Glossary
Distribution
A topping phase in which large holders sell into strength, often seen as a range with heavy volume on down days.
In technical analysis, distribution is the stage after a long advance in which well-informed or large holders gradually sell their positions to eager buyers, without pushing the price down sharply enough to scare them off. Price usually stops climbing and moves sideways in a range while supply quietly outweighs demand. It is the mirror image of Accumulation, and the idea traces back to Richard Wyckoff's market studies from the early 1900s.
How analysts spot it
No single bar proves distribution, but a cluster of clues suggests it:
- Heavy volume on down days and lighter volume on up days within the range.
- Failed rallies that poke above the prior high and quickly reverse, sometimes called an upthrust.
- Weakening indicators, such as a falling on-balance volume line or a bearish Divergence in momentum while price holds near its highs.
- Narrowing participation, with fewer stocks making new highs across an index.
What happens next
If distribution is real, the range eventually breaks down and a Downtrend begins, which is why traders watch the bottom of the range as Support. If buyers absorb the selling, the range becomes a pause before the next leg up, and the same chart is relabeled consolidation.
A different meaning
"Distribution" also refers to payments a fund or company makes to investors: dividends, interest, capital-gain distributions from mutual funds, or return of capital. Context makes the sense clear.