Bad air data control for the associated side you're hitting Alt Hold on.
Your problem isn't an autopilot one, it's a flight director one. What you're seeing is called "Porpoising."
Turn on your ADI's/HSI's, hit alt hold, and have someone watch the command bars while you hit the little red button on the air data control of the associated side. If they *DO NOT* see it go offscale, you have discovered the bad ADC.
Next swap your Flight Director Computers between each other, if the problem follows, you have your answer.
Next check your cable tension. If it is low, you're not getting the proper action out of the feedback loop and you'll see porpoising.
If that doesn't work, hook your pitot static tester to one or the other and leak test it. You might be getting cabin pressurized air into that system.
Lastly, Do the X formation if you have EFI's, i.e. put your pilot's upper EFI in the copilot's lower, copilot's upper in the pilot's lower, etc. (I'm assuming you're equipped with them and have an H3) otherwise, just swap the ADI/HSI's from side to side and see if the problem persists.
If even that doesn't get it figured out for you, check the relay in the back of the hellhole. When you get all the way to the back, it is down on the junction box just fore of the hellhole and it will be the bottom one there. You might have a loose wire/pin or that relay took a crap.
Unfortunately, you CAN NOT put the #2 Air Data Control into the #1 position and do a little swapology... well you technically can put it there, but it won't work right.
