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Blow Off Bottom

Moneyzine Editor
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Moneyzine Editor
1 mins
January 8th, 2024
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Blow Off Bottom

Definition

The term blow off bottom refers to extraordinarily high trading volume in a single session that is associated with the end of a downward price trend. A blow off bottom can be seen in charts, and is used by technical analysts to predict price trends.

Explanation

Technical analysts study various market data with the hope this information will guide them in selecting securities. Two of these data include historical trading volume and security price trends. One of the predictors used to signal the end of a downward price trend is a blow off bottom, which is characterized by both a rapid decrease in the price of the security and a spike in trading volume. A blow off top is the converse of a blow off bottom.

The appearance of a blow off bottom can be the result of unexpectedly good financial news as well as market speculation. A blow off bottom signals the end of a security's downward price movement, and the beginning of an increase in price. This trend is characterized by the following:

  • A statistically significant spike in trading volume, oftentimes appearing in a single trading session.

  • A historical pattern of price decreases, followed by a sharp decline in price on the same day trading volume spikes.

  • The inability of the security to sustain the low price occurring earlier in the trading day, indicating a resistance level.

Related Terms

  • Back Months (Forward Months)
    Back Months (Forward Months)
    The term back months refers to any set of futures contracts for a given commodity that expire in a month that is different than the front month. Futures contracts will have a number of dates in the future during which contracts will expire.
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  • Front Month (Near Month)
    Front Month (Near Month)
    The term front month refers to the expiration month of an active futures contract with the shortest time to maturity. The front month of a futures contract will vary with the contract's underlying asset.
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  • Blow Off Top
    Blow Off Top
    The term blow off top refers to extraordinarily high trading volume in a single session that is associated with the end of an upward price trend. A blow off top can be seen in charts, and is used by technical analysts to predict price trends.
    Moneyzine Editor
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  • Breakaway Gap
    Breakaway Gap
    The term breakaway gap refers to a significant gap appearing in the historical price chart of a security. Breakaway gaps signal the beginning of a new price pattern.
    Moneyzine Editor
    Moneyzine Editor
    November 6th, 2024

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