Capitulation
Definition
The point at which investors give up on a losing position and sell en masse, often marking the bottom of a decline.
Explanation
Capitulation is characterized by extreme volume, widespread pessimism, and indiscriminate selling. It represents the final phase of a market decline when even the most patient holders abandon their positions. Contrarian investors view capitulation as a buying opportunity because once sellers are exhausted, the only direction is up. Classic capitulation indicators: VIX above 40, put/call ratio above 1.5, AAII bearish sentiment above 50%, and record mutual fund outflows.
How Stoquity Uses This
Stoquity incorporates capitulation analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.