TomWilliamsVSAPrinciples

SignsofWeaknessSOW
SOWPrinciple1
Upbaronanarrowspread,closemiddleorlow,volumeveryhighorlow.Weaknessalwaysappearson anupbarbecauseprofessionalsellinghastosellintoasurgeofbuying.Thenarrowspreadindicates supply.Somethinghascappedthetopendofthemarket.Selling,orlackofdemandfromprofessional moneyaretheonlytwothingsthatcandothis.Ifthevolumeishighplusthiswillshowsupply.Ifthe volumeislowthiswillshowlackofdemand.Checkforoldresistancelevelstotheleft.

SOWPrinciple2
Marketsareconstantlybeingtraded.Asuddendownmovewilllockmanytradersintopoorpositions astheywaitandhopeforarallytogetoutwithlittleornoloss.Ifafterareactionthemarketthen startstogoup,thenanyoldresistantlevelwillrequireefforttogoupandthroughtheseoldhighs becausetheyhavetoovercomethesellingfromtheselockedintraders.Toapproachanoldhighon lowvolumeandnarrowspreadsindicatesthattheoldhighsarenotgoingtobepenetratedbecause thereisnodemand.Ifthemarketisnotgoingtogoupthenitisgoingtogodown.

SOWPrinciple3
ThisisknownaseffortversusResult.Anyindicationofstrengthyoushouldexpectastrongmarket.If thenextbarisdownonawidespreadclosingonthelowsandthelowandthecloseislowerthanthe previousbarthisisacountermandingsignal.Youdonotfightthemarketbutyouhavetoassumethat therehasbeennoresultfromtheSOSthereforethemarketmustbeweak.Iftheoriginalindication wasgenuineSOSthenprofessionalmoneywouldimmediatelymoveintothemarketgivinghigher pricesnotlower.

SOWPrinciple4
TheUpThrust.Upthrustsarethereforaverygoodreasonandthatistotriggerstopsinaweak market.However,manychartpatternslooklikeUpThrustsbutfailtoliveuptheirpromises.TheUp Thrusthastolookright.Ithastobeintherightplace.Manyarecreatedinastrongmarketbygapping upattheopeningthenfallingoffforarestonlytocarryonup.Thegenuineonesareeasytosee. BasicallyyoushouldhaveSOWinthebackgroundnotSOS.

SOWPrinciple5
Upbaronvolumelessthanthe2previousbars.Thisindicateslackofdemandfromprofessional money.Thiscomesintoitsownonshorttimeframes.
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TomWilliamsVSAPrinciples
SOWPrinciple6
Adownbaronawidespreadplusclosingonthelowpushingdownandthroughaprevioussupport level.

SOWPrinciple7
Strengthappearsondownbarsespeciallyifthebarhasclosedinthemiddle.Herethisisdiscounted becausethehighishigherthanthepreviousbar.ThisisahiddenupthrustandaSOW.Thisprinciple arrivesinavarietyofdisguises.

SOWPrinciple8
Asurgeinoptionvolume.Upbarafterarallyandtheoptionvolumeisveryhigh.Professionaltraders willhaveaverygoodideawhenatophasbeenreachedandwillentertheoptionmarkettohedge theirpositions.Seemstobecleareronatopthanalowofamarket.SOS

SOWPrinciple9
Buyingclimax.Upbarwithwidespreadsclosingmiddleorlowonultrahighvolume.Verypowerful SOWiftherearenooldtopstotheleft.Asamarketkeepsongoingupdayafterdayapointwillbe reachedatsometimewhenmanytradersthathavesoldprematurelyorthosethatarenotinthe marketcannotstandtheconstanthigherpricesandfrenzygivesthetradingsyndicatesandmarket makersagoldenopportunitytounloadlargeamountsofstockatahighpricewithouttheiractivity resultinginlowerprices.Thismarksthehighpointofthemarket.

SOWPrinciple10
Topreversal.Thisisacommonsignofweakness.Thefirstbarismarkeduprapidly,closingonthe highs(usuallyongoodnews).Thevolumecanbehigh(supplyswampingdemand)orlow(no demand).Thenextbarrapidlyreversesdown,onawidespread,closingonthelows.Ifthelowand thecloseislowerthanthefirstbarthisaddstotheweakness.Aswithalltheseindications,itis importanttoreadthefollowingbarsforconfirmationofcontinuedweakness.

