Blow Off Top

Definition

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.

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 an upward price trend is a blow off top, which is characterized by both a rapid increase in the price of the security as well as its trading volume.

The appearance of a blow off top can be the result of unsettling financial news as well as market speculation. A blow off top signals the end of a security's upward price movement and the beginning of a decline 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 increases, followed by a spike in price on the same day trading volume spikes.
  • The inability of the security to sustain the high price occurring earlier in the trading day.

Related Terms

breakaway gapblow off bottomfront monthback months