What is Preliminary Supply (PSY) in Wyckoff?
Preliminary Supply is the first notable appearance of selling pressure near the top of an uptrend. Institutional sellers begin offloading positions, creating resistance where the trend previously moved freely.
How It Works
PSY is the distribution mirror of Preliminary Support. As price approaches the top of a sustained advance, selling volume starts to show up on rallies. The market may briefly stall or dip before resuming higher, but something has changed. Where previous rallies were smooth, PSY introduces friction. PSY doesn't mark the top. The Buying Climax that follows usually pushes price to a higher high. But PSY is the first evidence that institutions are beginning to sell. A few wide-range down candles on above-average volume within an otherwise bullish trend. A rally that stalls where previous ones didn't. Like PS in accumulation, PSY is about reading a shift in character rather than a completed event. The uptrend is still intact. But the effortless quality of the advance has a crack in it.
Why It Matters
PSY puts you on watch that distribution may be forming. On its own it's not actionable, but when a Buying Climax and Automatic Reaction follow, PSY becomes the first piece of the puzzle and the earliest clue that the trend's character was already shifting.
Common Mistake
Shorting at PSY. The uptrend is still intact and the buying climax often pushes price higher after PSY appears. PSY is context, not a trade signal. Wait for the full distribution range to develop.
Example
Heavy selling appears during a rally and you label it PSY. But instead of forming a range, price absorbs the selling and continues higher without pause. There was no distribution. The selling was profit-taking within a healthy trend. PSY only means something once the range forms around it.
Stoic Insight
Seneca: 'Begin at once to live, and count each separate day as a separate life.' PSY is the first day of a new chapter in the trend. Most traders don't notice because the old chapter still looks bullish. The volume shift is subtle, but it's there for those paying attention.
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