Distribution is the process through which positions are reduced before a decline.
Like accumulation, it rarely appears obvious while it is happening.
Price may continue to move sideways or even slightly upward, giving the impression that strength remains. However, beneath the surface, the behaviour begins to change.
In distribution:
- Upward moves lose momentum
- Volume during rallies often decreases
- Downward movements begin to show increased activity
This reflects a shift in control.
Where demand once dominated, supply begins to take over.
The key is not to look for dramatic reversals, but for subtle changes:
- Rallies that fail to follow through
- Increased selling pressure on declines
- A weakening relationship between effort and result
By the time price breaks lower, the process has usually been underway for some time.