Buying Climax Above Rising 10 Week MA

Note:  The historical stock examples given below are for EDUCATIONAL USE ONLY.  They ARE NOT to be used to make buy/sell decisions in today's market.  For more information, please read the HSR Terms of Use.

Description

Price surges well above its 10 Week MA on the widest range AND heaviest volume of its entire uptrend. 

Behavior Notes: 

1.  A buying climax may be preceded by a streak of higher weekly closes.

2.  Price should close near the top of the range or else it represents stalling.

3.  An exhaustion gap may occur on the daily chart within the buying climax week.  If present, the exhaustion gap should appear after an advance.

Please >>CLICK HERE<< for an example of an exhaustion gap on a daily chart.

4.  After the buying climax, it's important to see how price behaves the following week.  If price can't follow-through and close strong, it may print an inside bar, price reversal bar or drop rapidly and erase most of the gains from the prior week.  These price behaviors provide more evidence that the buying climax week may have set the stage for a top.

What you need to know

A buying climax is a week of maximum intensity (volume and range) that indicates extreme enthusiasm for a stock. 

It may end with price declining and giving back most of the gains from the prior advance.

You may want to be suspicious of upward price spikes on heavy volume that come AFTER a large move.

Institutional money managers prefer liquidity to sell stock.

The frenzied demand for stock within a buying climax provides a pool of liquidity for opportunistic managers to sell into strength. 

As a result, much of the heavy volume associated with a buying climax may be distribution behind the scenes.

Historical Stock Chart Examples 1A-1C: Alkermes (ALKS) 2000

Please >>CLICK HERE<< to go to the next price behavior within Topping Behaviors.