Understanding Wyckoff Reaccumulation: A Guide to Continuation Patterns

Richard D. Wyckoff created a powerful way to analyze markets in the early 20th century. His Wyckoff Method uses price and volume to understand market behavior. A key part of this method is the idea of Reaccumulation. In short, this is a pause or sideways phase during a larger uptrend. During this time, large traders absorb shares before the trend moves up again.

What is Reaccumulation?

Essentially, reaccumulation acts as a temporary pause within a major uptrend. This phase can last for weeks, months, or even years.

During this period, the price action stays within a trading range. For many traders, this sideways movement is frustrating. As a result, they often sell their shares. Larger, well-informed operators then buy up these shares, getting ready for the next move higher.

The Five Phases of Reaccumulation

We can break the reaccumulation process down into five clear phases. Understanding them helps traders spot these patterns.

• Phase A: Stopping the Trend This first phase marks the end of the previous uptrend. It often starts with a Buying Climax (BCLX) and an Automatic Reaction (AR). These events set the top and bottom of the new trading range.
• Phase B: Building the Cause Next, this phase involves a series of price tests within the range. This allows large traders to gradually buy up the available supply of shares without pushing the price up too much.
• Phase C: The Final Test This phase often includes a “shakeout” or “spring.” This is a sharp downward move designed to mislead and remove the last of the weak holders. In short, it tests the market’s readiness for the next uptrend.
• Phase D: A Show of Strength After the test, the price moves up decisively above the resistance levels. This breakout is a Sign of Strength (SOS) and signals that the uptrend is ready to continue.
• Phase E: The Markup Finally, the stock leaves the trading range behind. Demand is now fully in control, and the uptrend resumes with new energy.

Reaccumulation vs. Distribution

One of the biggest challenges for traders is telling the difference between reaccumulation and distribution, as both move sideways. However, you can look for key clues.

• Volume Clues: During reaccumulation, the trading volume often gets lower on downswings. This suggests that supply is drying up. In contrast, distribution might show higher volume on downswings as large players sell their shares.
• Price Clues: In a reaccumulation phase, the price tends to make higher lows. This shows there is steady demand. On the other hand, a distribution phase may show lower highs, which points to weakening demand.