Anatomy of a Bubble Top

A price bubble is an exaggerated upside that reaches unsustainable heights. After the bubble peaks, it collapses in a brief period, often to exaggerated lows. After irrationally bidding up the stock investors then sell it in a panic. If the company has real products and real earning, the stock may begin to recover. Or it may languish at low levels for months or years.

Corning (GLW) made a bubble top in 2000 at $112 on the anticipation that its fiber optics operation would generates huge profits. When reality set in, the stock fell to $1.10.

Now the stock has recovered to the mid $20 range, a historical high discounting the bubble high.

Related Articles:

Price Patterns - A Bubble Top Is an Extreme Pattern
Price Patterns - Bump and Run Reversal Top Defines Price Bubble
Price Patterns - A Double Top Signals a Downside
Price Patterns - Head and Shoulders Top Has Three Tops
Price Patterns - Triple Top Signals End of Upside Move
Price Upsides Often Occur in Three Stages

Updated February 25, 2008.