When you see a very sharp spike followed by a severe decline in price accompanied by a huge volume, then it’s a “Blow-off”. It signifies the exhaustion from panic buying of the bulls resulting to sell off of the stock.
See below chart of MJC stock as Blow-off sample
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| Click image to enlarge |
Here are some of the reasons why there is a significant increase in volume:
a. News
b. Earnings release
c. A rumor
d. other factors
Blow-off is a sign which tells us to sell ASAP and saves us from the bear phase.
Blow-off indicates a major resistance level.
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