We have learned that once we experienced the stopping action of the down trend (Preliminary Support, Selling Climax, Automatic Rally, Secondary Test), we can draw our trend lines using the bottom of the Selling Climax and the top of the Automatic Rally.

As the price action moves through the trading range, there will be a series of tops that will be formed from the various rallies within the trading range. These tops were formed by either lack of demand failing to further fuel the advance, or supply that came in and turned the price action back. This supply level wanders above the tops, and unlike the trading range, is not a straight line. We call this supply level the Creek. Like creeks, there are minor creeks and major creeks. A minor creek can be within the trading range. A major creek runs on top of the trading range.

When we refer to the Jump Across the Creek, we are talking about the major creek that runs across the top of the trading range. When the price action moves up, volume will come in as the Composite Operator aggressively buys up these shares to insure he is able to advance his stock. You will see high volume (good demand), wide price spread, and sometimes even a gap in the price action.

The jump occurs where the volume comes in. It is best to think of the creek separately from the resistance lines you have drawn to form your trading range.

The Jump Across the Creek is a Sign of Strength that needs to be tested. The test is the Back up to the Edge of the Creek.

Jump Across the Creek