Spike
What Is a Spike?
A spike is a comparatively large vertical or downward movement of a price in a short period of time. A genuine illustration of a negative spike in the financial markets is the notorious stock market crash of Oct. 19, 1987, when the Dow Jones Industrial Average (DJIA) plunged 23% in a single day. A price spike up is at times utilized as opposed to a crash.
A spike may likewise allude less regularly to the trade confirmation slip that shows every one of the relevant data for a trade, like the stock symbol, price, type, and trading account data.
Grasping Spikes
There are less intense instances of spikes, which are seen when investors respond to unforeseen news or occasions, for example, surprisingly good earnings results. Utilization of "spike" begins from the out of date practice of putting in paper trade request slips on a metal spike upon completion.
The concept of a spike in a stock's price is utilized in technical stock analysis. Technical analysis is the study of trends in stock price changes and in trading volume, which is the number of shares traded in a day or month. Portfolio managers study these historical trends to foresee the behavior of stock prices from here on out.
Fundamental analysis, then again, assesses a stock's future price in view of company sales and earnings. Money managers join technical analysis with fundamental analysis to come to conclusions about stock prices.
Trading a Price Spike
A technical analyst might consider the price trading range for a particular stock. Expect that, throughout recent months, a stock has traded somewhere in the range of $30 and $45 per share. Notwithstanding a price range, a technical analyst checks out at the long-term trend in a stock's price. In this case, expect that the stock's price has trended up from a price in the low $30s to a current price close $45 per share.
In this scenario, on the off chance that the price of the stock rapidly moves below $30 or above $45, that might be a buy or sell indicator for the technical analyst. Expect that the stock has a low spike down to a trading price of $27. Assuming that the stock's trading pattern returns to the normal trading range, the spike might be an anomaly. Then again, assuming prices start to trend downward after the low spike, the spike might be an indication that report about the company has changed investor sentiments about the stock. A technical analyst might involve this trend as motivation to sell the stock.
Spikes: How a Trade Is Confirmed
The term spike likewise can allude to a trade confirmation, which is the written record of a security transaction. The Securities and Exchange Commission (SEC) screens how investment data is revealed to investors. One SEC disclosure requirement is to give a trade confirmation at whatever point a security is traded.
The trade confirmation incorporates a description of the stock or bond, along with the exchange where the transaction occurred. The broker affirms the number of units traded, which might be shares of stock or the par amount of bonds bought or sold, along with the security's symbol.
Features
- Technical analysts utilize the occurrence of spikes to assist with pursuing trading choices. For example, assuming that the spike was joined by expanding or decreasing volume.
- A spike is a sudden and large move in the price of a resource — either up or down, yet more frequently while depicting up-moves.
- Spikes can happen when new data rapidly enters the market, for example, an earnings surprise or SEC investigation.
