Main phases according to Wykov
1. Accumulation
Institutions accumulate assets before a large price rise. The price moves laterally into a
consolidation zone, where selling volumes are absorbed.Subphases are:
- Subphases: Preliminary Support (PS), Selling Climax (SC), Automatic Rally (AR), Secondary Test
(ST), Spring, Test
- Preliminary Support (PS), or Preliminary Support, is the first key stage in
Richard Wykoff's theory that signals that a financial asset's long and sustained downtrend is
beginning to meet resistance from buyers. This usually occurs after a long period of decline
when the price is already in highly depressed areas, often below its real or perceived value. It
is at this stage that signs of interest first begin to emerge from so-called 'smart money' -
institutional investors, professional traders or large market participants looking for lucrative
entry opportunities. Although the price may still be falling, there is some slowing of the
decline, coupled with increased trading volume and the emergence of strong price reactions on
the upside, albeit short-lived. Often long lower shadows of candles are seen, indicating that
when a breakout to lower levels is attempted, price is quickly bought. This suggests that market
participants are starting to reject the lower values and build up position. Preliminary Support
does not immediately lead to a trend reversal, but it is the first warning signal that market
dynamics are beginning to change. It sets the stage for the next key moment in the accumulation
pattern - the Selling Climax, where the selling culminates. Thus, Preliminary Support serves as
a psychological and technical marker indicating that the market is beginning to find a bottom,
even though it is not yet ready for a major reversal. This stage is extremely important for
traders who use the Wykoff methodology because it shows where the foundation for a potential
trend reversal and the start of a new accumulation phase begins to build.
- Selling Climax (SC), or the climax of the sell-off, is one of the the most
important and dramatic moments in the accumulation scheme according to Richard Wykoff's theory.
This is the point at which the continuous downtrend reaches its emotional and price extreme.
After the Preliminary Support stage, when there have already been early signs of interest from
larger market participants, the Selling Climax marks the point at which mainstream investors -
often small speculators and panicked traders - give up and sell everything, driven by fear,
desperation or a loss of faith in the market. The price movement at this point is extremely
sharp, almost vertically downward, accompanied by heavily rising volume, indicating not only a
massive sell-off, but also that someone at the other end of the market is buying aggressively.
This is the point at which institutional buyers, already watching the market, become activated
and begin to absorb sellers, buying up a huge amount of assets at extremely low prices. A
Selling Climax is often characterized by a one-day or short-term price collapse in which
volatility is extremely high, and participants' reactions are driven by emotion rather than
logic. This is one of the signs that we are witnessing a climatic
moment - the market is not just falling, it is crashing because everyone is exiting their
positions at the same time. At this point, despite the intense decline, the asset is starting to
show signs of rejecting the lows. Candles can end with long lower shadows, and in some cases, a
strong bounce is seen within the same session or in the following days. This is because the
sellers' pressure is completely absorbed by the big buyers who start the accumulation process.
The Selling Climax is usually followed by an Automatic Rally (AR) stage - a quick and sharp
recovery to the upside that further confirms that the moment of maximum fear has passed and the
market is entering a calmer, horizontal phase. SC is a critical moment because it often marks
the end of a bear trend and the beginning of the accumulation process. For traders who
understand the Wykoff structure, the Selling Climax is an opportunity to begin building
positions with long-term potential, especially when this stage is confirmed by subsequent price
and volume action. In short, a Selling Climax is not just the low point in a move, but a
culmination of panic and mass capitulation that creates the conditions for a trend reversal.
This is the moment when weak hands leave the market and strong hands begin to take control.
Recognizing SC requires experience, observation of price-behavior patterns and an understanding
of market psychology, but its proper identification can offer some of the best entry points into
the entire market cycle.
- The Automatic Rally (AR), or automatic rally, is a key stage in the
accumulation scheme according to Richard Wykoff's theory, which follows immediately after the
Selling Climax (SC). This stage represents the market's first significant upward reaction after
a long and exhausting downtrend culminating in a massive panic and sell-off. AR marks the first
sign that the sellers' dominance has been temporarily broken and that serious buying activity is
emerging in the market. This rally usually happens quickly, sharply and with high volatility -
just as vigorous as the fall before it. At this point, we are already seeing buyers begin to
dominate in the short term and the downward pressure has been temporarily overcome.
