Definition
A Selling Climax appears after a sustained decline as panic selling creates an unusually wide down bar and the highest relative volume. Absorption produces a close well off the low and can halt markdown.
Market psychology
Weak holders capitulate while professional demand absorbs the flood of supply. A rally and successful retest strengthen the case.
Recognition rules
- A mature prior decline
- Ultra-high relative volume
- Wide down spread with a long lower rejection
- A rally or reduced-supply retest follows
Common mistakes
- Buying any high-volume down bar
- Ignoring a close on the low and continued weakness
Teaching example
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Read a text alternative
Panic supply is absorbed near the end of a decline. The close off the low and immediate response are the evidence; high volume alone would not be enough.
- Market phase
- Accumulation
- Pattern
- Selling Climax
- Timeframe
- D1
What price action supports absorption?
Rejection plus follow-through shows that demand absorbed panic supply.