medium · Volume Spread Analysis climaxes-tests-springs-upthrusts
When analyzing the 'Emotional Cycle,' why is a 'Selling Climax' considered the end of the panic phase and the start of a new cycle?
- The stock's P/E ratio hits a 20-year low, making the stock look 'undervalued' by nearly every fundamental metric available.
- Market-makers are required by exchange regulation and listing rules to immediately halt any further decline in a stock following a climax print.
- The ultra-high volume indicates that the last of the weak holders have capitulated and their stock has been transferred to professionals.
- The news cycle finally turns entirely positive again across every media outlet, allowing analysts to justify a sustained and healthy mark-up phase.
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