Who this entry is for — Anyone who still sees «strength» in a stock that is already slowing at the top of the trend. Preliminary Supply is the first footprint of institutional supply — the first warning that distribution is starting.
Source: Wyckoff Schematics (Pruden, MTA 2006); Wyckoff Analytics teaching. Phase A distribution event, mirror image of accumulation PS.
Prerequisites
Distribution phases A–E (phase A) and Preliminary Support (PS) — the bullish twin.
Definition
In plain terms — The stock has risen for months, then rallies shorten and bars show rising volume at the highs: large operators are starting to sell without crashing price yet. Public euphoria is not over — but institutional supply is.
Preliminary Supply (PSY) marks the start of distributive phase A: institutional supply emerges while the uptrend is still visible to the broad public. Highs become harder to extend, rally closes lose vigour, and volume signals that large positions are passing from professional sellers to late buyers. The PSY is not the definitive top — the buying climax often follows with the last FOMO wave absorbed by large operators. The full sequence PSY → BC → AR (Automatic Reaction) → ST defines the distribution trading range.
| Feature | Typical PSY | Not PSY if… |
|---|---|---|
| Context | Mature uptrend | Markdown already underway |
| Volume | Rising at highs | Record euphoric climax (BC) |
| Price | Shorter rallies, local lower highs | Breakout that accelerates |
| Expected follow-up | BC, then AR | Markup resumes with SOS |
Example — Stock from €60 to €78 over four months. At €76–77, two weeks show volume +40% at highs and closes in the lower half of up bars: PSY. BC at €80.50 on 3× average volume with close at €78 marks the peak; AR drops to €74 and fixes range support. A premature short on the PSY would still have fought residual demand.
PSY and redistribution
In redistribution within a broader markdown, phase A can mislead: a climax down and a bounce resemble accumulation, but market context is bearish (redistribution). PSY at the top of a markdown bounce is less obvious than PSY at a bull market top — step 1 of the five steps weighs more.
Common mistake — Shorting on the PSY without waiting for BC + ST and without the nine selling tests (test 2). The PSY signals that supply exists, not that markdown has started: phase B can last weeks with upthrust and UTAD still far away.
Symmetric
Preliminary Support (PS) in accumulation.
Summary card
| Abbr. | PSY |
| Phase | A (distribution) |
| Sequence | PSY → BC → AR → ST |
| Nine tests | Test #2 (with BC and ST) |
| Symmetric | PS |