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Selling Climax Chart Suggests Broad Stock Bounce Ahead

Selling climaxes occur when a stock makes a 12-month low but then closes the week with a gain. They are a sign that stocks are going from weaker to stronger, more sophisticated hands.  Buying climaxes occur when a stock makes a 12-month high but closes the week with a loss.  They are a sign of a stock going from stronger to weaker, less sophisticated hands.  This chart from Investors Intelligence shows an extraordinary number of stocks with selling climaxes compared to last year when buying climaxes were signaling stock declines. Work by Investors Intelligence shows that sellers into buying climaxes and buyers into selling climaxes are  right about 80% of the time after
4-months’ time.

Selling Climax Chart Suggests Broad Stock Bounce Ahead
Selling Climax Chart Suggests Broad Stock Bounce Ahead

Courtesy of investors-intelligence.com.


Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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