A Preliminary Supply (PSY) is a concept in the Wyckoff Method that can signal the early stages of a potential Distribution phase. It describes a point during an extended uptrend when significant selling begins to emerge, causing price to react downward from a previously strong advance. PSY does not necessarily mean that the market has reached its final top. Instead, it suggests that large market participants may be beginning to reduce positions or that supply is becoming strong enough to interrupt the existing uptrend.

PSY is usually identified through a combination of price action and volume. The market may continue making higher highs, but increased trading volume can appear alongside noticeable selling pressure. This can indicate that demand is meeting substantial supply. After PSY develops, the market may experience an Automatic Reaction (AR), followed by a Secondary Test (ST), creating a trading range.

An important feature of PSY is that it provides context rather than a standalone trading signal. Traders should examine what happens after the initial selling appears. If subsequent rallies struggle to make meaningful progress and volume shows signs of increasing supply, the probability of Distribution may rise. However, if demand quickly returns and price continues strongly upward, the PSY may simply represent temporary profit-taking.

Understanding PSY can help traders recognize when an established bullish trend may be transitioning into a more balanced market. It is particularly useful when combined with other Wyckoff concepts such as Buying Climax (BC), Automatic Reaction, Secondary Test, Sign of Weakness, and Last Point of Supply. By studying these events together, traders can better evaluate whether institutions may be preparing for a larger change in market direction.