An Overview of the Wyckoff Method: Part 4

Thus far, we Have discussed Wyckoff Accumulation and Distribution events over the course of our previous three articles within the Wyckoff Method series. In this article, we will be discussing Reaccumulation and Redistribution. If you feel the need to review the previous subject material, check out the links below:

An Overview of the Wyckoff Method: Part 1

An Overview of the Wyckoff Method: Part 2

An Overview of the Wyckoff Method: Part 3

Reaccumulation:

Reaccumulation serves the exact same purpose as Accumulation, although there are differences between the two. Reaccumulation primarily differs from Accumulation in that Reaccumulation signifies a the end of a downtrend. A Reaccumulation begins with a stop action of a selling climax, which leads to a potentially lengthily uptrend within the market. Reaccumulation is essentially a pause within a major upward trend, the Reaccumulation phase can be a pause in a macro trend which may take weeks, months, or years to complete.

Reaccumulation is essentially a "bear-traps", set by the composite operators of the world and are intended to interfere with major upwards trends. This interference is intended to mimic bearish divergences, by simulating conditions that would normally indicate a Bearish continuation pattern; hence the term "bear trap." Many traders fall victim to this circumstance, by selling their long positions and initiating short positions, under the assumption that the market is diverging into a downtrend. Meanwhile the composite operators take advantage of this artificially induced sideways price action by purchasing assets while the supply and demand ratio is behaving as if it were beginning to stabilized.

All instances in which assets are being absorbed indicate either accumulation or Reaccumulation. In the instance of Reaccumulation, it is more common than not for the initiation of this scenario to appear at the point of Automatic Reaction (AR) on the Wyckoff Distribution events schematic. After this point, the composite operators will place higher bids, on each subsequent pullback. This is the indicative identifier of a potential Reaccumulation, which initially differentiates the price action of a Reaccumulation compared to a Redistribution.

Redistribution

Redistribution is the exact opposite of Reaccumulation. Redistribution events often follow Distribution events. In fact, Redistribution can only occur after after a Distribution has taken place. A Redistribution event is essentially a "bull trap." The composite operators use large buying power to incite a bullish "fake out", which mimics the Last Point of Supply (LPSY). This leads traders to initiate long positions, rather than short positions. The overall goal of the composite operator in this instance is to sell into the long positions placed by traders, to gain further market advantage.

In our fifth and final Overview of the Wyckoff Method: Part 5 "Composite Man" we will discuss how composite operators influence the markets and which disciplines we can gain from understanding the investment strategies of the most influential market movers.

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