Psychologically, the Automatic Rally is a moment of confusion and surprise for market
participants. After a Selling Climax where many have capitulated, the sudden and aggressive
surge higher is often met with skepticism. Many small traders who have just sold in panic are
standing on the sidelines, not believing the market can recover so quickly. Meanwhile, more
experienced participants and institutional investors are starting to use this moment to analyze
the price and volume reaction. AR is not just a simple bounce, but an important clue to the
future range of consolidation. The highest point of an auto rally often serves as an upper bound
(resistance) within the accumulation zone. This means that after this surge, the market will
most likely enter a period of sideways movement where the price will oscillate between the SC
level and the AR level. The automatic rally arises from two
main factors: exhaustion of sellers and aggressive entry of buyers. After the Selling Climax,
there are almost no participants left willing to sell at low levels. Institutional players who
have begun to accumulate create intense demand, and when supply drops sharply, the price begins
to jump almost vertically. This leads to short-term euphoria, but it is important to understand
that AR is not necessarily the start of a new uptrend, but part of the process of establishing
the range in which the entire accumulation structure will develop. In practice, AR is a critical
marker. It allows traders to identify the boundaries of the price range and build expectations
for future movement. Many strategies within the Wykoff framework use this level as a starting
point to identify key resistance areas that price will return to repeatedly before managing to
break through them. Monitoring volume during AR is also important - if volume is very high, it
may mean that there is still significant supply that will need to be absorbed in the next
stages. If volume is gradually decreasing, this indicates decreasing pressure from sellers and
controlled market behaviour, which is usually a positive signal for future sustainability. In
short, the Automatic Rally is not just a technical spike, but an important element of the
supply-demand balance that marks the end of the panic phase and the beginning of a market
recovery. Recognizing and correctly interpreting it is essential for building scenarios and
strategic inputs within the Waikowski accumulation scheme.
- The Secondary Test (ST), or Secondary Test, is an essential part of the Wyckoff
accumulation structure and occurs after the Selling Climax (SC) and Automatic Rally (AR). The ST
represents a repeated downward price movement in which the market
"tests" whether the seller pressure that led to the Selling Climax is still present. This is an
important moment when price returns to the area around the SC, but its behavior and especially
the volume with which this movement is occurring provide key signals as to whether the market is
ready to move into a new phase or if there is still supply to be absorbed. The secondary test is
usually accompanied by lower volumes and lower volatility compared to the Selling Climax. This
is logical as the underlying "psychological storm" has already happened - panic has broken out,
many of the weak hands have already been kicked out of the market, and now the remaining
participants are watching the price and volume reaction with caution. In this context, ST is a
kind of "test of strength" - if on a repeat decline price does not reach the previous low (SC),
or if it does reach it but with much weaker volume and an immediate reaction upwards, it is a
sign that the sellers are losing control and that the big players are starting to exert more
influence. Psychologically ST has a strong role to play. While some of the market is starting to
see signs of recovery after AR, the secondary test creates a moment of doubt. Many participants
are hesitant as to whether this is just another brief correction before another decline. This is
why the secondary test is so important - it provokes a reaction that can be measured by price,
volume and duration. If sellers fail
to push the market lower despite their best efforts, this confirms that the majority of supply
has already been absorbed and accumulated by more informed market players. From a technical
point of view, ST may take different forms. Sometimes the price makes a double bottom, almost
identical to the SC, which is often used for confirmation by traders looking for entry signals.
At other times, ST may even break SC slightly - this is called a "spring," or a false break down
that further eliminates the last weak hands before price heads up. In all cases, however, the
key element is volume - in a strong ST, volume should be clearly lower than in an SC, signaling
that supply is declining. The timing of the ST also matters. It can occur shortly after AR or
after several range fluctuations, depending on market dynamics. If the market is more illiquid
or subject to manipulation, the ST may drag on or be repeated several times. However, the
objective is one - to ascertain whether the market is clear of weak hands and whether
accumulation is at an advanced stage. Ultimately, the Secondary Test is more than just a
repetition of a bottom - it is a tool for market professionals to "test" the market before
moving into a more aggressive phase of accumulation and preparation for an up move. For the
trader who follows the Wykoff structure, ST is a critical point to monitor and analyze - if
correctly identified, it offers an excellent opportunity to position in the early stages of the
upcoming trend.
