Skip to main content

8. Six phases, five things to examine

The previous five chapters followed individual axes: Rhythm, Intensity, Structure, Migration, and Stochastic. This chapter reverses the perspective. From one phase, you scan all five at once.

This is a lookup chapter for when you are looking at a chart. The first four axes are primary data. Stochastic is a secondary timing indicator, always read last.

For accumulation, re-accumulation, distribution, and re-distribution, each axis is read through three questions: what must be seen, how to use it, and where mistakes are likely. Markup and markdown are processes of impulses and retracements, so signs of weakening across swings must also be tracked. If you remember only one line, remember the easy to get wrong line.

8.1 Accumulation​

A bottom area after extended markdown: PS, SC, AR, ST, Spring, Test, LPS, SOS.

Someone is accumulating stock at low prices. Do not catch the bottom. Wait for sufficient evidence that supply has been absorbed, then enter on the final test swing.

Rhythm: Sonic R ribbon

  • Must see: Price remains below the ribbon, but the Dragon becomes less steep and turns sideways.
  • How to use: Use only for exclusion. A rising ribbon is usually late confirmation.
  • Easy to get wrong: One candle closing above the Dragon means nothing in a trading range.

Intensity: VSA

  • Must see: The Selling Climax has prominent Harmony or stopping volume. Selling then cools, Secondary Tests are often Dead, and Absorption repeats around the bottom.
  • How to use: Look for a sequence of climax, weakening selling, quiet tests, bottom absorption, and returning demand in SOS. Clusters of Absorption are the clearest trace of accumulation.
  • Easy to get wrong: Bright red Harmony in Phase B is not necessarily a new Selling Climax. If Time peak still moves down, markdown may continue.

Structure: histogram

  • Must see: Time peak sits low in the range, holds there, and thickens. Absorption on the rail shows the market is paying to hold price at the bottom. Revisited marks a level that was left and then tested again.
  • How to use: A valid Spring usually sweeps into Thin or Single print below the bottom and then rebounds. Unaccepted below the low shows money entered but the market did not accept that level. SOS should leave a Single print; a futures gap is evidence of the same kind.
  • Easy to get wrong: A thick but gray histogram may only be time, not money or cause. When the profile lacks enough data, do not infer that the market is quiet.

Migration: Value Area and dashboard

  • Must see: Value Areas overlap and move little in Phases A and B. In Phase D, new value begins stepping upward.
  • How to use: When price is stationary but the time-based money-flow measure favors buying, accumulation is occurring beneath the chart's surface. Abnormally increased time in the Value Area during a climax cycle shows stock changing hands at the low even though price does not stay there long.
  • Easy to get wrong: When the Value Area band is dotted, the sample is insufficient for detailed inferences. Read only the signals still shown reliably.

Stochastic: outside PRISM

  • Must see: At the Selling Climax, the indicator is usually low. Phase B oscillates messily and is nearly useless. At the Spring, price makes a new low while Stochastic makes a higher floor.
  • How to use: Track floors across Secondary Tests. Rising floors favor accumulation, flat floors are inconclusive, and falling floors invalidate the thesis. Bullish divergence at the Spring is the indicator's largest contribution. Phase D is confirmed when its oscillation range shifts up and pullbacks hold higher.
  • Easy to get wrong: Do not buy just because Stochastic is low. It can remain low for a long time in markdown.

8.2 Markup​

The main markup wave after SOS. This is Phase E of accumulation: SOS, LPS, then an uptrend with pauses.

Effort is producing result. Hold the position and buy pullbacks; do not hunt tops.

Call the price stretch from leaving the Dragon to its extreme before returning an impulse. A retracement is the price swing back to the Dragon.

Rhythm: Sonic R ribbon

  • Must see: Price is above the Dragon; longer-term trend lines are below and all point up. Pullbacks usually stop at the Dragon.
  • During the impulse: Visually read price's expansion away from the Dragon. A move that travels too far and too quickly may be a climax.
  • During the retracement: Observe where the pullback stops. The deeper it stops, the more cushion the trend has lost.
  • Weakening across swings: Impulses no longer expand well, or retracements stop progressively deeper, are early warnings of late markup.
  • Easy to get wrong: Price piercing and holding below a medium-term trend line changes character, so read it as a trading range. A strongly expanding Dragon also makes extension comparisons unreliable.

Intensity: VSA

  • Must see: Impulses have bright green Harmony; retracements have Dead or muted Harmony. Volume drying up during a pullback is required.
  • During the impulse: The most prominent bar should be early in the swing, not at its end. Absorption in the middle of an impulse is supply blocking the path.
  • During the retracement: Read the final bar. A healthy pullback cools progressively and ends with No Supply at the Dragon.
  • Weakening across swings: Declining effort in impulses while price still makes higher highs is an early warning.
  • Easy to get wrong: Absorption at the end of a retracement at the Dragon can be demand supporting price, the opposite of Absorption in the middle of an impulse. Expanding volatility can also make bars look muted, so compare raw volume.

