Some will sell shares at any price just to get out. Others won t buy no matter how cheap the stock gets. That moment, the moment of maximum despair, is a bottom. Before a market or stock gets to that final moment, however, Wall Street analysts have to go through their own ritual of capitulation. No matter how cheap they get, no one issues a buy.
Analysts compete with each other to see how deeply they can slash an earnings estimate.
Right now, we re about halfway through this process of analyst capitulation for the technology sector. Analyst capitulation sets the stage for the sustainable rally. Just as downward earnings revisions kicked the stuffing out of stocks on the way to the bottom, upward revisions help support the market on the way up. The value of identifying analyst capitulation in a specific stock should be pretty clear. If you can tell when the analysts have thrown in the towel on a stock, you ll have a very good indication that the bottom in that stock is near.