The Philippine Stock Exchange Index using Wyckoff Method

5 min readMay 27, 2021

Hi everyone,

I’m Juvar and I mostly trade and do technical analysis on cryptocurrencies on my TradingView profile. But on this post, I’d like to do a technical analysis on the Philippine Stock Exchange Index (PSEI). I am not going to fully explain the Wyckoff Method but I’d like to show you the similarities on how the PSEI somehow follows the Wyckoff Method.

Disclaimer

Before we start, please note that I am not a financial advisor. I do these technical analysis for educational purposes and to share my opinion on what’s happening on the market. I am not predicting events as, obviously, no one can (unless you can manipulate the market lol). Let’s get started.

The Wyckoff Method

The Wyckoff Method is a technical analysis approach developed by Richard Demille Wyckoff. He is one of the five “titans” of technical analysis, together with Dow, Gann, Elliott, and Merrill. Personally, I only know Elliot’s Wave Theory but not great at it. The Wyckoff Method is to study the price movement of the market based on Wyckoff’s Three Laws:

Supply & Demand;
Cause & Effect; and
Effort vs Result.

I won’t be able to further explain these laws but the resources below may help. In this method, the price moves in cycles and is made up of four phases:

Accumulation Phase;
Markup Phase;
Distribution Phase; and
Markdown Phase.

Today, we will be applying these phases on the Philippine Stock Exchange Index (PSEI) on a macro scale.

The Philippine Stock Exchange Index (PSEI)

As of this writing, May 27, 2021, the PSEI experienced a massive pump, opening at 6,374.31 and closing at 6,665.14, a 4.5% increase not seen in months or years.

The Wyckoff Method can applied in different timeframes but for this analysis, we will be applying it to the 2-monthly (2M) timeframe or chart.

Wyckoff Method on PSEI

Here, we have a 2M chart divided into four phases that we mentioned earlier. Currently, I think we are in the Distribution Phase or maybe we are already beginning the Markdown Phase. Let’s see the chart from January 1985 to today; compare it to the Wyckoff Market Cycle; and discuss the Accumulation and Distribution Phase.

Phase 1 — Accumulation Phase

The Accumulation Phase consists of five phases A-E. Phase A is usually the end of a trend but since this is the first phase of the first cycle, we can plot the Accumulation Phase in the PSEI as follows:

We can see how it rhymes with the schematic. But, what does the letters SC, AR, ST, LPS mean? These letters or signals tell you a story. You can find their meanings in the resources below.

We can also see that on Phase D, the price action exceeded our resistance lines, managed to bounce, but went back down our resistance lines.

But before Phase D ends, we can see that it broke through our resistance lines again and managed to test the previous high (the orange line), which is very interesting, as oppose to testing the black resistance line.

As for Phase E, it is possible it’s also the Phase A of Phase 3, the Distribution Phase which we’ll discuss next.

Phase 3 — Distribution Phase

The Distribution Phase consists of five phases, as well: Phases A-E. For this phase, we’ll be using the monthly (1M) chart instead of the 2-monthly (2M) chart to get more accurate price actions.

Again, if we try to plot the Distribution Phase to the PSEI, we will get this.

Based from the Distribution schematics, we are missing the “SOW” signal or Sign of Weakness. We’re looking for a lower low after AR but it seems that the price action didn’t achieve that. Other than that, the other signals seems to follow the schematic.

Where are we now?

Currently, I think we are in the edge of Phase D going down to Phase E in the next few months or years if we follow the Wyckoff Method. You can also see that the current price is below the support line. We may see a rejection from there and start the Markdown phase. On the other hand, I think it’s possible to invalidate this pattern if we manage to go up instead of dumping down.

Again, please read the disclaimer. I’m not spreading FUD or encouraging anyone to panic sell. Please do your own research and manage your risks. If you like to know more about this theory, I will be leaving resources below.

Happy trading and investing!

Cheers,
Juvar 🚀🌕