Structure: histogram

  • Must see: The path has Thin and Single print between nodes. Genuine markup leaves gaps because price passes through too quickly.
  • During the impulse: Sparse space between nodes is the trace of the push.
  • During the retracement: A node is where a pullback stops. Price touching a node edge and bouncing is healthy; moving deeply into an old node damages the structure.
  • Weakening across swings: The highest node should be small and new. When it becomes thick like old nodes, the latest pullback has spent too much time.
  • Easy to get wrong: A thick Time node at the top with Absorption warns of markup changing to distribution before price does. An alert when price returns to the saddle is a backup after a jump across the creek, a notable LPS location.

Migration: Value Area and dashboard

  • Must see: Value and money flow both move up, forming stairs. A wide Value Area in a trend is normal behavior.
  • During the impulse: The Value Area band must temporarily crawl up with price. Price advancing while value remains at the swing's base means the impulse is not being paid for by the market.
  • During the retracement: Value should not temporarily fall with price. A healthy pullback keeps value above the old value area.
  • Weakening across swings: Each impulse-retracement pair must build a new step. When swings pass without value rising, migration is exhausted even if price has not fallen.
  • Easy to get wrong: Value deforming in place rather than migrating usually signals a trading range. Time-based money flow favoring selling while value still rises is an early distribution warning.

Stochastic: outside PRISM

  • Must see: The indicator is embedded in the high zone, and pullbacks hold the uptrend floor.
  • During the impulse: High embedded is a ban on shorts, not a sell signal.
  • During the retracement: Consider buying only when Stochastic holds its floor, price touches the Dragon, and VSA produces Dead.
  • Weakening across swings: A progressively lower pullback floor means a downward range shift is forming.
  • Easy to get wrong: Do not prioritize bearish divergence at impulse tops. Expanding ranges distort top sequences; pullback floors are more reliable.

Profile of a standard swing​

Healthy impulse: price decisively leaves the Dragon, VSA has early-swing green Harmony and no blocking Absorption. Structure leaves Thin, value temporarily rises with price, and Stochastic is embedded in the high zone.

Healthy retracement: price returns to the Dragon slowly and with overlap, VSA cools to Dead, price stops before an old node, value does not fall with the pullback, and Stochastic holds its floor.

Entry: the final Dead bar of the pullback at the Dragon, close to an old node edge, while value holds steady and Stochastic still shows an upward range shift. This is where all five axes tell one story.

8.3 Re-accumulation​

A trading range within an uptrend: a small Buying Climax, AR, ST, shallow Spring, LPS, and SOS.

This is difficult because it initially looks exactly like distribution. The arbiter is which side money is moving toward. Chapter 10 adds a morphological test while waiting for money flow to confirm.

Rhythm: Sonic R ribbon

  • Must see: Price swings around the Dragon, but longer-term trend lines still point up and lie below the range.
  • How to use: The thesis survives if the range lies above the medium-term trend line. Discard it if price fully loses the longer-term trend lines.
  • Easy to get wrong: The ribbon cannot distinguish re-accumulation from distribution because both make the Dragon go sideways.

Intensity: VSA

  • Must see: Rising bars are brighter, falling bars are dimmer, and Absorption concentrates low in the range.
  • How to use: See whether the prominent effort falls on rising or falling bars. This is a quick visual read of money flow.
  • Easy to get wrong: When falling bars grow brighter and rising bars fade, the thesis has changed before the breakdown.

Structure: histogram

  • Must see: Time peak is low in the new range. The bottom has Absorption; the top is mostly Thin and Unaccepted.
  • How to use: A low Time peak favors re-accumulation; a high Time peak favors distribution.
  • Easy to get wrong: The histogram may still carry traces of preceding markup. Trust the new range only once it occupies most of the observation window.

Migration: Value Area and dashboard

  • Must see: Value is flat while time-based money flow favors buying. This is a range absorbing supply.
  • How to use: Stationary price with buyer-leaning money is more important information than surface direction.
  • Easy to get wrong: Price pinned at one level can feel compressed. Distinguish a price shelf from absorption by the time the market actually spends in the Value Area.

Stochastic: outside PRISM

  • Must see: The indicator resets to the middle zone while price still holds a higher low.
  • How to use: Use it only to time re-entry after the four core axes already favor re-accumulation.
  • Easy to get wrong: A similar reset also appears in distribution. It is a timing tool, not a classification tool.

