Climax

DEFINITION of 'Climax'

A market condition that is characterized by very high trading volume and a dramatic downward or upward movement in price. High volume and downward price movement indicate a selling climax, while high volume and upward price movement indicate a buying climax. Either type of climax signals the end of a trend.

BREAKING DOWN 'Climax'

Selling into a climax run can be a good exit strategy, because by selling during a period of euphoria, investors can lock in dramatic gains. A buying climax can bid a stock's price up to levels it will never reach again, or that it will not reach again for at least a decade. At the end of a buying climax, prices can fall sharply as investors realize the stock has been overbought.

RELATED TERMS
  1. Net Volume

    A term in technical analysis that represents a security's uptick ...
  2. Ease Of Movement

    A technical momentum indicator that is used to illustrate the ...
  3. Technical Rally

    An upward movement in a security's price following a declining ...
  4. Pullback

    A falling back of a price from its peak. This type of price movement ...
  5. On-Balance Volume (OBV)

    A momentum indicator that uses volume flow to predict changes ...
  6. Breakaway Gap

    A term used in technical analysis. A breakaway gap represents ...
Related Articles
  1. Stock Analysis

    3 Early Warning Signs You Can Use to Exit Positions

    Use these three early warning signs to take fast exits on open positions.
  2. Trading Strategies

    Technical Analysis: The Importance Of Volume

    By Cory Janssen, Chad Langager and Casey MurphyTo this point, we've only discussed the price of a security. While price is the primary item of concern in technical analysis, volume is also extremely ...
  3. Active Trading

    Essential Strategies For Trading Volume

    Looking to trade using volume? Have a look at these essential tips.
  4. Active Trading Fundamentals

    Dow Theory: Volume Must Confirm The Trend

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.comAccording to Dow theory, the main signals for buying and selling are based on the price movements of the indexes. Volume ...
  5. Active Trading

    Sell Growth Stocks The IBD Way

    Savvy investing is all about learning some smart rules and sticking to them. We give you the rundown.
  6. Technical Indicators

    Use Market Volume Data to Determine a Bottom

    Market bottoms often carve out classic volume patterns that let observant traders make fast and accurate calls.
  7. Active Trading Fundamentals

    Market Breadth: Volume Studies

    Fortunately, the basic signals conveyed by volume data are easy to read. When a stock is traded, the transaction is recorded and included in the daily volume. When volume levels spike for a ...
  8. Active Trading

    3 Technical Tools To Improve Your Trading

    Find out how volume, the Aroon indicator and Fibonacci numbers can improve your profits.
  9. Chart Advisor

    Big Volume Decliners Breaking Support

    These four stocks all broke support on May 6, on high volume.
  10. Stock Analysis

    An Option Indicator That Speaks Volumes

    Alan Ellman of The Blue Collar Investor cites recent volume action in three stocks that illustrates how watching volume patterns can give option traders critical signals and even predict upcoming ...
RELATED FAQS
  1. Why is the Ease Of Movement Indicator important for traders and analysts?

    Read more about the ease of movement indicator, a technical momentum oscillator created by Richard Arms to track price changes ... Read Answer >>
  2. What indicators help define a bull market?

    Learn about a number of various technical indicators traders and analysts use to define and confirm the existence of a bull ... Read Answer >>
  3. What is the difference between the Ease Of Movement Indicator and the MACD?

    Read about the differences between two technical momentum oscillators, the ease of movement indicator and the moving average ... Read Answer >>
  4. What are the best technical indicators to complement the Uptick Volume?

    See how uptick volume can be used to help confirm price trends from nearly every trend-following indicator, especially when ... Read Answer >>
  5. What are the main differences and similarities between Money Flow Index & On Balance ...

    Understand the basics of On Balance Volume and the Money Flow Index, including their similarities and differences in terms ... Read Answer >>
  6. What is a common strategy traders implement when using the Money Flow indicator?

    Learn a common trading strategy traders implement with the money flow indicator to identify profitable trade entry and exit ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center