Wyckoff MethodIntermediate

Wyckoff Distribution Schematic

The Wyckoff distribution schematic: buying climax (BC), automatic reaction (AR), secondary test (ST), upthrust after distribution (UTAD), sign of weakness (SOW) and last point of supply (LPSY).

Library categories

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

MarkdownBCARSTUTADSOWLPSYRange highRange low
BC and AR frame the range, ST retests the high, UTAD pokes above and fails, SOW breaks the low and LPSY fails below it before markdown.Schematic diagrams drawn to explain the idea; they are not market data.

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.

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.

What does UTAD stand for?

1. What does UTAD stand for?

Which event breaks below the range?

2. Which event breaks below the range?

If price keeps closing above the UTAD high…

3. If price keeps closing above the UTAD high…

Practise it risk-free

Open the free chart, use replay to go back in time and look for this concept candle by candle with $20,000 in virtual money.