

Ih%n 36-1/4;

then ?5-3/4

and finallyto 354/4.

Nothing that

has Mppened $o far has cmumd us any uneasinesson this short sale.

After the 3/4 rally from 3’7, not~ thut the subseqwnt ralliesare as follows:l/4P3/4,

3#$, l/4fi 1/4,

the stookis j&L/4,

S@

at

1/$, 1/8, 1/2, l/4,

1/411/8.

NOW

that pricewe are 4 pointsto tha good on

paper,with a stop at 35-1/43so at least 3 pointsare assured. We may’ho smartsmugh to coveron the declinewound 2 P. M., or to shoveour Htop down withinl/4

of the bottom$becausewe can’t

expectit to go ri@t on down withouta rally. But the rally of 3/4 to 35 wttrns ua that th~ stickia meetingmore resistance~%low there and when it ~ps again to 34+’2 we give = order to buy it at the marketand cancelour #top. We have to pay 35* which give~us a @?oss profitof 3#&

points,or a net of 2-3/4. We standpat for the rest

of the dq.

TR SectionCS Page 10

AMERICANCAN Cmblmd with fivo leaders Juw@ 3.4-15-16-17, 1932. ThisITapeReadingChmt of AmcmtccnCan is combinedwith a Viave Chart of’fivo Ieaders@ of which Can is me; the otlmr four am Anncon&, Gmeral ElecWc, Can

the

f!ctlbws

Oemml

the five

more doWmnt

Motoroand Steel.

It is

rmmkable how closely

leadms. Pmdlapethis is becauseit wa6 at that in its marketmovawats than the othersamong the tivu;

but this is just what we am lookingfar — n stock that can bo plotted wuttha @W

$n which the ~&Vf5

(hart

aids we in im~qmb$

the Tape

Rmd$ng Gharlj.‘PhuaWQ cm antkaipatethe moves ad trudewith profit in the one stick. !h qmning of Can, June 14th,is 200.38-l/8. Them ia a quick declineof l@

pointsto 37; thm a mlly of l-1/2points,whkch shows

that the greatestpowm in Can is on the W

side. The Wave Chart mm-

firm this by’advana$ngusar~ twioe as much as it declinedfrom the opening. Follow@g the straightupming of l-1/2 pointswe expecta decline of 3/4, but the dip 18 only 5/8 —— a mmfirmuthn of strength. On Ws

dip W* go long at 3$, tith a stop at 36-7/$. WMn the

price goes tq a new high, 38.-5/8, we move our stopup to 37-5/8. When aftera l/4 @oint tradingrange,Can touchesthe high point againwith 200 sharesat 38.5/8,we raise the stop to 38-1/8. A fux!thar bulge end n new high is made -- 1000.39-1/4. The Wave Charthas hetietofore mmf$rmed the bullishness,but the down swing from that point,tihefourthfor the My, is a littlelongerthan the third down swing,and we

got

ready to cell cm the rally,unlensCan goes on

Copyright1932 by RichardD. V~ckoff

TR SectionCS Page Xl

throughto a mm high with considerablevoluue. Can SItOpS

agdn

with 900.39+4.

W+ bring our stop tightUP

under it to 39 and mko it Q doubh stop, &o that whm the pric~ rGcedm againm@ .nreout of our long with a gros~profitof 1 point and are shortat 3$)with Q stop at 39-1/2. After touching38-7/8,

there

is Q wcmk rtily to l/8 lower thnn

the previoustop, and the Wmo Chart recordsa fmcticmnll,ylo~7ertop, whichis a cotiimation that the short sido is the right one. (Mm d$clinm to 38.1/2,rallies1/4, Stop is

moved dOWn

to

39.

then bcicks up to 38. Our

The ViaveChart has been bemish, but the

followingral~ in th~ Wave Chartis longerth.m tho previousone, and th@ dip whimh followsis shorterthan tha previousom.

This is our

warningthat d ralil.y is coming. We cover our shortat the marketand get it at 38-~/13, which is 5/8 gross, or 1/8 not. Added to the previous profitof 1 paht gross,OX’l/2 net, xmhs 5/8 mt profitfor the day. The olo~ingpniceis 38-1/4. From now on, we suggestthat studentsuse this comnbimtionchart for workingout correcttradesbqed on instructionsgiven%n this md otlm’CM@

SQudiescontainedin this Divisionof the Course. Also that

the rwult of theirpaper tradingbe sent to w in writing go over and ci%mkprogress

so that we can

and correcterrors. This will give us both an

opportunityto see wlwthertheseTape ReadingInstructionsand examplesare being fullyunderstood,and in case of any misconceptj,on or departurefrom pmpm

pmcedulm, we shallbe

able

to make corrections.

Copyright1$)32by RichnrdL).Vyokoff

\/

‘“,

--4

$? ii 8

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