A situation where investors give up hope and sell stocks in panic, often marking the bottom of a market decline. Capitulation usually involves high trading volume and extreme pessimism. After capitulation, prices often begin recovering because most of the willing sellers have already sold.
After months of falling prices, a stock drops 15 percent in a single day on heavy trading. Frustrated investors sell everything, thinking losses will continue. Once this panic selling ends and no more sellers remain, the stock stabilizes and begins climbing back up.
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