A quién sirve esta entrada — For anyone who can recognise a bottom but gets caught out by tops. Distribution is the schematic mirror of accumulation: how the Composite Man stops an uptrend, offloads his positions in a range, and starts the markdown while the public keeps buying.
Fuente: Pruden & von Lichtenstein, Wyckoff Schematics (MTA 2006), which present two variants of the distribution schematic; Wyckoff Analytics.
Prerrequisitos
Accumulation phases A–E — the structure is symmetric and it helps to master the bullish one first — and Trading range.
The symmetry and its traps
Distribution is the reversed portrait of accumulation: where there demand absorbed supply at the bottom of the market, here supply absorbs demand at the top. But the symmetry is conceptual, not aesthetic. In practice tops are trickier than bottoms for two reasons. The first is emotional: distribution happens in euphoria, often on excellent news, and selling when everything seems to be going well is counterintuitive. The second is structural: distribution ranges tend to be wider, «noisier», and richer in false signals than accumulation ranges, because late demand keeps pushing even while the large operators unload. This is why the distributive phase C, with its upthrust, produces more costly traps than the spring.
| Phase | Operational name | Key question |
|---|---|---|
| A | Halt of the uptrend | Has the rise stopped? |
| B | Building the bearish cause | Is the range offloading positions? |
| C | Test of demand | Is there demand left capable of making new highs? |
| D | Dominance of supply | Do SOW + LPSY confirm weakness? |
| E | Markdown | Exit the range in a downtrend |
The events, mirroring accumulation
Every distributive event has its bullish twin, and keeping them paired helps read the schematic without memorising it piece by piece.
| Abbr. | Event | Role | Accumulation twin |
|---|---|---|---|
| PSY | Preliminary Supply | First institutional selling at the top | PS |
| BC | Buying Climax | Demand exhaustion at the highs | SC |
| AR | Automatic Reaction | Post-BC correction that sets support | AR |
| ST | Secondary Test | Return toward the BC area on reduced volume | ST |
| UT | Upthrust | False breakout, supply test | — |
| UTAD | Upthrust After Distribution | Late test, phase-C bull trap | Spring |
| SOW | Sign of Weakness | Decline on wide spread and volume | SOS |
| LPSY | Last Point of Supply | Weak bounce before markdown | LPS |
In plain terms — The buying climax says «the rise is ending», the UTAD cheats the last buyers with a false new high, and SOW plus LPSY say «now they are selling with conviction». The public buys precisely while the large operators hand them the shares.
Phases A and B — the uptrend fades, the cause loads
Phase A stops the uptrend. The first significant supply (PSY) slows the rise; the buying climax marks the peak of buyer urgency, often on enormous volume and a close in the lower half of the bar — maximum effort, a result that begins to run short (law 3). The automatic reaction that follows is the first change of character: a decline wider and faster than the uptrend had accustomed you to see, which sets the range support. The secondary test returns toward the climax area; if the top is confirming, it does so on reduced volume.
In phase B the Composite Man distributes. Rallies toward resistance show signs of demand absorption: bars that struggle to extend, volume that grows on reactions and falls on rallies — the inverse of the healthy relationship of a markup. It is the longest and most ambiguous phase, and it is here that the P&F count builds the downside objective.
Phase C — the test of demand (UTAD)
Ejemplo — Range resistance at €80. Price punches through to €83 on a volume spike, breakout traders enter, but the bar closes at €79, inside the range. In the following days a SOW appears that takes price to €74 on double volume: the UTAD has discovered that above €80 there was no demand able to hold the new highs. Whoever bought the breakout is now trapped.
Phase C tests demand with the UTAD: a false breakout above resistance that attracts buyers and then returns into the range. It is the mirror of the spring in accumulation, and shares its logic — verifying that there is no fuel left on the other side — but with the opposite sign. Like the spring, it is not obligatory: the schematic variant without a clear UTAD is frequent, and forcing the search for an upthrust on every top leads to premature shorts.
Phases D and E — supply dominates, price collapses
In phase D supply takes control in a declared way. The Sign of Weakness is the decline on wide spread and significant volume toward — or beyond — the range support; the bounce that follows is weak, without volume, and draws the Last Point of Supply, the last favourable zone to short before the break. Once support (and the internal ICE) is lost, phase E is the markdown proper: a downtrend in which the weak rallies — subsequent LPSY — offer short-add zones toward the count objective.
| Signal | What it confirms |
|---|---|
| SOW | Supply has exceeded demand |
| LPSY | Weak rally — supply is still in control |
| Volume on decline > volume on rally | Effort/result law consistent with markdown |
The two Pruden variants
Caution — Pruden distinguishes two distribution schematics, and not forcing a single one onto every top is part of the method. The A–E logic stays identical; what changes are the details of phase A and the sharpness of the phase-C events.
| Variant | Characteristic |
|---|---|
| Type 1 | Classic BC / AR / ST, clear UTAD in phase C, easily readable top |
| Type 2 | Range with an internal bearish bias already in phase B, less dramatic phase-A events, often without a marked UTAD |
Type 2 is the one that most easily deceives: without a spectacular buying climax and without a clear UTAD, it looks like simple congestion while the bearish cause loads silently. The defence is step 1 of the five steps — market context — and reading the volume on the internal rallies.
Nine selling tests
The nine selling tests are the mirror checklist of the buying tests (step 4 of the five steps) and should be read on the bar chart, with the objective tests on the P&F.
- Previous upside objective reached (the uptrend has «paid» its count).
- Preliminary supply, buying climax, and secondary test present.
- Bearish activity on reactions exceeding bullish activity on rallies.
- Break or bending of the bullish trendline.
- Lower highs — falling highs in the final part of the range.
- Lower lows — falling lows.
- Stock weaker than the market index.
- Well-built top — a trading range that provides the bearish cause.
- Downside objective from the P&F count covering the decline potential.
Card — Distribution
- Ideal short timing: phase C–D, after the UTAD and on LPSY
- Stop: above the UTAD or above the most recent LPSY
- Target: minimum objective from the P&F count of the cause
- Typical mistake: shorting in phase B without confirmation, or chasing a long on the buying climax