Weis Wave Trade Setups By David H. Weis
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Weis Wave Setups
action
reaction
When I finally settled on the time and reversal filters for the different markets, I plotted the waves manually on chart paper. The charts looked like the one above where there is no time information. The price bars were not shown either. The waves are plotted equidistantly. In many ways, studying the wave lines without the price bars made the task simpler. To have a more complete picture, I kept a 5-minute and 60-minute chart on the computer screen for reference of intraday highs and lows. Trading with the waves is a process of looking for an action (i.e., change in behavior) and a reaction (i.e., pullback). You see on the chart above the high-volume downwave. This is the heaviest down-volume on the chart. It is a bearish change in behavior. On the pullback (reaction), the volume is much lower. As soon as price starts down again, I go short. Trading the Weis Wave involves pullbacks. Of course, there are springs and upthrusts to act on as well. But it’s the pullbacks that more often appear. This is trading like a counter-puncher. And it works!!!!!
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8-18-11
All of the following samples are of the ESU11 with a .75 point wave calculated from 4000 Tickbar closes. The volumes are in thousands of contracts. The bearish change in behavior is the 87k on the sell-off from the high. Now look at the reaction. First we see 25k and then one last, tiny upwave on 13k. It says no demand. Don’t wait. Go short as soon as price reverses down and protect above the high of last upwave. This is the essence of tape reading. Remember Wyckoff said a downturn occurs when the buying waves shorten in time (i.e., vol.) and length and when the selling waves increase in time and length (here the large downwave on 87k).
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8-17-11
45k is the change in behavior on this chart—the heaviest down-volume on the chart. It is followed by shortening of the upward thrust. The last upwave draws out volume of only 14k. This tips the scale in favor of the bears. Go short. Don’t wait.
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The 93k represents climactic volume. See shortening of downward thrust on the next downwave and notice the low volume. It says supply is spent. Buy with a stop under the low. I say to the market: “Prove me wrong.” Shortening of the thrust is my favorite setup.
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Early morning trading in U.S. The low with 13k volume said to expect a rally. Good demand (34k) initially but demand quickly dried up. Supply on decline (22k) and no volume on last upwave. Down she goes. This is not a classic example.
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This is the classic example. Call it the prototype. Climactic volume followed by very large up-volume. On the pullback, no supply. Buy immediately and protect under the low. With this pullback strategy, you trade at the danger point where risk is the least.
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8-10-11
56k on downwave is change in behavior.
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Notice the low volumes and small upwaves after the 76k. Supply emerges on 42k break. No demand on 15k pullback. Down it goes.
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Undoubtedly the 113k downwave is a bearish change in behavior; however, there is no low-volume pullback near the high. Instead, it occurs at a level too far below the high for me to act on. You need that pullback shortly after the turning point. Now go through charts and see how many of these kinds of situations you find. They are every where. If you want to experiment, I would trade 50 shares of U.S. Steel and watch the 5-minute chart using a 10¢ wave and trade the pullbacks. This method works extremely well but you cannot have a bias or any preconceived ideas. Don’t look for action; let the trades come to you. Find trades; do not seek them. 10
Shortly after the opening on August 22, we see the first setup that works according to the book. The second setup starts with a heavy volume upwave (104) and a low volume pullback. But then the air went out of the rally. The upwave does not stretch upward and volume stays very low. Close out any long immediately. Go short. This underscores the need for flexibility. You must have no attachment to any ideas about the trend. Just listen to what the market says about itself in the present.
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The low volume (27k) and shortening of the thrust indicated a down-move was likely. Then came the heaviest down-volume (49k) since Monday. These two waves paint a bearish picture. Go short on the next upwave.
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Here are a number short-term trades based on shortening of the thrust. Notice how sometimes the thrust shortens on very low wave volume and other times it occurs on heavy wave volume. The first type signals lack of demand or supply. The second reflects large effort with little reward. These kind of setups appear every day. One trade is not pinpointed. It involves a change in behavior followed by a low-volume pullback. The answer is at the bottom of page 14
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Answer: The sell-off from the high is a bearish change in behavior. It is followed by a relatively shallow pullback on less wave volume.
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When determining wave size or retrace, avoid having too many waves or too few waves.. The list below contains some of preferred retrace amounts for studying intraday waves: S&P .75, NASDAQ 2.0, Dow 5 Russell 2000 .40; Bonds 3/32nds (.09375), 10- Year .5/32nds (.015625), 5-Year .015625; Soybeans 1¢, Corn 1¢, Wheat 1¢; Sugar .10, Cocoa 2, Coffee .25; Currency futures & forex .0003 for all; Cotton .10; Gold 5, Silver 5¢, Copper .0025; U.S. stocks 10¢ (usually 10¢ for daily). I have no energy charts to determine their best wave size.
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