Parabolic Long Scanner — Capitulation Bounce Setups
The mirror image of the parabolic short: a stock crashes hard, sellers are exhausted, and the first green day appears. These are bounce plays after a capitulation event, ranked by how much the stock typically moves so you see the names with real recovery potential.
A capitulation bounce is one of the most explosive short-term moves in the market. When a stock drops 30%, 40%, or more in a matter of days, the selling feeds on itself. Margin calls force liquidation. Stop losses trigger in cascades. Panicked holders dump shares at any price. The chart goes nearly vertical — downward.
Then the selling stops. Not because the news changed or analysts upgraded it, but because everyone who was going to sell already has. The weak holders are gone. The overhead supply has been cleared by the panic. When the first buyer steps in, there is nobody left to sell to them at these prices, and the bounce can be just as sharp as the decline.
Kristjan Kullamägi describes the parabolic long as the inverse of his parabolic short setup. Where the short scanner looks for stocks too far above their averages, the long scanner looks for stocks too far below them. The mechanics are the same: when price gets too stretched from the mean, a snapback is likely. The difference is direction.
The critical distinction between a capitulation bounce and catching a falling knife is timing. A falling knife is still in freefall — the selling has not exhausted itself yet. A capitulation bounce candidate shows evidence that selling pressure has peaked: climactic volume on the final down day, extreme distance below moving averages, and ideally the first green candle appearing after a string of red ones. The scanner looks for these signs of exhaustion, not just a large decline.
How the parabolic long scanner works
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01
Screen for distance below moving averages
How far has the stock fallen below its 10-day, 20-day, and 50-day moving averages? The more extreme the deviation, the stronger the rubber-band effect when it snaps back.
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02
Measure the magnitude of decline
Total percentage drop from the recent high to the low. Larger drops clear more overhead supply and create more bounce potential.
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03
Count consecutive down days and volume climax
A string of 5 or more red days in a row indicates panic selling, not orderly distribution. Climactic volume on the final down days is the signature of forced selling.
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04
Flag the first green day
Has a green candle appeared after the selling? This is the earliest evidence that the balance between buyers and sellers has shifted.
Results are ranked by the stock’s average daily range (ADR) — how much it typically moves in a single session. A volatile stock with a 6% ADR that just crashed 40% has far more bounce potential than a slow-moving utility that dipped 8%.
What you see in each result
Decline from high
Total percentage drop from the recent swing high, showing the full magnitude of the selloff.
Distance below 20-day EMA
How stretched the stock is below its mean, the primary measure of bounce potential.
Average daily range
The stock’s normal daily volatility. Higher ADR means more room for a recovery move.
First green day signal
Whether the most recent session closed green after a string of down days.
Daily chart
Candles with moving averages showing the full decline and current position relative to the averages.
Catalyst
What caused the crash, when identifiable. A stock that crashed on a missed earnings report is a different trade than one that crashed on a fraud allegation.
Questions about the parabolic long scanner
What is a capitulation bounce?
A capitulation bounce happens when a stock has fallen so sharply that all the weak holders have been flushed out. The selling exhausts itself — volume spikes on a climactic down day, then the next session shows a green candle as buyers step in at depressed prices. The bounce can be swift because the overhead supply has been cleared.
How is this different from buying a falling stock?
Catching a falling knife means buying while a stock is still actively declining with no sign of a bottom. The parabolic long scanner waits for evidence of seller exhaustion — climactic volume, extreme distance below moving averages, and ideally the appearance of a first green day. It looks for the bounce, not the bottom.
What makes the first green day important?
After a string of red days during a parabolic selloff, the first green day shows that buying pressure has finally exceeded selling pressure. It does not guarantee the bottom is in, but it is the earliest sign that the imbalance has shifted.
The parabolic long is the mirror of the parabolic short setup: a crash stretched far below its averages, betting on a snap-back rally.
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