Reaction

  • It is the sharp movement against the direction of the climax.
  • Climax is not confirmed until the 3rd logical event (Reaction).
  • This is a critical event because it's not only confirmed that climax, but also represent the 1st CHOCH (change of character) in the Wyckoff Method.
  • This CHOCH (change of character) itself must be confirmed by next Logical Event no. 4 (Secondary test).
  • Automation Rally
    In an accumulation structure, the reaction is called automatic rally.
  • Automatic Reaction
    In distribution structure, a reaction is called automatic reaction.

Useful information:

  • In other words, reaction signals, the end of the current trend or the beginning of the sideways movement, or a new counter trend.
  • The degree (volume & wide range candles) of the reaction is the key factor in determining the market will indeed reverse after sideways movement, or will continue the prior trend.

Important:

  • A strong reaction suggests that a reversal might take place.
  • A weak reaction with low volume, suggest a re-accumulation or re-distribution.

Uses of Reaction.

  • It is used as one of the boundaries of accumulation or distribution ranges.
  • It confirms the climax.
    The automatic really confirms the selling climax.
    The automatic reaction confirms the buying climax.
  • It served as a context. By observing the reaction, not only the climax is confirmed, but now traders can expect a test of the climax.

Extra Info:

This is very useful because it eliminates the uncertainty using such methods like Wyckoff, and has the benefit of knowing what to expect in each market scenario.
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