πππA selling climax, also known as capitulation, is the culmination of a prolonged period of selling in a stock. It is a sharp rapid decline in price followed by a high trading volume. This indicates mass panic selling where investors liquidate their positions regardless of price to avoid further losses.
This event often marks the final stage of a downtrend & signal that a market bottom is near as most of the investors with lower risk tolerance have exited the market , leaving potential buyers to step in.
Eg: April 25, $NVIDIA(NVDA)$ experienced a significant drop that displayed the characteristics of a selling climax. Nvidia dropped 7.3% on April 4, marking the 2nd straight day of major drops. This sharp drop was followed by big spike in trading volume. The high volume on a sharp down move indicates panic selling.
After April lows, Nvidia bounced back. By June Nvidia had rallied 45% from April lows.
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