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SignsofStrengthSOS
SOSPrinciple1
Bottomreversal.Awidespreadplusdownbarclosingonthelow.Thelowandthecloseislowerthan thepreviousfourbars.Followedbyanupbaronawideplusspreadclosingonthehighs.Thisarrives inavarietyofversionsbutbasicallythefirstdownbarisashakeoutusuallyonsocalledbadnews. Thesecondbarisrapidlymarkeduptolocktradersin(ifyoushorted)oroutofthemarketifyou wantedtobuythemarket.(peoplehesitatebuyingbecauseitnowappearsexpensivetotheearlier price.

SOSPrinciple2
Stoppingvolume.Tostopadownmovedemandhastoovercomethesupply.Theoddwaysupplyand demandisevidenthere.Asamarketfallsdayafterdayapointwillbereachedwhentheherdcannot standthelossessotheyalltendtopanicatasimilartime.Ifthepricelevelsreachedarenow attractivetoprofessionalmoneytheywillstepinandstartbuying.Thisactivitycausesasurgein volumeastheybuyandcovertheirshortpositions.

SOSPrinciple3
TheTest.ThisisaverycommonSOSfrequentlyseenjustbeforeanupmove.Isalsoseeninarising marketafteraminorSOWandindicateshigherprices.

SOSPrinciple4
DownbarsclosinginthemiddleonreducedvolumeseenafteranySOWindicateshigherprices.Thisis astrongSOSinanuptrendafteraSOWbecausethereisnocontinuationoftheweakness.Ifthereis nocontinuationexpecthigherprices.

SOSPrinciple5
Awidespreadupbarclosingonthehighspushingupandthroughanoldtoptotheleft.Thisis demandandanefforttogoup.Afterthiseventthemarketusuallyrestsorstartstoreact,youarenow lookingforindicationsofstrengthtoconfirmthestrength.SOSPrinciple6

SOSPrinciple6
Thisisaverypowerfulindicationofstrength.Firstyouseestoppingvolume(seeprinciple2).The markethasashortrallyonlytofallagainbackdownintothesameareaasthefirsthighvolumeseen

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TomWilliamsVSAPrinciples
duringthestoppingvolume.Thevolumeislow.Ifthespreadisnarrowandorclosingonthehighs thisisastrongindicationofstrength.

SOSPrinciple7
Thisislavariationofstoppingvolumewhichhasarrivedon2barsratherthanon1bar.Onthefirst barsupplywassoheavythatprofessionalmoneywasunabletoabsorballthestockdumpedontothe market.Thisallowsthemarkettofallonthenextbarusuallyonsocalledbadnews.Thiscanbe gappeddownontheopeningcausingthepanic.However,tocloseinthemiddleorhighsindicates demandhasovercomethesupply.

SOSPrinciple8
Thehiddentest.Thisisavariationofthebottomreversal.Ifthemarketlowhasfallenbelowthe previous4barsonawidespreaddownclosingonthelowsandthenextbarisuponawidespread closingonthehighsthenthishasthehallmarkofalowbottomreversalandasignofstrength. However,ifthelowofthesecondbarislowerthanthepreviousbarthisaddstothestrengthonthe assumptionthatthemarkethadbeenmarkeddownontheopeningonlytofindthattherewas absolutelynosupply,sothemarketquicklyreversedonawidespreadclosingonthehigh.Ifthereis nosellingatthelowerlevelsthenexpecthigherprices.

SOSPrinciple9
Sellingclimax.Widespreaddownclosinginthemiddleorhighafterasubstantialdownmovehas alreadytakenplace.Thevolumeisultrahigh.Asamarketfallsdayafterdayapointwillbereached whentraderswillstarttopanicandencouragedbybadnewswillstarttodumpstockontothemarket. Ifthemarketclosesinthemiddleorhighthenprofessionalmoneymusthavedecidedthatthelower pricesnowlookedattractiveandwillstarttobuyintothepanicselling.Theactivitywillcausethe volumetobeultrahigh.Thismarksthelowpointofthemarket.

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