Distribution is accumulation in reverse. After an uptrend, the Composite Operator sells a large position to eager buyers in a range near the top. The schematic is the accumulation schematic flipped upside down, with its own names for each event.
Phase A: stopping the uptrend
- PSY (preliminary supply): the first heavy selling after a long rise. Volume expands, but price usually pushes higher.
- BC (buying climax): a burst of enthusiastic buying on very high volume, often on good news. Large holders sell into it.
- AR (automatic reaction): once buying is exhausted, price drops sharply. The AR low marks the bottom of the range.
- ST (secondary test): price revisits the BC area on lower volume, showing buying pressure is fading.
Phase B: building the cause
Price rotates in the range while the Composite Operator distributes. There may be upthrusts (UT) above the range high that quickly fail. Rallies often come on weaker volume than declines, a sign supply is gaining the upper hand.
Phase C: the UTAD
The UTAD (upthrust after distribution) is a break above the range high that fails and closes back inside. It traps breakout buyers and triggers the stops of short sellers, giving large holders a final chance to sell at high prices. Not every distribution has one.
Phase D: supply takes control
- SOW (sign of weakness): a sharp drop on rising volume that breaks below the range low (the "ice").
- LPSY (last point of supply): a weak rally after the SOW that fails below the range, on low volume. Often the best-risk short entry.
Phase E: markdown
Price leaves the range and trends lower. Rallies are short and weak, and supply clearly dominates.
| Accumulation | Distribution | Role |
|---|---|---|
| PS | PSY | First sign the trend is meeting resistance |
| SC (selling climax) | BC (buying climax) | Emotional extreme on huge volume |
| AR (automatic rally) | AR (automatic reaction) | Sets the other side of the range |
| ST | ST | Retest with less volume |
| Spring | UTAD | False break of the range: the trap |
| SOS (sign of strength) | SOW (sign of weakness) | Real break of the range |
| LPS | LPSY | Pullback that holds; the entry |
Key takeaways
- Distribution is the range where large holders sell their position after an uptrend.
- Phase A stops the rise (PSY, BC, AR, ST); Phase B builds the cause.
- The UTAD is a failed break above the range that traps late buyers.
- A sign of weakness below the range and a weak last point of supply lead into the markdown.