What it means
Distribution is the mirror of accumulation: a trading range after an advance in which supply is thought to overwhelm demand before a markdown.
BC (buying climax): a heavy, fast rise that stops the advance. AR (automatic reaction): the drop that sets the range low. ST: a retest of the highs. UTAD (upthrust after distribution): a brief break above the range that fails. SOW (sign of weakness): a strong break below the range. LPSY (last point of supply): the weak rally that fails below the old range.
Why traders use it
Each push to the highs attracts less follow-through, until a final breakout attempt (UTAD) traps late buyers and supply takes control.
The UTAD is a sweep of the range high in liquidity terms.
Chart examples
Distribution from climax to markdown
How to identify it objectively
- 1After an uptrend, mark the climactic high (BC) and the reaction low (AR).
- 2Watch retests of the highs (ST) with weaker momentum.
- 3UTAD: a break above the range that closes back inside.
- 4SOW: a close below the range low; LPSY: a rally that fails below it.
Bullish use
- 1If the "UTAD" keeps closing above the range, the advance is continuing: it was re-accumulation.
- 2A failed SOW that returns into the range weakens the bearish idea.
Bearish use
- 1A UTAD reclaimed back inside is the earliest short trigger.
- 2SOW and LPSY offer later, more confirmed shorts.
- 3Markdown follows when demand is exhausted.
What confirms it
- Rallies to the highs on weaker momentum.
- UTAD rejected quickly.
- SOW closes below the range low.
What invalidates it
- Closes above the UTAD high.
- A breakdown that fails back into the range.
How a hypothetical setup is built
Entry
On the LPSY rally after the SOW, with a bearish close below the old range low.
Stop
Above the LPSY high.
Target
The range height projected down from the breakdown.
A hypothetical illustration of how the concept is turned into a plan, not a recommendation. Practise it on a paper account first.
Related concepts
- Wyckoff MethodWyckoff Spring and Upthrust
- Wyckoff MethodWyckoff Accumulation
- Chart PatternsDouble Top and Double Bottom
Historical testing
Not tested on The Tradeskill.
Limitations: when it fails
- Distribution and re-accumulation can look identical while forming.
- Labels change as the range develops.
- Intent of large participants is an interpretation.
Knowledge check
Pick an answer to see the explanation. Nothing is saved.