8.4 Distribution​

A top area after extended markup: PSY, BC, AR, ST, UT, UTAD, LPSY, SOW.

Effort at the top no longer produces result. The deciding sign is money beginning to concentrate in declines while price remains sideways.

Remember the principle in section 1.1: a bottom is a moment; a top is a process. Evidence at tops is often spread over time, so accumulate it rather than wait for it to appear together. Do not make a plan depend on a UTAD, because not every structure has one.

Rhythm: Sonic R ribbon

  • Must see: Price is still above longer-term trend lines but has crossed the Dragon in both directions. The Dragon turns down only late.
  • How to use: Use the ribbon only for late confirmation and managing the remaining position.
  • Easy to get wrong: This is the ribbon's largest trap. Buying Climax, Upthrust, and UTAD can appear while the ribbon still looks entirely bullish.

Intensity: VSA

  • Must see: A Buying Climax has large effort but disproportionate result, often appearing as Absorption. Absorption then concentrates at the top, and rallies in the range are often Dead.
  • How to use: Top absorption with weak rallies is enough to stop buying before price breaks. SOW needs convincing selling effort; otherwise the breakdown can return to the range.
  • Easy to get wrong: Absorption at the top of markup can sometimes be temporary absorption. Require confirmation from a high-shifting Time peak and seller-leaning time-based money flow.

Structure: histogram

  • Must see: Time peak remains high in the range; Absorption lies at that node; Revisited appears near the ceiling. After UTAD, Unaccepted directly above the top shows the market did not accept the swept level.
  • How to use: Unaccepted at the top is strong evidence for placing short risk. After SOW, a broken saddle often becomes LPSY when price returns to test it.
  • Easy to get wrong: Unaccepted may be absent due to insufficient data. Revisited only says a level was repeatedly tested, not who won. Decide with money flow and bar color at the level.

Migration: Value Area and dashboard

  • Must see: Value Areas overlap while time-based money flow favors selling. Lots of money with no value migration is cycle-scale absorption.
  • How to use: When price direction differs from money direction, trust money. Seller-leaning money flow is often the earliest top evidence. Increased Value Area time at the top edge shows stock changing hands where price cannot hold.
  • Easy to get wrong: Do not compare migration readings across cycles on different timeframes. At UTAD, some measures may not reflect the sweep; use the time price remains to distinguish a sweep from a genuine breakout.

Stochastic: outside PRISM

  • Must see: The Stochastic ceiling declines while price still tries to make higher highs, then the oscillation range shifts down.
  • How to use: Track the ceiling across price touches of the range ceiling. A declining ceiling reveals distribution. Bearish divergence at UTAD is strong only when it coincides with Unaccepted and VSA evidence at the same level.
  • Easy to get wrong: Bearish divergence repeatedly appears in healthy markup. Read it only after time-based money flow favors selling.

8.5 Markdown​

The main markdown wave after SOW. This is Phase E of distribution: SOW, LPSY, then a downtrend with weak rallies.

Downtrends run on fear, so they are fast and noisy. Sell weak rallies; do not catch bottoms.

Markdown has impulses and retracements like markup, but it is not a simple inversion. Because declines are more hurried, comparison sequences here are often less reliable and need stricter context.

Rhythm: Sonic R ribbon

  • Must see: Price lies below the Dragon; longer-term trend lines lie above and all point down. Rallies die at the Dragon.
  • During the impulse: Do not put too much trust in extension comparisons because volatility expands very quickly in markdown.
  • During the retracement: A rally touching higher trend lines and then being pushed down can still remain entirely within the downtrend.
  • Weakening across swings: Shortening impulses and rallies climbing higher over multiple swings show resistance being pushed back.
  • Easy to get wrong: A fast rally is not automatically a reversal. When money flow still favors selling, require price to hold above key trend lines before changing bias.

Intensity: VSA

  • Must see: Downward impulses are usually bright red Harmony, rallies are dimmer, but the pattern is not as clean as markup.
  • During the impulse: Bright red effort carries less weight than green effort in markup because panic creates volume itself.
  • During the retracement: Read the final rally bar. Dead or No Demand at the Dragon times selling. If the bar is bright, prioritize close position: only a weak close is worth shorting.
  • Weakening across swings: Selling truly exhausts only when effort and raw volume both decline. Brightness alone is easily distorted by volatility.
  • Easy to get wrong: Stopping volume means something only where price is extended far from the Dragon. It signals selling stopping, not buying confirmation.

