Distribution Schematic B: Phase Differences and the Upthrust After Distribution

Distribution is the mirror of accumulation, but the two schematics are not perfect inverses. Schematic B has distinct phase differences that, if missed, lead to holding longs into a markdown.

Phase A: stopping the uptrend.

• Preliminary Supply (PSY): initial selling slows the rally. Volume rises, price still advances but struggles.
• Buying Climax (BC): panic buying on very high volume, wide spread up bar that closes off its highs. Smart money begins distributing.
• Automatic Reaction (AR): sell-off from the BC. The AR low and BC high define the range.
• Secondary Test (ST): price revisits the BC area on lower volume, confirming buying pressure is exhausted.

Phase B: building the cause. Multiple tests of the range. Smart money distributes across this phase. Volume often shows subtle weakness: rallies on lower volume, declines on higher volume. This asymmetry is the early distribution footprint.

Phase C: the Upthrust After Distribution (UTAD). The mirror of the Spring. Price breaks above the BC high (resistance) on reduced volume to trigger breakout buyers and stop out shorts, then reverses sharply back into the range. The UTAD confirms demand is exhausted.

UTAD validation. A valid UTAD shows lower volume than the BC on the break above resistance, a quick reversal back into the range (within 1-3 bars), and a close back below the BC high. A UTAD that holds above resistance on heavy volume is a true breakout, not distribution.

Key differences from Schematic A. The UTAD can repeat (a "UTAD test"), whereas the Spring is usually a single event. Phase D is choppier with multiple lower highs, because distribution takes longer than accumulation. Phase B volume shows subtle weakness (declining rally volume) rather than accumulation's building strength.

Phase D: the markdown begins.

• Sign of Weakness (SOW): a decline on increasing volume toward the AR low.
• Last Point of Supply (LPSY): a rally to a lower high below the UTAD area, on diminishing volume. This is the highest-probability short entry. Stop above the UTAD high; target the AR low and beyond.

Phase E: breakdown. Price breaks below the AR low (support) on increasing volume. Distribution is complete. The cause projects the markdown target.

The distribution trap. Traders mistake Phase B range rallies for trend continuation and go long. The warning: if rallies consistently close on lower volume than declines, distribution is likely underway. Distribution is harder to spot than accumulation because the UTAD makes new highs, which looks bullish—confirming the UTAD's failure is the signal that distribution is in control.

Entry rules.

• Conservative: short at the LPSY in Phase D, after the UTAD test confirms. Stop above the UTAD high. Target the AR low, then the cause projection.
• Aggressive: short at the UTAD reversal, stop above the UTAD high.
• Breakdown: short on the Phase E break of support with a close below the AR low. Stop at the last LPSY.