A Buying Climax occurs at the end of an up-trend.
News is generally quite good and "mug-punters" are filling their boots thinking that the stock is going to the moon.
But as the amateur traders are filling their boots, professionals are dumping their holdings onto the market.
This results in huge volumes of shares changing hands. But changing from strong holders to weak holders.
As a result the amateur traders get exhausted and the professional traders get rid of their holdings. There exists no more demand and the stock has only one way to go - and that is down.
By definition a "climax" means the ending of something.
So a "Buying Climax" means the end of a trend, and in this case, a rising trend.
And the last up-trend bar must be on high, or better still, ultra-high volume.
It can either be a narrow bar or a long bar (with a close below the middle). This indicates that there is strong selling pressure from strong holders that overcome the weak holders (i.e. amateurs or mug punters - aka "the crowd").
The next bar would be crucial. For the whole move to be classed as a Buying Climax, this next bar MUST be down.
The high volume must happen on an up-bar.
To quote Tom Williams:
"True strength always appears on a down-bar"
What is happening is that weak, un-informed traders are piling in to buy, at the same time the professionals are only too happy to sell to them. Once this transfer of ownership happens - a Bear Phase is guaranteed.
The ill-informed traders think, because all the news is good, and the markets continue to rise, that everything in the garden is rosy. It is a classic example of crowd behaviour.
Contrary thinking is an advantage to the informed investor. (contrary to the crowd that is).
You knew the answer to that question would be yes - didn't you?
There is no better explanation than the student of Richard Wyckoff - Tom Williams, to explain the ins and outs of anything to do with volume.
His masterpiece - Master The Markets - explains plainly all about the Buying Climax and its relationship to individual stocks and how the professionals take control.
Master The Markets by Tom Williams
You can obtain Master The Markets by clicking this link below:
For the informed trader, a Buying Climax is easy to spot. (But not as simple as a Selling Climax).
For a Buying Climax, there must be something to reverse, i.e. an up-trend.
And remember - True weakness always appears on up-bars.
The bars may be any time frame - daily, weekly, monthly. It is the volume in relation to the price spread that is important. The close of the bar must finish near the low for the period.
A Buying Climax may not come along too often, but when they do - a Bear Phase is assured.
Chris and Clem Meet Up - hopefully, the last time before lockdown easing
Chris and Clem Meet Up - at last! They can meet in the beer garden
Chris and Clem Meet Up and it is Chris' turn to do most of the talking. Chris' little windfall has allowed him to widen his portfolio. Chris vows of more.