Automatic Reaction (AR — distribution)
Volume Price Analysis glossary · Climactic Price Action & Reversal Dynamics
Definition
The first sharp decline from a Buying Climax that defines the lower boundary of a distribution range.
Automatic Reaction (AR — distribution) in plain English
This is the mirror image of the Automatic Rally, but at a market TOP. After price rockets up in a frenzy of buying (a Buying Climax — everyone piling in at the peak), the buying suddenly exhausts and price drops sharply, like a balloon that stops being inflated and sags. That first sharp drop is the Automatic Reaction, and its low marks the FLOOR of the sideways range where insiders quietly sell off (distribute) their holdings. Watching that floor tells you the range is still in play as long as price keeps bouncing up from it.
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