- Spring in Richard Wykoff's theory represents one of the key points in the
structure of accumulation. It is a move in which price temporarily breaks below a support level
established by previous lows (most often below the Selling Climax and/or Secondary Test level),
only to quickly move back above it. Visually and emotionally, spring looks like a new breakdown,
which often tricks market participants into believing that a deeper fall is imminent. In
reality, however, this move is most often part of the strategy of larger players who use the
moment to buy up the remaining supply of panicked traders - the "weak hands" - before the price
takes a steady upward turn. Spring is not just a technical break below previous lows. It is a
behavioral and psychological test in which many capitulate because they believe the market will
continue lower. A sense of selling and desperation is created, thus traders who bought earlier
or who are unsure of the move sell in panic. This is where the accumulation role of large
participants comes into play: they absorb these sales and accumulate long positions at low
prices. The next price reaction - a rapid recovery back above the previous support level - is a
sign of this process. From a technical point of view, the spring is accompanied by certain
characteristics that make it recognisable. The volume on the breakout can be high or moderate,
but the key is in the price reaction - whether it quickly moves back above the broken area. This
quick return indicates that the actual selling was weak and that the sellers did not have the
strength to sustain the move down. В
addition, often after a spring price forms a new higher low and begins a sequence of upward
impulses - something that confirms the validity of the spring and the exit from the range.
Spring also has strategic significance for traders who use Wykoff's theory. For experienced
traders, this is a potential entry point into the market - not just because of the
the lower price, but also because it confirms that the accumulation is probably coming to an end
and the markup phase is imminent. Unlike the Secondary Test, which simply tests the support
level, the spring is a more aggressive form of manipulation and represents the final "cleaning"
of the market of the remaining unconfident participants. It is a kind of trap that creates the
illusion of weakness when in fact the market is preparing for strength. Psychologically, spring
is associated with intense fear and uncertainty, making it difficult to interpret in real time.
Many traders, even with experience, succumb to the pressure and sell at the moment when they
should be considering buying. This is why understanding spring is so important - it requires not
just technical observation, but a deep understanding of the market structure, the intent behind
the moves and the rhythm of the accumulation phases. In conclusion, a spring is not just a price
decline - it is the final act of accumulation designed to cause panic and enable the
more informed participants to accumulate long positions before the start of a new trend. For
traders who can read this signal and who have the patience to wait for confirmation through
price and volume behavior, spring provides one of the best opportunities to enter the market
with a favorable risk/reward ratio.
- Test (test) takes a particularly important role, especially at the end of the
accumulation phase and before the start of more significant upward movements. A test is a price
behaviour where the market moves back to previous low levels (usually around Spring or below the
support level) to
"test" whether there is no longer supply - i.e., whether sellers are exhausted. This is a moment
of confirmation that the worst has passed and that further price declines are unlikely, at least
in the short term. If the test is successful, it provides the careful trader with an opportunity
to enter a position with a high probability of success. For a move to be recognized as a test,
it must meet several key behavioral characteristics. The most important of these is low volume.
This is a sign that the supply is effectively exhausted - that there are not many sellers
willing to sell at these levels. While Spring's move down is often abrupt and emotional, the
test happens much more moderately and smoothly, with the market "sliding" down to make sure
there is no more selling interest. If volume remains low at this point and the price reacts with
a reversal and a new rise, this is confirmation that the accumulation has been successfully
completed. The test also plays an important psychological role. It often creates uncertainty in
participants who are not sure whether the spring was real or not. For traders who missed the
entry during the spring, the test offers a second opportunity to enter at a low level, but only
if they can
to read the situation correctly. Psychologically, this requires calmness and objectivity -
because at this point there is still doubt whether the market will really turn up. This is a
moment when the "smart money" is already in and the rest of us are watching. Technically, the
test can take many forms - a new low (which doesn't hold), a double bottom, or just a short
decline that doesn't reach the previous lows. The key here is the volume reaction and price
behavior after the test. If after the test the market starts making higher highs and higher
lows, this is already a structural indication of the start of the markup phase - an uptrend.