Structure: histogram

  • Must see: A thin profile, many Single print below, nodes forming only at pauses, and Time peak sliding with price.
  • During the impulse: Thin is information: the market did not build a level there, so price can move quickly in either direction. A gap below remains an area to watch.
  • During the retracement: Single print and saddles above are resistance. A rally reclaiming an old node breaks one step of the decline.
  • Weakening across swings: The new low node should be small. When it thickens, the market is spending too much time to continue falling.
  • Easy to get wrong: A thick Time node at the bottom with Absorption warns that markdown is changing to accumulation.

Migration: Value Area and dashboard

  • Must see: Value and money both move down in stairs.
  • During the impulse: Value must temporarily move down with price. Price falling while value hangs at the swing top means the decline is not being paid for by the market.
  • During the retracement: A rally healthy for sellers keeps value below the preceding value area. Value crawling into the old band is an early short warning.
  • Weakening across swings: The stairs must keep descending. Since markdown is often short, use a smaller timeframe when more context is needed.
  • Easy to get wrong: Time-based money flow favoring buying while value still falls shows buyers beginning to absorb stock. Near the end, money changing hands at the low while price does not stay there is the profile of a Selling Climax.

Stochastic: outside PRISM

  • Must see: The indicator is embedded in the low zone; rallies cannot reach the high zone.
  • During the impulse: Low embedded bans bottom-picking. A floor continuously near the low zone is saturated and adds no information; a rising floor while price still makes new lows shows sellers struggle to hold closes at the low.
  • During the retracement: A weak rally touching the Dragon, producing Dead, and showing no meaningful Stochastic improvement times trend-following selling.
  • Weakening across swings: A rising rally ceiling warns of an upward range shift. When the ceiling and floor disagree, trust the unsaturated sequence; if both are readable, prioritize impulse floors. Floors rising before ceilings is the normal order of a bottom.
  • Easy to get wrong: A prolonged low indicator is not a reason to buy. Markdown usually provides few rallies for comparison, so ceiling sequences often lack a sample.

Profile of a standard downward swing​

Healthy downward impulse: price leaves the Dragon, closes weakly, VSA shows early selling effort, Structure leaves Thin, value falls with price, and Stochastic is held in the low zone.

Rally healthy for sellers: price rebounds to the Dragon then loses momentum; the final bar is Dead or closes weakly; price does not reclaim the old node; value is nearly flat; and Stochastic cannot escape its low range.

Short entry: the final rally bar at the Dragon, directly below a Single print or old saddle, while money flow still favors selling. This is where the axes converge.

8.6 Re-distribution​

A trading range within a downtrend: AR, ST, false Spring, LPSY, and continuation SOW.

It is as difficult as re-accumulation but usually shorter. The test lies in the response after the bottom sweep, not in the sweep itself.

Rhythm: Sonic R ribbon

  • Must see: Price swings around the Dragon, while longer-term trend lines still slope down and lie above the range.
  • How to use: The thesis survives if the range lies below the medium-term trend line. Price holding above the longer-term trend lines invalidates it.
  • Easy to get wrong: Its early stage may resemble accumulation. The ribbon cannot decide.

Intensity: VSA

  • Must see: Prominent effort is on falling bars, rising bars are dimmer, and Absorption concentrates at the top of the small range.
  • How to use: Read the rally after the bottom sweep. Genuine accumulation usually rebounds quickly, decisively, and reclaims most of the range. Re-distribution rebounds weakly, drags, and is capped early.
  • Easy to get wrong: The bottom sweep looks like a Spring until the rally reveals its quality.

Structure: histogram

  • Must see: Time peak is high in the small range; the bottom has only Thin and Unaccepted, while Absorption is at the top.
  • How to use: A range swinging at the low edge of a Thin trail from preceding markdown favors re-distribution. If price rallies deeply through the void trail and builds a new node, it is no longer merely a rebound.
  • Easy to get wrong: Do not mistake a node left over from prior markdown for a node from the current range. A new node broadening over time may be cause accumulating at the bottom.

Migration: Value Area and dashboard

  • Must see: Value overlaps while time-based money flow still favors selling.
  • How to use: Money continuing to flow out in a range after markdown is re-distribution. If the structure is too short to read, use a smaller timeframe for context.
  • Easy to get wrong: A bright band may be residual panic or short covering, not absorption. With a thin sample, use only the signs that remain reliable.

Stochastic: outside PRISM

  • Must see: The indicator rebounds to the middle zone while price still holds a lower high.
  • How to use: Compare the current rally ceiling with prior rallies. If it remains capped in the old range, the structure is intact. Use it only to time selling again after the four core axes already favor re-distribution.
  • Easy to get wrong: Escaping embedded in the low zone is normal and does not mean the market is reversing. It remains a timing indicator, not a classification tool.

These six tables assume you can already name the structure. In the live market, the order is usually reversed: before you know the phase, you only have one bar that just closed and a question that must be checked across all five axes.