Second wave anticipation is a random trading thoughts from my personal observation on the behavior of certain stocks. It goes like this. The stock will see sudden spike in volume and price within very short period of time. Correction follow soon after the peak and consolidate at certain level that is higher than the pre-spike level. This is what I called the First wave. It is my opinion that collecting at the consolidating level to ride the second wave is an interesting trading idea. Here is one example:

Chart : Example of Second wave anticipation, PDZ chart as of August 7 2014 (source: ChartNexus)

As the chart shows, before the first wave, the price of the counter is quite flattish with minimal volume. First Wave came with significantly high volume push the counter from around 0.08 to the peak of 0.16. Subsequently after the peak, the counter went into correction with decreasing volume and consolidate around 0.12. Then the Second Wave came and push the price from 0.12 to peak at 0.18 with again significant volume. Immediate after the 2nd Wave the counter consolidate again around 0.155 for some times with decreasing volume before the 3rd Wave comes again push to price higher.

 

It is my opinion that the counter will still have legs as long as the peak of each wave is higher than the previous and the consolidate level is also higher than the previous consolidate level.

 

I would like to clarify that this is just a random observation from my dumb view and is not a tested method for trading. As always, trade at your own risk.