Patterns in the distribution phase

The climax does not have to be a peak, but there will be many support factors or signaling signals when the peak is being formed.

This high price action may not happen clearly, can be reflected in strong price action, but the volume does not have an abnormality or the volume increases strongly but does not show much on the price action. In any case, it is important to note that the final phase of an uptrend always marks the first phase of the next trading range, with price zones correcting early to form patterns at a later stage. this paragraph.

That is why smart traders will often track price action on the first correction when forming a sideways price range and look for signals that strong selling price actions match market conditions. present. The depth of the correction could provide more clue to a future downtrend, with the 100% retracement of the previous last bull run signaling the first failed bullish momentum to continue making the top...

You see the chart below:


Schlumberger (SLM) rose to an all-time high in June 2014. The uptrend shows the highest volume in a year, but the uptrend stops only 4 points higher than the previous high. But then a pullback (red triangle) wiped out the previous bull run.

This first failure sparked a warning that the Uptrend might be coming to an end. The distribution phase that occurred in September showed reduced volume confirmed by the OBV indicator and the price of this stock fell to its lowest level in 18 months.

Trends can move at random regardless of technical signals. We cannot tell whether there will be a price range or a continuation. The trend will occur or if a reversal will initiate a Downward trend. But the aforementioned technique requires us to pay attention to the development of price and volume during a sideways market and to look for clues that provide the information we need to choose our next direction and move. in public whenever possible.

Open a short position

You see the chart below:



Biotech play Geron (GERN) got out of a period of low volatility in September and rose more than 500% to a November high with volume up 20 times the average daily volume.

Price leveled off shortly thereafter and formed a bearish triangle and OBV showed declining volume. And the price broke in March to the beginning of the uptrend in a single session.

Short sellers focus their attention on the bearish triangle pattern. Well defined at the horizontal support is near 4.25 and the stop loss can be placed just above the downtrend line of the pattern.

In short, in order to capture the correct peak, you need to focus on identifying technical patterns or signals that show bearish signals at the distribution stage. And then rely on a multitude of OBV indicators to determine descending volume. If you have these factors, your chances of catching the top of a trend will be much more accurate.