Wyckoff Distribution

Distribution is the mirror of accumulation. After a markup, large interests sell into strength inside a range. The textbook events include a buying climax, an automatic reaction, a secondary test of the high that makes less progress, and sometimes an upthrust, a break of the high that fails back into the range. A sign of weakness is a decline that breaks the range with wide spread and volume. Rallies back to the underside of the range, a last point of supply, are the method's preferred short location. As with accumulation, the schematic is cleaner than life. A range at the highs can also be a re-accumulation in a bull market, a pause before another markup. The volume and the failure of the upthrust are what argue for distribution. The mere existence of a range does not.

Compare the rallies inside the range with the declines. If the declines are wider and more urgent, and the rallies are laboured and overlapping, supply is gaining. An upthrust that cannot hold above the range is the short trigger for aggressive traders. Conservative traders wait for the range to break and for a weak rally back into it. The stop goes above the upthrust or above the range. Targets come from the cause, the width of the range, and from the next real support, which may arrive sooner. Take the nearer one seriously. Distribution ranges love to tempt a second long. Your job is not to be that long if the weakness has already printed.

The bullish alternative is re-accumulation: the range holds, the "upthrust" fails to break down, and price leaves the top of the range and holds the pullback. If that happens, the distribution label was wrong. Flip with the evidence. Many of the best markup legs begin from a range that pessimists called distribution because it felt late. Lateness is not a Wyckoff event. A failed breakdown and a held breakout are.

The bearish trade is the failed upthrust or the failed retest of a broken range, in the direction of a new markdown. It is a short at a high, so the higher-timeframe trend is often still up. That is a genuine conflict. Wyckoff traders take it because the campaign evidence has shifted. If you take it, size it as a reversal until the markdown is obvious, and get out if the range is reclaimed. A reclaimed distribution range is often a continuation of the bull market, and the short was the mistake, not the start of a conspiracy.

Shorting a strong bull market's first range because a book showed a climax at the top. Also treating every new high as an upthrust. A new high that holds is a breakout. And using the composite-operator story to hold a short while the market makes higher highs. The story is a teaching tool. Higher highs are the market.

Distribution and re-accumulation look alike in the middle of the range. The distinction is often clear only after the break, which is when the easy part of the move is gone. Volume clues are noisier than they were in Wyckoff's tape-reading room. And a distribution count can point at a target far below the next major support. The support is the real obstacle. The count does not remove it.