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.