Test is also a confirmation tool. It is like the last squeeze of the brake before the car goes
forward. If the car is not going backwards and there is fuel (in this case, buyer interest),
then a more sustained move can be expected. Traders often use the test as a time to open long
positions, especially if it occurs after a clearly recognized spring. This allows a low-risk
entry and a good risk-reward position. In conclusion, Test is one of the most subtle, yet most
valuable signals in the Wykoff structure. It doesn't just tell us that the price is ready to
move higher, but that the market has already gone through the phases of fear, panic and
manipulation, and that only the strong participants remain in the game. Recognizing a test
requires an understanding of context, patience, and volume monitoring - but when interpreted
correctly, it represents one of the most reliable opportunities to enter a market with favorable
conditions.
2. Uptrend/Markup phase
The accumulation phase is followed by a sharp uptrend where the market enters a bull market.
-
Here the price makes higher highs and higher lows supported by volume.
3. Distribution
The reverse process of accumulation. Institutions begin to sell off assets, keeping the price
artificially high until they have transferred enough volume to market participants.
- Subphases: Preliminary Supply (PSY), Buying Climax (BC), Automatic Reaction (AR), Secondary Test
(ST), Upthrust (UT), Upthrust After Distribution (UTAD).
- Preliminary Supply (PSY) is a key phase that marks the beginning of the
distribution process. This is the point at which we first see a visible increase in selling
pressure after a prolonged uptrend. Once the price of an asset has climbed steadily, often with
the participation of the general public, signs of exhaustion begin to appear - this is when
Preliminary Supply comes into play. This is the first tangible evidence that supply is beginning
to outweigh demand. Preliminary Supply is not a moment when the market immediately turns around,
but it is the first signal that the most informed participants (the so-called "smart money") are
beginning to gradually unload their positions. This often happens when prices have risen
strongly and when there is intense interest from the mass of investors who have been attracted
by the previous move. At this point, the process of distribution begins - the transfer of assets
from the professionals to the less experienced participants who buy at the top, under the
influence of emotions and fear of missing the opportunity. From a technical perspective,
Preliminary Supply is recognized by increased volume and a slowdown in the pace of growth. The
price can still make new highs, but the reactions after them are now different - a clearer and
sharper pullback down is seen after reaching a new peak. Deeper corrections are emerging,
reflecting the first signs of strong supply. These corrections may recover, but there is
gradually increasing volatility and price growth is becoming more difficult to sustain.
Psychologically, the PSY is associated with increasing euphoria and participation by so-called
"late buyers". These are investors who join the market after much of the move has already been
made, often influenced by media hype or mass positive opinion. They are the ones being sold to -
the "smart money" is using the liquidity the masses provide to unload their positions before the
price collapses. It is important to stress that the PSY is not the peak, only
the beginning of
the completion. It is often followed by more upside attempts, which are expressed in Selling
Climax, Automatic Reaction, and other stages of the distribution phase. However, Preliminary
Supply is a signal for vigilance. It alerts the careful trader that buyer dominance is in
question and that market dynamics are beginning to shift. On the actual chart, traders should
watch for a sharp increase in volume at a new high and for the presence of sharp rejections or
the formation of long shadows at the top of candles - all of which could be part of the PSY.
This is also a point at which a review of risk parameters and potentially a reduction in
exposure is recommended, especially if there is no confirmation of continued upside momentum. In
conclusion, Preliminary Supply is an important warning phase. It tells us that the market
dynamics are changing and that a new stage is beginning - that of position allocation. Being
able to recognize the PSY is part of building strategic sense to exit positions in a timely
manner and protect against a subsequent deep correction. For traders who follow Wyckoff logic,
this stage is the first red flag that the "golden time" of growth may be coming to an end.
