Wyckoff Theory
Master the art of reading institutional footprints through Wyckoff methodology. Understand accumulation, distribution, and trade with smart money.
The first bounce after a Selling Climax
What It Is
After the Selling Climax, price naturally bounces. This is called the Automatic Reaction because it happens almost automatically—when selling pressure exhausts itself, even minimal buying creates upward movement. The AR establishes the top of the trading range. It's not accumulation yet—it's simply the market catching its breath after the panic. Volume during AR is typically lower than the SC, confirming it's a reaction rather than new buying pressure. The distance from SC low to AR high defines the initial trading range where accumulation will unfold.
Automatic Reaction (AR) - Visual
Price Behavior
- Strong bullish reaction from SC lows
- Fast upward movement
- May recover 30-50% of the prior downtrend
- Creates the initial resistance level
- Often occurs within 1-3 sessions after SC
Volume Behavior
- Volume lower than SC
- Reaction-based, not accumulation
- Shows natural rebound, not aggressive buying
- Volume typically decreases as AR completes
What It Means
- Confirms that demand exists at lower prices
- Establishes the top of the trading range
- Selling pressure temporarily exhausted
- Sets up the Secondary Test to follow
The AR is not a buy signal by itself. It merely establishes the range. Wait for Secondary Tests and confirmation before assuming accumulation is underway.