MARKETS SPECTATOR: Ore climax

The high volume offloading of iron ore stocks today is indicative of a selling climax.

There appears to have been a genuine selling climax in a number of the iron ore miners today, especially the midcap pure plays like Atlas, Gindalbie Metals and Mount Gibson Iron Ore.

A genuine selling climax is characterised by excessively high volume following a strong move lower in prices and is a hallmark of traders panicking and making decisions purely based on the emotion of fear.

There is a common misconception that climactic volume in the direction of a trend is a sign of continuation. However, this couldn’t be further from the truth as it indicates panic selling in the stock and frequently marks bottoms on many different timeframes.

Below are two of the best examples I’ve seen for a very long time. I think there is a very good chance today will mark the lows in these stocks for the short to medium term.