- Buying Climax (BC) in the context of Wyckoff theory is one of the most
important and dramatic stages in the asset distribution process. This is the point at which the
market reaches its emotional peak - prices soar, volume increases sharply, and buyers - driven
by fear of missing the opportunity - enter the market en masse. This sudden influx of demand
marks the last phase of the uptrend before a reversal occurs. Although at first glance BC looks
like a new high and a moment of strength, it is actually a signal of weakness - a moment when
the smart money completes the sell-off and the crowd takes all the risk.
Buying Climax is characterized by an explosive move up, which is often accompanied by extremely
high volume and volatility. This is no ordinary rally - it's a final, sometimes "artificially
fueled" burst designed to attract as many buyers as possible. This is where market psychology
reaches its extreme - the media often reports records, social media overflows with optimism, and
the feeling is that prices will never fall. In this chaos of enthusiasm, large market
participants use liquidity to unload their long positions. BC is often followed by an abrupt
change in price behaviour - from a smooth and strong move up to stronger reactions down,
indicating that demand has been exhausted.
Volume remains high, but is starting to change - no longer a supportive move higher, but showing
aggressive participation by sellers. This is also the point where many traders and investors get
"trapped" believing that the rise will continue, when in fact the market has already gone into
distribution mode. Buying Climax is a key technical and psychological marker. It coincides with
the highest prices in a given cycle, but is inherently a false signal of strength. Here it is
important to monitor not only the price movement but also what volume is saying. The combination
of a sharp rise in price and volume followed by immediate or short-term downward momentum
suggests that the top has been put in. This stage can be especially dangerous for inexperienced
traders. Like a decoy, BC looks like a golden opportunity, but is actually a trap. This is why
knowing the Buying Climax and being able to recognize it in time is so important. It's often the
last chance to exit the market profitably before a serious downturn begins. In conclusion, the
Buying Climax is the culmination of an uptrend - a point at which optimism and demand peak, but
behind the scenes the final phase of selling by professional participants is taking place. After
this, a phase of weakness usually begins to build, which gradually turns into a downtrend. For
the trader who understands the psychology behind this stage and can monitor volume and price
together, BC is not just a warning, but an opportunity to defend or even reverse a position at
the right time.
- Automatic Reaction (AR) in the context of Wyckoff theory represents the natural
and inevitable counter reaction in the market that follows immediately after a Buying Climax
(BC). Once the price has peaked
by a rapid and volume-supported upward impulse, and demand has exhausted itself, the market
reacts by making an automatic, sharp and often equally voluminous move downward. This move is
the first serious sign that the market dynamics are changing and that the distribution phase is
beginning to take shape. AR is not just a brief correction - it is a powerful reaction to the
forces of supply beginning to overwhelm demand. Automatic Reaction is called "automatic" because
it is not triggered by a specific news story or event. It arises from pure market logic - once a
large amount of buying has gobbled up the existing supply during BC, and large market
participants have already unloaded significant positions, there is no one to support the price
at the new high levels. New buyers, often small investors, quickly discover that the price is
starting to fall, and this leads to panic, which accelerates the decline. Volume usually remains
high as the market struggles to find a new area of balance where supply and demand meet again.
AR serves as the lower boundary of the newly forming range. In most cases, this range will be
the distribution zone, where price will move sideways as professional participants gradually
sell the remainder of their long positions. Psychologically, AR represents the moment when the
euphoria of BC collides with the reality that the move up cannot continue indefinitely.
Investors begin to lose confidence and weak hands capitulate. Furthermore, AR is extremely
important for delineating structural levels. The level to which price falls at AR often serves
as future support within the distribution range. It enables the analyst to begin to delineate
the upper and lower boundaries of the area in which price will consolidate before beginning a
downtrend. In this context, the AR is not just a reaction, but a structuring element in the
Wyckoff model that serves as a guide for the next stages such as Secondary Test (ST), Upthrust
(UT) and finally a distribution breakout. In practical terms, AR can be a signal to more
experienced traders that a market trend is in the process of changing. Although it may still
look like a simple correction, the combination of AR and BC sets the stage for the consolidation
phase. After the AR, there is often a brief upward bounce or ST, but it fails to recover the
highs, confirming that the uptrend is exhausted. In conclusion, the Automatic Reaction is a
critical component in the Wyckoff model that marks the first serious display of weakness after a
price peak. It indicates that the market is beginning to change its structure, that supply is
reactivating, and that professional participants are no longer supporting the uptrend.
