A momentous occasion

Sofearnot

Everybody has indicators that they prefer. What is your favorite indicator/scan/method to see if a stock is under Accumulation?

I have generally used MACD - a positive number would indicate accumulation ("buying"), but it would also be positive at a high at Mkt tops, when it is about to start a Decline.

Sofearnot

There are numerous methods, I just wonder what people Use to answer the question "is it going to CONTINUE to go Up?" What is the most Accurate/reliable?

Sofearnot

Could use Volume, but that is again quite subjective.

markd

Here's my take on accumulation. I come at it from a Wyckoff perspective. For Wyckoff, accumulation is NOT rising prices - that would be the mark up phase.


My understanding of his use of accumulation is that it means large interests are adding to their positions WITHOUT raising the price (actually, by keeping it within a range). (He called large interests operators or syndicates or the "Composite Man"; today they would be mostly fund managers of different kinds). Distribution would be the opposite - operators selling out of their positions without lowering the price. Accumulation and distribution occur because large operators must take their time putting together and taking apart their positions. They cannot buy or sell all at once because they would overwhelm the market. And, they want to keep quiet their interest in a symbol to avoid others front-running them.

Years ago, Joe Granville said you could detect accumulation and distribution using his method called "On Balance Volume", or OBV. OBV is calculated by keeping a running total, starting with an arbitrary but very large number (maybe several multiples of average volume, to avoid getting a negative result), and adding the total volume for days closing up, and subtracting total volume for days closing down. Accumulation was occurring if the OBV was generally moving up and price was not. Basically, the volume was higher on up days and lower on down days, so even if there were more down days, OBV could still rise. Distribution would be opposite - OBV falling while prices stay up or rise because volume was generally higher on down days.

Since Granville, a number of other aggregate volume indicators have appeared, each with a variation on the proportion of volume to add/subtract to the running total. One of these is Alexander Elder's Force index. Unlike OBV, it takes into account the size, as well as the direction, of the price change from one close to the next. And instead of a running total, the bar to bar results go into an EMA. The default length of the EMA is 13, but longer parameters work also.

https://school.stockcharts.com/doku.php?id=technical_indicators:force_index

Here's a chart example of Force showing long term accumulation



This is a weekly chart, and Force is the fouth window down from the top. The Force parameter is 52 weeks (i.e. a year). The squiggly lines are MAs, but you can ignore those.

At 1, price is making new lows, but Force does not. So all that selling from June to November did not undo the heavy buying in March. So those buyers are holding on even though they have a losing position.

At 2, 3, price challenges the low at 1, but each time Force is higher, showing new accumulation (meaning, during the range, net buying (as Force calculates it) has been better than net selling).

Eventually, the operators have built their positions and mark up begins.

It's worth noting that prices can rise without accumulation happening - operators are not interested in every stock. Also, the accumulation pattern can fail - operators are not infallible.

P.S. I'm not saying this symbol is a buy (or a sell). I'm just noting that it exhibits behaviors that I think Wyckoff would characterize as accumulation.

markd

P.S.

Here's the same symbol over the same period (roughly) with OBV and MACD:



OBV makes new lows during the range period, which is misleading. Or, you could read it as price not confirming volume, so price is strong...

MACD continues to rise during the range period, which might be taken as confirmation of the Force interpretation - so maybe the two together - since one measures price and the other volume they are not measuring the same thing twice- could work pretty well.

markd

Here's another post with a Wyckoff chart accumulation analysis (note it's on a daily time frame with different parameters):

https://scan.stockcharts.com/discussion/2500/wyckoff-and-twtr#latest

Sofearnot

Excellent analysis & commentary Mark

Sofearnot

Adx Signal Line confirms the Strength of some of these Movements.

Sofearnot

Notice, the slanted 'W' on the OBV from the Apr '21 Peak to present. the m.a. makes this More obvious

lmkwin

Excellent comments and analysis on this thread. I don't use OBV or Acc/Dist per se, but it does show up on the price chart. I do like the horizontal nature of Volume by Price. You can set that one up on both the time charts and the PnF charts. Also, I have to do an obligatory plug for PnF, which takes the same data, and displays it in a different manner.

This chart is a 3% by 2 box reversal chart.

Sofearnot

looks like it is finally running-out of Steam; rs has been stalling the last month and refused to go higher. obv trend is softening too. another significant down day and it will break. Time for stop losses...

Sofearnot

that is in keeping with lengths of time of those past movements

Sofearnot

I'm Calling the High on this one, yesterday specifically.

Sofearnot

yeah buddie

Sofearnot

Even tho Brazil is buying Cheap petrol by the dozens from Russia, right now, the stock is Still down 2% and some change