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Why Recent Selling Climax is Good News for Bulls in Short-Term

The chart from chartcraft.com below shows that stocks comprising the NYSE composite have been in the midst of a selling climax. That historically indicates that they are set for a rebound, at least in the short-term. Why? Selling climaxes occur when stocks make a 12-month low but then close the week with a gain. That indicates the stocks are being accumulated and buyers are out numbering sellers, driving prices higher. Conversely buying climaxes occur when stocks reach a 12-month high but close the week lower, indicating the stocks are headed down.

How do we know this is important news for investors? Chartcraft.com says its studies indicate buyers into a selling climax and sellers into a buying climax are right 80% of the time after four months of time. In other words, odds are the recent selling climax should be good news for bulls in the short-term.


John Del Vecchio

About John Del Vecchio Author of Rule of 72: How to Compound Your Money and Uncover Hidden Stock Profits and What’s Behind The Numbers: A Guide To Exposing Financial Chicanery And Avoiding Huge Losses In Your Portfolio, John is a forensic accountant at heart. Standing on the shoulders of the great David Tice, James O’Shaughnessy and Dr. Howard Schilit, he built a framework of algorithms and a multi-factor grading system that has made him one of the more successful short-sellers around. John graduated Summa Cum Laude from Bryant College with a B.S. in Finance and was awarded Beta Gamma Sigma honors. He earned the right to use the Chartered Financial Analyst designation in September 2001.

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