| Capitulation |
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Actually
an old war term, referring to the act of surrendering or giving up.
In stocks it is associated with "giving up" any previous gains in
the stock price. True capitulation involves extremely high volume
and sharp declines (oversold stocks), it usually indicates panic selling.
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After
this "capitulation selling" there is said to be great bargains because
everyone who wants to get out of the stock for any reason (including
forced selling due to margin calls), has gotten out of the stock and
the price should reverse or bounce off the lows. Shrewd investors
will wait for the capitulation to finish before buying back in rather
than trying to pick a bottom. |
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