Two charts look identical. Both show price stuck in a range, going nowhere. Both have similar volume. Both have similar candle patterns.
One is accumulation - smart money loading up before a massive rally. One is distribution - smart money unloading before a devastating decline.
The chart looks the same. The outcome is opposite. How do you tell the difference?
Context Is Everything
The first clue is what happened before the range.
Range after extended decline = likely accumulation. Price fell significantly. Sellers are exhausted. Holders are demoralized. Smart money sees value and starts buying.
Range after extended rally = likely distribution. Price rose significantly. Buyers are exhausted. Holders are complacent. Smart money sees overvaluation and starts selling.
This isn't foolproof - trends can continue after consolidations - but context gives you the prior probability.
The Volume Tell
Within the range, volume behavior diverges:
Accumulation volume pattern:
- Higher volume on rallies (up bars) within the range
- Lower volume on declines (down bars) within the range
- Volume spikes at the bottom of the range that don't break it down
Smart money is buying. Their buying prevents significant declines. Volume on down moves accomplishes nothing.
Distribution volume pattern:
- Higher volume on declines (down bars) within the range
- Lower volume on rallies (up bars) within the range
- Volume spikes at the top of the range that don't break it out
Smart money is selling. Their selling prevents significant rallies. Volume on up moves accomplishes nothing.
The Failed Move Signature
The clearest signals come from failed attempts to leave the range - patterns first codified by Richard Wyckoff in the early 20th century and still valid today.
In accumulation, look for the spring: Price breaks below the range support, triggers stops, then rapidly reverses back inside. Smart money used the stop cascade to complete buying. Rally often follows quickly.
In distribution, look for the upthrust: Price breaks above the range resistance, triggers FOMO buying, then rapidly reverses back inside. Smart money used the breakout to complete selling. Decline often follows quickly.
These transition points offer the best risk-reward with clear invalidation levels.
The Transition Confirmation
Wyckoff identified specific signals that mark the end of each phase:
When accumulation ends, you'll see a sign of strength (SOS): a high-volume rally that breaks above the range and holds. Buyers are in control. Markup has begun.
When distribution ends, you'll see a sign of weakness (SOW): a high-volume decline that breaks below the range and holds. Sellers are in control. Decline has begun.
Wait for these confirmations if you want safer entries. The tradeoff: less favorable price, but higher certainty.
The Bottom Line
Identical-looking ranges can precede completely opposite outcomes. The difference isn't in the price pattern. It's in the volume behavior, the failed moves, and the context of what came before.
Learn to read accumulation and distribution, and you learn to see what the chart isn't showing - the intentions of the players who actually move markets.
Some analysis systems automate this detection by classifying regime phases with strength percentages, tracking whether OBV confirms via trend ribbon direction, and flagging when volume divergence suggests the transition is beginning. The manual read remains valuable for context, but automated classification can catch what tired eyes miss.
Volume Oracle classifies regime phases as Accumulation (green), Distribution (red), or Weakening (gold) with strength percentages. Plutus Flow confirms via OBV trend ribbons and divergence detection. Two independent volume-based systems agreeing on the same phase changes everything.
See both systems →