Definition
A price spike is a sudden, sharp move that pushes price far above or below the surrounding range and then quickly retreats. On a chart it appears as a long, thin protrusion, an upward spike on a sharp rally or a downward spike on a sharp plunge, that stands out clearly from neighboring bars.
Spikes are visual evidence of an emotional extreme. They usually form when news, panic, or a burst of enthusiasm forces a flurry of trades at once, only for price to snap back as that pressure dissipates within a session or two.
Why it matters
How it works
A price spike forms when one side of the market is briefly overwhelmed. Buyers chasing a breakout or sellers dumping into a panic create a fast move, but because that activity is concentrated rather than sustained, price cannot hold the new level and reverts.
Analysts read the volume and the close of the spike bar for clues. A spike that closes near the opposite end of its range, leaving a long tail, signals strong rejection of the extreme price. Spikes commonly accompany momentum exhaustion and can be the trigger that ends a trend.