Knowing and correctly interpreting AR helps traders identify the end of an uptrend and the
beginning of a consolidation or distribution, which is key for planning next trading actions and
managing risk.
- Secondary Test (ST) within Wyckoff theory represents one of the key events that
confirm the beginning or development of accumulation or distribution. After Buying Climax
(BC) and the subsequent Automatic Reaction (AR), the market enters a period of sideways movement
- the so-called trading range. In this context, the Secondary Test aims to check whether market
participants are still exhibiting the same supply or demand behaviour and whether the energy
behind the initial reaction (BC and AR) has been maintained or has started to wane. In a
distributional context, a Secondary Test typically represents a price move back to Buying Climax
levels or near the upper end of the range. This move up looks like a continuation of the
uptrend, but is actually a "test" of whether there is enough demand to break the top. In most
cases, however, volume during ST is lower than BC, and price fails to make a new high. This is a
signal that demand is weakening and supply is strengthening, which is an indication of a future
decline. Secondary Test in this case depicts the hesitation of the market participants - whether
the price will rise or be pushed back by resistance. In the context of accumulation (hoarding),
ST performs a similar function but in the opposite direction. After the Selling Climax (SC) and
the Automatic Rally (AR), price retests the low levels reached during the SC. If this test
occurs with
lower volume and little downward movement, it means that supply in the market is decreasing -
i.e. sellers are exhausted and the new supply is not enough to lower the price further. In this
case, a Secondary Test indicates that the market is beginning to build a foundation for future
upward movement. Most often price makes a new low, but volume is weak and there is no
continuation of the decline - this is a sign of the remaining supply being absorbed by the
smarter market participants. The most important characteristic of a Secondary Test is the
context in which it occurs. Its role is not to create a new trend, but to confirm or reject the
possibility of a trend change. Professional traders use it as a guide - when ST shows a
weakening of momentum relative to BC or SC, it means that a structure is forming in which
control is shifting from one side (buyers or sellers) to the other. If volume and volatility on
ST are significantly lower relative to the primary reaction (BC or SC), this is considered a
strong signal that market momentum is changing. ST is also an important event in delineating the
range boundaries. In a distribution, it often marks the second high in a double top, and in an
accumulation, the second low in a double bottom or the beginning of a consolidation phase. This
is a time when traders should be particularly observant and watch for divergences between volume
and price movement - something that can further confirm the start of a trend reversal. In
conclusion, the Secondary Test is not just a re-move to BC or SC, but a deeply significant
moment in which to measure market strength. It is a test of the commitment of buyers and
sellers, of the strength of supply or demand, and of the market's ability to sustain or reverse
the trend. A trader's success in entering future positions depends on the correct interpretation
of the ST, as this test provides insight into the maturity of the current stage of the cycle and
enables early positioning before the next move.
- Upthrust (UT) in the context of Wyckoff theory is a crucial point in the
distribution phase that symbolizes the market's last attempt to
"deceive" buyers before the real price drop occurs. Upthrust is a short-term and often sharp
move above the upper boundary of an established trading range (range) that looks like a breakout
and the start of a new uptrend, but quickly proves false. It usually occurs after the market has
gone through a Buying Climax (BC), an Automatic Reaction (AR), and several Secondary Test (ST)
that have formed a well-defined upper and lower consolidation range. UT is perceived as market
manipulation - a last ditch trap for buyers where stops above previous highs are activated and
new entrants are attracted with the idea that a breakout and trend higher is imminent.
