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Source: Wyckoff Terms
Distribution area is where the Supply overcomes Demand and stops the upward move and eventually begins the downward move. Distribution refers to the elimination of a long investment or speculative position and often involves establishing a speculative short position by professional interests in anticipation of a decline of price. In the distribution area the professional investors or speculators who had previously had bought stock, sell there stock to the public. The public buys and it generally buys because of good news of various sorts. Good news on the company, its product, the economy or any news which will entice untrained people to rationalize there buying decision. The best news of all is the advancing of the price of a stock. Often the reason that untrained people buy is that they do not want to miss out on the anticipated profits they think there are going to get as the stock continues to move up. Or they may buy because the stock has reacted a few points from the top and they think they are getting a bargain. After having sold there long stock professionals have no reason to support the stock on reactions and so they cancel there bids under the market, they may not only cancel the bids but they may establish short positions in anticipation of a large decline in price. Distribution is usually accomplished in a relatively SHORT TIME, Whereas accumulation takes MUCH LONGER, sometimes over many years. MAJOR distribution occurs in only a few weeks or perhaps a few months very rarely over a several year period. Distribution is usually characterized by wide price movements and heavy volume and GREAT activity.
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