David H. Weis - Trades About to Happen: A Modern Adaptation of the Wyckoff Method

T RADES A BOUT TO H APPEN

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T RADES A BOUT
TO H APPEN

A Modern Adaptation of the
Wyckoff Method

David H. Weis

Foreword by Dr. Alexander Elder

Cover image: istockphoto.com/liangpv
Cover design: Wiley

Copyright 2013 by David H. Weis. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:
Weis, David H.
Trades about to happen : a modern adaptation of the Wyckoff method / David H. Weis.
pages cm -- (Wiley trading series)
Includes index.
ISBN 978-0-470-48780-8 (cloth); 978-0-470-48780 (ebk); 978-1-118-25870-5 (ebk); 978-1-118-23362-7 (ebk)
1. StocksCharts, diagrams, etc. 2. Stock price forecasting. 3. Investment analysis. 4. Wyckoff, Richard Demille, 1873-1935. I. Title.
HG6041.W885W45 2013
332.63'2042dc23
2012046824

This book is dedicated to my wife, Karen,
and to the memory of my parents.

For the gods perceive things in the future;

Ordinary people things in the present;

But the wise perceive things about to happen.

Philostratos, Life of Apollonies of Tyana

CONTENTS

FOREWORD

W hen you go fishin' in a lake, you don't just row out to the middle and throw a line in the water. You go where the fish livearound the edges and near the sunken trees. Same way, you enter trades near the edges of congestion zones, where bulls or bears are so exhausted that a small amount of pressure can reverse a trend.

I've often heard these and other pronouncements, delivered in David's Southern drawl, in my Traders' Camps. Now it is a pleasure to see them in his book, available to you even if you can't travel to a week-long Camp and study with David in person.

David is a quiet man who spends day after day in solitude in his trading room, but he has played a large role in the development of many serious traders. When discussing markets with friends, I often hear: This is where David would draw a line. His way of reading charts has been taken up by hundreds of his students.

Expanding on classical works of Richard Wyckoff, written almost a century ago, David has built a modern superstructure of market analysis. The changing heights of price bars, accompanied by rising or falling bars of volume are the basic irreducible elements from which David builds his market analysis. He uses these patterns to read the behavior of crowds across all markets and timeframesand then to place his orders.

All trades leave indelible tracks on price and volume charts. David focuses on themand these charts speak to him. Now, in this book, he teaches you to read their language.

David's sharp focus on price/volume behavior reminds me of a teacher I had in medical school. She was shy and a little deaf, and usually stood in the back during grand rounds. We knew that she was so observant and so attuned to patients' body language that when professors disagreed about a diagnosis, they'd ask for her opinion. A person who watches intently, on the basis of a great deal of experience and without any hidden agenda can see deeper than most.

A careful reading of this book will open your eyes to the huge importance of false breakoutswhat David calls springs (when they point down) and upthrusts (when they point up). He promises: once you become attuned to the behavior of a spring and upthrust your eyes will be opened to an action signal that works in all time periods. The spring can provide the impetus for a short-term pop playable by day-traders or serve as the catalyst for long-term capital gains.

Having sat for hours in the back of the room while David was lecturing and showing trade examples, false breakouts have become one of my key patterns to trade. Now you can be guided through dozens of charts by David, moving forward bar by bar, as you learn to read their messages and anticipate trend reversals.

The chapter on absorption will teach you to gauge the strength of the current trend. Is that trend moving forward like the Greek phalanx marching in step across the Plain of Troy as David puts itor is its advance being absorbed by growing supply, which precedes a reversal? Now, as your eyes move across David's charts, you'll see how their price and volume patterns reveal their secret weaknesses or strengths.

Do not rush as you read this book. To fully benefit from it you need to let its many messages sink in. Be sure to apply David's concepts to current charts, watch them open up to you and become more meaningful before returning to the book and studying another dozen pages. This isn't a quickie bookit took David years to write, and the more attention you give it, the deeper will be your benefit.