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9. Reading the chart by event

The previous chapter answers where you are standing. This chapter is for the moment a candle has just closed, when you need to know whether what just happened is truly the event you were waiting for.

Every event has two parts. On the chart describes what is visible. It counts as real when is the deciding part, because Wyckoff reads relationships between events, not the shape of an individual candle. A beautiful candle in the wrong context gives you no information to trade.

Read the recognition conditions first, then return to the chart to find the matching image.

9.1 The Accumulation sequence​

PS: Preliminary Support · Phase A

  • On the chart: A bearish candle with prominent activity appears after markdown, after preceding candles have already calmed. The profile shows no new acceptance and value still leans down.
  • It counts as real when: This is not an entry point. Only note that buying interest has begun to support price.

SC: Selling Climax · Phase A

  • On the chart: A prominent selling candle, usually closing better than its intraday action suggests. If volume is large but price does not travel far, it may appear as Absorption.
  • It counts as real when: SC is the anchor of the whole structure. It must stand out above every subsequent selling candle in the range. If subsequent supply is equally or more forceful, the market has not completed its climax and you must choose a new SC anchor.

AR: Automatic Rally · Phase A

  • On the chart: A forceful bullish candle with an expanded body. Price often moves quickly and leaves areas that the market crosses or visits only very briefly.
  • It counts as real when: The AR high creates the initial range ceiling. In a healthy structure, the market will gradually return to test this area.

ST: Secondary Test · Phase A into B

  • On the chart: A Dead candle or muted activity candle appears near the SC low. The candle body contracts.
  • It counts as real when: The test must be quieter than SC. If selling force erupts again with equal or greater intensity, supply has not exhausted, so it is not a valid ST.

Phase B: building cause

  • On the chart: Candle intensity progressively calms. Absorption appears in the lower half of the range, the accepted price area stabilizes low in the range, Value Areas overlap, and time-based money flow favors buying.
  • It counts as real when: This is usually the long stretch that makes traders impatient. Either trade only the two edges or stay out. Track whether the accepted area around the time concentration point is widening. That is cause being built.

Spring / Shakeout · Phase C

  • On the chart: Price breaks below the range low then quickly reclaims it. You may see bullish Harmony or Absorption, with traces of the market rejecting the low area just below the bottom.
  • It counts as real when: Both a quiet Spring and a high-volume Spring are valid. Low volume shows that no one wants to sell anymore. High volume with Absorption shows supply being absorbed. But high volume without absorption, with price also failing to reclaim the range low, is a genuine breakdown rather than a Spring.

Test of Spring · Phase C

  • On the chart: A Dead candle at or above the Spring, with a narrow body and drying volume.
  • It counts as real when: The test must hold above the Spring low and be quieter than the Spring. Without either condition, it does not qualify.

LPS: Last Point of Support · Phase D

  • On the chart: A Dead candle at the upper edge of the old range or an accepted price area. Price can also return to test the boundary between price areas.
  • It counts as real when: This is usually the best risk-reward entry in the structure because the support level and thesis invalidation point are clear.

SOS: Jump Across the Creek · Phase D

  • On the chart: Strong bullish Harmony, an expanded body closing near its high, breaking through AR or a structural boundary. Value begins moving up in steps.
  • It counts as real when: A genuine jump must leave a bypassed price area behind. If price only crawls upward without creating a gap, the backup swing will lack a clear level to test. This is a sign of a weak breakout.

9.2 The Distribution sequence​

PSY: Preliminary Supply · Phase A

  • On the chart: A prominent bearish Harmony appears after markup, while earlier pullbacks were still very quiet.
  • It counts as real when: Do nothing yet. Only note that supply has begun to appear.

BC: Buying Climax · Phase A

  • On the chart: Very large volume but price does not travel proportionately, so it often appears as Absorption instead of distinct bullish Harmony. This is effort without result.
  • It counts as real when: BC must stand out from candles in the range. This is also where an Absorption candle has its highest diagnostic value.

AR: Automatic Reaction · Phase A

  • On the chart: A forceful bearish Harmony with an expanded body, creating the range floor.
  • It counts as real when: The AR low is the level that later SOW must break through.

ST: Secondary Test · Phase A into B

  • On the chart: A Dead candle or muted Harmony appears around the BC high. Price may rise, but no one is willing to pay higher.
  • It counts as real when: It must be quieter than BC. A muted Harmony here says very clearly: price can move, but the money following it is weak.

UT: Upthrust · Phase B

  • On the chart: Price exceeds the range ceiling then closes back inside. You may see bearish Harmony or Absorption.
  • It counts as real when: UT may repeat in Phase B. It is not an entry, but each such failure strengthens the distribution hypothesis.

UTAD · Phase C

  • On the chart: Price clearly exceeds the ceiling then reverses, leaving traces that the market did not accept the high price area. Much money enters, but price cannot hold there.
  • It counts as real when: The rejected area is a sensible place to put the stop for a short. Rejection of the high area, bearish Harmony, and weakening Stochastic are pieces of evidence that can converge, but do not necessarily appear at the same time. Use Stochastic only after time-based money flow favors selling.
  • Do not wait for it: Unlike a Spring, UTAD is often a whole extended series of failed upthrusts. Many distribution structures have no UTAD and move directly into markdown. An exit plan must still work when this event does not appear.

LPSY: Last Point of Supply · Phase D

  • On the chart: A Dead candle at the old range low that has become resistance, or at an accepted price area above.
  • It counts as real when: The candle must contract and be quiet. A rally with bright Harmony is not LPSY.

SOW: Sign of Weakness · Phase D

  • On the chart: Strong bearish Harmony, an expanded body, breaking through the AR low. Value begins stepping down.
  • It counts as real when: SOW must also leave a bypassed price area behind. Otherwise, this structure may only be a deep pullback.

Both sequences above assume you already know which structure you are in. But there is a situation in which that assumption often fails, and that is exactly the question of the next chapter.