Here is a set of terms that you will hear us mention on more than one occasion:

Absorption: the reduction of floating supply caused by persistent long-term buying within a trading range.

Accumulation: from a supply/demand perspective, demand is emerging to gradually outstrip and absorb supply and to support the price at the level.

Against the Box: As in "Short against the box". A prolonged action in which you sell a security you own. The purpose of this action is to limit risk during a period of market uncertainty.

Rally / Automatic Rally (AR): after the Selling Climax one of two things can happen: an automatic rally (AR) or a sideways movement. This can be followed by a Secondary Test (ST) of the Selling Climax or a continuation of the bearish move. To understand this, we must look at what happens in the Selling Climax. The SCX is caused by panic selling. The price goes too low creating a gap and as soon as the downward movement stops, the stock should start to recover. We call this Automatic Rally (AR) because it happens automatically.

In general, RA lasts from a few days to about a week. The rally can be weak or strong. If the AR is weak and the supply pushes the market so hard that, instead of achieving a good rebound, the price simply moves sideways for a few days, or even for a couple of weeks, most likely after this sideways move, the downtrend will continue. If there is simply a sideways movement, the stock will most certainly continue the downtrend.

Automatic Reaction (AR): after the Buying Climax (BCX), we usually observe an Automatic Reaction (AR). The magnitude of the reaction depends on the exhaustion of demand and how extensive the first wave of selling is. The AR will also be limited by new buying from those who see the price as an opportunity to buy at interesting prices, and whether the reaction has enough support to sustain it.

Backup to the edge of the creek (BUEC): Normally after a potential SOS, after jumping the Creek, the BUEC is usually the reaction of the jumping of the creek and usually seeks support above the Creek. The BUEC is usually a probable Last Point of Support (LPS).

• Minor Creek: usually occurs in the lower or middle part of the Trading Range but is effectively somewhere in the TR.
• Major Creek: the Jump of the Major Creek is a larger move and very often takes the stock above old resistance levels in the TR, often reaching new highs.

Bear Market: bear market.

Bull Market: bull market.

Buying Climax (BC or BCX): The climax that ends an uptrend is called Buying Climax because it ends the situation where demand is stronger than supply. The demand builds up and builds up gradually until finally, we have a peak where the demand disappears. In the BC we can observe a volume peak and a larger range as it progresses.

After a BC, we can see an AR or a sideways movement. These moves, in turn, develop into a continuation of the uptrend or a Secondary Test (ST). If the supply is too weak to lower the price, instead of having an AR we will have a sideways move. Usually, we will see some form of AR. The AR can occur with rising volume, or with a lot or no volume. It can have a wide range or even a narrow one.

Campaign: a market operation organized for the purpose of moving the price of shares.

Composite Man or Composite Operator: The term used to refer to the interest of professionals in the market.

Creek: refers to the bid at the top of the trading range. The Creek is a hand-drawn line connecting the highs of the rallies within that trading range.

Cross or Jump the creek (JAC): refers to jumping the Creek or resistance. We see this jump as a Sign of Strength (SOS). We say that the point where JAC occurs, is where the volume entered, that is, where we observe the effort and buying intention.

Distribution: From a supply and demand perspective, the area of distribution is where supply exceeds demand and stops the upward movement and then begins a downward movement. Distribution involves the unwinding of a large position and is often accompanied by new selling positions in anticipation of a price decline.

In the distribution area, professional investors or speculators who had previously bought shares sell their shares to the public. The public usually buys because of good news. The price at the beginning usually continues to rise, because weak hands buy for fear of missing out on the rise.

Distribution usually takes a relatively short period of time, while accumulation takes much longer. Distribution is generally characterized by large price movements, large volume and high activity.

Effort versus Result or Effort versus Result (E/R): when we see an Effort in the market, both buying and selling, the Result should be proportional to the effort. If we look at a stock that has been moving for days in a five point range and a volume of 1000 shares and the price tries to break out to the upside without getting it, with a volume of 3000 shares for a couple of days in a row, we should think that the supply is coming in and the price will end up going down. It is an effort that is not having a proportionate result, and most likely the stock will go down to at least the previous levels.

Ice: the Ice is the support area of the TR, which once crossed becomes resistance. We draw the Ice as we did with the Creek, joining with a trend line the support points at the base of the TR.

Institutional investors: large corporate investors such as banks, insurance companies, sovereign wealth funds, investment funds, mutual funds and pension funds.

Last Point Of Support (LPS): we must observe a lack of supply that we can appreciate by a relative narrowing of the candles and a decrease in volume. We must compare the upward movement that constitutes the SOS and the subsequent reaction, the LPS.

In the event that we observe a possible SOS indicated by broad candles and rising volume on the way up and then followed by a significant bid with broad candles and rising volume, this would cancel the probability of an SOS and the security will likely return to the TR for additional testing.

Last Point Of Supply (LPSY): the LPSY is preceded by a Preliminary Supply (PSY), Buying Climax (BCX), Automatic Reaction (AR), Secondary Test (ST), and a Sign of Weakness (SOW). Only next, we will look at the Last Point of Supply (LPSY).

The reaction preceding the LPSY must be a SOW. Any possible SOW must be confirmed, denied or left in doubt by a price expansion. If the recovery has a relative lack of demand, evidenced by narrow candles and a decrease in volume, this would confirm the LPSY.

However, if demand remains strong in that rally with rising volume and long candles, it would be better to consider a denial of the SOW and we would have to question the SO and LPSY. In these cases it is better not to take risks and avoid taking short positions.

Law of Cause & Effect (C/E): to have an effect you must first construct a cause. The effect we observe should be proportional to the cause and cannot be separated from the cause.

Law of Supply & Demand (S/D): when demand is stronger than supply, prices will go up. When supply is stronger than demand, prices will fall.

UTAD: Upthrust After Distribution. This is a final bullish reaction in the form of an upthrust that would initiate the end of the distribution range.

Here is a theoretical scheme of how the market works under the Wyckoff system:

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