Dictionary

Capitulation

The point in a decline where holders give up and sell all at once, producing a high-volume flush that often marks a low.

The mood around a market cycle. The same price path labelled with the feelings that tend to travel with it, from optimism up to euphoria and down through panic to despondency. Confidence is highest where the most money is already committed and prices are highest.

Capitulation is the emotional end of a selloff. volume spikes, prices gap down, and fud is everywhere. It is only identifiable with certainty afterward; plenty of capitulation-looking days are followed by more decline.

Traders watch for a high-volume reversal candle with a long lower wick as one possible signal.

Example: after a 45% decline, a stock falls 15% in one session on five times average volume and then closes near its high. That session later proves to be the low.

Related: dead-cat-bounce, volume, wick, fud

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