Accumulation Distribution Testing Selling and buying climax

 

Once the campaign has begun, the price action then follows this typical pattern, where the market is repeatedly moved higher and lower. This type of price action is essential to 'shake' sellers out of the market. We can think of this as shaking fruit from a tree, or as we do in Italy, harvesting the olives! The tree has to be shaken repeatedly in order for all the crop to fall. Some of the crop is more firmly attached and takes effort to release. This is the same in the financial markets. Some holders will refuse to sell, despite this constant whipsaw action, but eventually they give up after several 'false dawns', generally on the point when the campaign is almost over, with the insiders preparing to take the market higher with fully stocked warehouses. So the campaign comes to an end. It is all over, until the next time!

The insiders now have a willing supply of victims to whom they happily sell to in ever increasing numbers, but careful never to sell the market too hard. Prices therefore trade in a narrow range, sucking in more buyers on each dip. Finally, the warehouse is empty, and the campaign comes to an end. Fig 5.11 illustrates the typical price action and volume schematic of the distribution phase

The colour of the body of the candle is unimportant. What is important, is the height of the wick, the repeated nature of this price action, and the associated high volumes. This is sending a clear signal that the market is ready to move fast, and as the warehouses are all empty, the reaction will be quick. The insiders are now jumping on their mats, and heading off down the helter skelter, back to 'square one' to begin the process once again with an accumulation phase. When we see this price action, following a distribution phase, it's best to be in front of your screen – ready and waiting! Now let's look at the opposite of the selling climax, which is the buying climax. This is the firework party that marks the end of the accumulation phase, and signals the start of the bullish trend higher. Fig 5.17

Do we mean the insiders are free to simply move prices higher and lower at random and whenever it suits them to do so. The answer is NO. What I mean by market manipulation, which is perhaps different to other peoples view, is that this simply means using every available resource, to either trigger fear or greed in the retail traders mind. This means using every piece of news in the media to influence the buying and selling, and to move the market in the direction that the insiders require, either higher to a distribution phase, or lower to an accumulation range.