Declining distribution describes a market pattern where an asset’s price falls concurrently with a decrease in trading volume. This indicates that the downward price movement is not driven by aggressive selling pressure from large holders, but rather by a weakening of selling momentum. Such a pattern can suggest that the market is experiencing reduced participation during the price decline, potentially preceding a period of price stabilization or a reversal. It often reflects a decrease in the intensity of selling activity.
Context
Analysts frequently interpret declining distribution as a potential sign of market exhaustion during a downtrend, but advise caution against drawing premature conclusions. The discussion involves distinguishing this pattern from a genuine lack of market interest or illiquidity. Observing subsequent price action and other volume metrics is crucial for confirming any sustained trend change.
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