What Is the Automatic Rally?
After the Selling Climax, selling pressure disappears and price bounces sharply. Shorts cover and buying is no longer met with supply. This bounce is the Automatic Rally. It happens quickly because there is little selling left, not because new demand has taken over.
Why It Matters
Once the SC and AR are marked, you can anticipate the structure and plan where to look for the Secondary Test and Spring.
- The AR high defines resistance of the range.
- Together with the SC low it gives you the range width.
- The midpoint is a useful reference for bias.
Distribution Version
In distribution, the equivalent is the Automatic Reaction, a fast drop after the Buying Climax that defines the bottom of the range.