Wyckoff Theory
Master the art of reading institutional footprints through Wyckoff methodology. Understand accumulation, distribution, and trade with smart money.
The first drop after a Buying Climax
What It Is
In distribution, the Automatic Reaction is the initial drop after the Buying Climax. When buying pressure exhausts itself, price naturally falls. This AR establishes the bottom of the distribution range. The concept is identical to AR in accumulation—just in reverse. Volume is typically lower than BC, confirming it's a reaction rather than new aggressive selling. The distance from BC high to AR low defines the initial trading range where distribution will unfold.
Automatic Reaction (AR) - Distribution - Visual
Price Behavior
- Strong bearish reaction from BC highs
- Fast downward movement
- May retrace 30-50% of the prior uptrend
- Creates the initial support level
- Often occurs within 1-3 sessions after BC
Volume Behavior
- Volume lower than BC
- Reaction-based, not distribution
- Shows natural pullback, not aggressive selling
- Volume typically decreases as AR completes
What It Means
- Shows supply is entering the market
- Establishes the bottom of the trading range
- Buying pressure temporarily exhausted
- Sets up the Secondary Test to follow
The AR in distribution is not a sell signal by itself. It merely establishes the range. Wait for Secondary Tests and confirmation before assuming distribution is underway.