Blowoffs and Selling Climaxes

posted under by ceecabolos
One final situation not covered so far that deserves mention is the type of dramatic market action that often takes place at tops and bottoms—blowoffs and selling climaxes. Blowoffs occur at major market tops and selling climaxes at bottoms. In futures, blowoffs are often accompanied by a drop in open interest during the final rally. In the case of a blowoff at market tops, prices suddenly begin to rally sharply after a long advance, accompanied by a large jump in trading activity and then peak abruptly. (See Figure 7.12.) In a selling climax bottom, prices suddenly drop sharply on heavy trading activity and rebound as quickly. (Refer back to Figure 4.22c.)

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