Chapter 32 · Wyckoff Theory

The Wyckoff schematics, phase by phase

What accumulation and distribution look like event by event, and the one test that separates them.

58 of 66 · 12 min

The Wyckoff cycle

A range where large positions are built, a markup, a range where they are sold, then a markdown. The cycle repeats at every timescale.

Wyckoff's contribution was not a pattern but a sequence of events with names, each of which is a testable claim about supply and demand. The value is that each event tells you what should happen next — and what would falsify the reading.

Accumulation, in order

Event	What happens	What it claims
PS — preliminary support	First significant buying after a decline	Sellers are meeting real demand
SC — selling climax	Wide bar, heavy volume, closes off the low	Panic selling absorbed by large buyers
AR — automatic rally	Sharp bounce on thin supply	Sets the top of the trading range
ST — secondary test	Return to the SC area on lower volume	Confirms supply has dried up
Spring	A dip below the range that fails	Remaining sellers flushed out
Test	Retest of the spring low on tiny volume	The critical confirmation
SOS — sign of strength	Wide advance, expanding volume	Demand now in control
LPS — last point of support	Higher low on light volume	The conventional entry

Effort against result

Heavy volume that produces little movement means someone large is absorbing the selling. That mismatch is the signal, not the price bar itself.

The test that separates accumulation from distribution

Both ranges look similar on a bare price chart. The difference is effort versus result — how much volume it takes to move the price.

Observation	Reading
Heavy volume, price barely falls	Absorption. Someone is buying what is being sold.
Heavy volume, price barely rises	Distribution. Someone is selling into the buying.
Light volume on a decline within the range	Little supply left — accumulation
Light volume on a rally within the range	Little demand left — distribution

Worked: reading a spring

A share has traded between Rs 418 and Rs 462 for two months. On one session it trades down to Rs 405, then closes at Rs 441 on volume 2.4× its 20-day average. Three days later it dips to Rs 424 on volume at 0.4× average.

The break below Rs 418 failed to attract follow-through selling and closed back inside the range: that is a spring.
The high volume on the spring day is stopping volume — supply met by demand.
The low-volume retest at Rs 424 is the test. Little volume means little supply remains at these prices.
Invalidation is precise: a close back below Rs 405 on rising volume says the reading was wrong. That is what makes this usable rather than a story.

Wyckoff, and the primary text we host→

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