Updated on March 12, 2023
Blow Off is a term used in technical analysis to describe a rapid and forceful price movement in the market. Such movement can usually be in a single direction and such a situation often results in an exhaustion of buying or selling pressure. The term Blow Off is usually used in describing the last stage of a strong trend. In such scenarios, the price moves rapidly in one direction which results in leaving behind the last traders who are still trying to enter or exit the market.
What are the types of blow off signals?
There are essentially two types of blow-off signals. A blow-off top indicates a sharp and rapid increase in the asset’s price which is followed by a sharp and rapid decline. This indicates that the trend has peaked and is most likely to reverse. Similarly, a blow-off bottom indicates a sharp and rapid decline in the asset’s price which is followed by a sharp and rapid increase. This indicates that the trend has bottomed out and is likely to reverse.
How to interpret Blow Off signals?
Blow offs can be significant events in the market. These signals can be used as a warning signal for traders and investors to close their open positions and to re-evaluate their positions in the market respectively.