Psychologically, the Upthrust works by creating false euphoria and confirmation of a
continuation of the uptrend. Many traders perceive this as a signal to enter long positions,
especially if the breakout is accompanied by volume. However, the truth is that this volume
often comes from professional participants who use the situation to sell large volumes to
enthusiastic buyers. Immediately after the breakout, the price starts to fall back below the
previous resistance level and sometimes falls sharply within one or a few bars. This sudden
reversal puts the new buyers in a losing position and forces them out of the market at a loss,
further fueling the oversupply. Technically, UT serves as a key signal that the distribution
phase is coming to an end and that supply is prevailing. This is the point at which the most
informed participants have completed unloading their positions and are now beginning to prepare
for the downward momentum. Within the Wyckoff structure, the Upthrust is often the last high
before the start of the markdown phase - the period when price begins to fall sharply and
sustained as the market no longer has the support of demand. UT can also be accompanied by a
volume anomaly - high volumes with no subsequent upside, further suggesting that it is a trap
rather than a legitimate breakout. It's important to note that an Upthrust is often confused
with a true breakout from consolidation, especially by inexperienced traders. Therefore, look
for confirmation signs such as a quick return below the previous resistance level, a weak
continuation move up, volume spikes without significant price gains, and increased volatility
without direction. These signs help more experienced analysts distinguish a false breakout from
a real one and position their trades in accordance with the true market context. In conclusion,
Upthrust is one of the most critical phases in the distribution structure according to Wyckoff.
It represents a moment of manipulation where buyer traps are activated by creating a false sense
of a breakout, only to be followed by a quick reversal and the start of a downtrend. For the
trader who understands the psychology behind UT and knows how to recognize it, this event
provides one of the best opportunities to enter a short position with very good risk-reward
potential. This makes Upthrust not only theoretically important, but practically an extremely
valuable tool in the arsenal of any analyst who follows Wyckoff principles.
- Upthrust After Distribution (UTAD) is a key phase in the distribution model
according to Richard Wyckoff's theory and represents the final element of the consolidation
structure before the market moves into a pronounced downtrend. UTAD is an insidious and
purposeful move that occurs after the distribution phase is complete and often acts as a last
lure for buyers. It is a false breakout above an established resistance level - above the highs
formed during the B and C phases of the distribution - that is intended to activate the stops of
traders with short positions and create the illusion of the start of a new uptrend. The real
purpose of UTAD, however, is to provide an opportunity for large market participants to unload
their last positions at the best possible prices before the market turns down. UTAD is less
common than the standard Upthrust because it occurs most often in complex or longer distribution
schemes. It occurs after a clear range has been established, with several previous breakout
attempts having been rejected. Just when the market looks ready to break this resistance, UTAD
occurs - a powerful breakout with a sharp jump in price and often accompanied by strong volume.
Psychologically, this move triggers massive FOMO (fear of missing an opportunity), causing a
large number of market participants to enter long positions just before the sharp decline
begins. Big players use this enthusiasm to sell aggressively, transferring risk to the crowd.
The result is a quick and decisive return of price below the previous resistance zone,
accompanied by increased selling pressure and the beginning of the markdown phase. Technically
speaking, UTAD is a trap of the highest order. It looks like a real breakout, but has no
duration - usually the move up is short lived, volumes are high, but then a sharp decline
follows. This indicates that there has been a massive realization of "smart money" profits
rather than genuine demand. Compared to the standard Upthrust, which can happen earlier in the
distribution, UTAD is a stronger signal that the accumulation cycle is now completely over, and
that the market is moving from an equilibrium phase into a sell-off mode. This is why many
traders consider UTAD to be one of the surest technical indications of a trend reversal. To
identify UTAD correctly, careful observation of the previous market structure is necessary -
especially false breakouts, exhausted demand and increased volatility. Often UTAD is also
accompanied by divergences with volume or indicators that do not confirm the move up. This is
useful for confirming the false nature of the breakout. It is also important to watch what
happens after the UTAD - if price cannot hold the new highs and quickly returns below the range,
this is a clear signal of impending weakness. In conclusion, the Upthrust After Distribution is
the final chord of the distribution phase, indicating that the strong hands have finally
unloaded their positions and the market is ready to move into a downtrend. This move is a
typical example of manipulation within the market structure, but it also provides an opportunity
for experienced traders to enter short positions with minimal risk and great profit potential.
Recognising UTAD in real time requires a combination of knowledge of structure, market
psychology and experience in volume monitoring, but once mastered, it becomes an extremely
powerful tool in the arsenal of any serious analyst or trader.
4. Downtrend / Markdown Phase
Price begins to fall sharply after distribution. Bear market with lower highs and lower lows.
