Blow-Off Tops on ASX: Seven Stocks Primed for 50% Corrections
- Anita Arnold
- Oct 22
- 9 min read
Seven ASX market leaders currently exhibit blow-off top patterns—technical formations characterised by three or more ascending trend lines culminating in vertical price acceleration. Understanding these patterns helps traders recognise when normal momentum transitions into potentially unsustainable extensions.
The challenge lies in timing. These patterns don't feel like warnings during formation—they feel like opportunities. When stocks go vertical, when volume surges, when everyone becomes comfortable buying—historical data shows these conditions have sometimes preceded sharp reversals. The educational value comes from studying how these patterns have behaved historically, though past performance is no guarantee of future results.
Bill McLaren's research into vertical trends provides the framework. His systematic documentation across market cycles identified specific characteristics that have appeared repeatedly. This analysis examines seven current ASX stocks exhibiting these same technical features, offering educational insight into pattern recognition and historical behaviour.
Understanding Blow-Off Tops: The Three Ascending Trend Line Framework
Blow-off tops develop through a structured progression that technical analysts study across market cycles. The pattern begins with a base trend line connecting multiple lows during an initial advance. This establishes the first phase of momentum.
The second trend line forms at a steeper angle, connecting subsequent lows at a higher rate of ascent. This acceleration shows strengthening momentum—still within normal parameters for sustained advances. Multiple touch points validate this second trend line, demonstrating the acceleration follows a consistent pattern rather than random price movement.
The third trend line steepens further, often going nearly vertical. This final leg frequently represents a significant portion of the total advance—sometimes 50% or more of the entire multi-year range compressed into just months. When this vertical acceleration occurs after an extended base-building period, historical data suggests increased probability of sharp reversals once the pattern breaks.
The educational framework centres on this progression: base trend → acceleration → vertical extension. Each phase shows multiple touch points on weekly charts, confirming the pattern's validity. Understanding this structure helps distinguish normal momentum continuation from potentially terminal phases.
The 50/80 Rule: Historical Correction Behaviour
Momentum trading education includes studying historical correction patterns. Research into high-momentum leaders reveals what's known as the 50/80 rule: approximately 80% of momentum leaders have historically corrected at least 50% from their peaks. Furthermore, about 50% of these stocks have shown corrections between 70-80%.
This statistical framework doesn't predict specific outcomes but provides educational context for risk assessment. When stocks exhibit vertical trend characteristics, understanding historical correction behaviour informs position management decisions. Remember that past performance is no guarantee of future results, and all trading involves risk.
The minimum correction target typically sits at the last acceleration point—where the vertical leg began its unsustainable advance. This level represents a return to the previous trend line before the final extension. Some patterns have shown corrections extending to earlier acceleration points, particularly when multiple ascending trend lines precede the vertical phase.
Measuring these levels involves identifying exactly where the final leg accelerated beyond the previous trend structure. That inflection point becomes the reference for understanding potential support levels based on historical pattern behaviour.
Seven Current ASX Examples: Educational Case Studies
Neuren Pharmaceuticals (NEU): The Template Pattern
Neuren provides the clearest educational example of a completed blow-off top, making it ideal for pattern study. The stock developed three distinct ascending trend lines on weekly charts, with each showing progressively steeper angles and multiple validation touches.
After the vertical third leg peaked, NEU corrected approximately 50% back to where that final acceleration began. This demonstrates the classic behaviour: the minimum correction returned price to the last acceleration point. The pattern then showed recovery signs, building a new base above that correction low.
This example serves as the reference template. The correction magnitude, the return to the acceleration point, and the subsequent recovery pattern all illustrate principles that appear across multiple historical examples.
Capricorn Metals (CMM): Eight Ascending Trend Lines
Capricorn Metals exhibits an unusually extreme case—eight ascending trend lines visible on weekly charts before the vertical phase. While some earlier trend lines show modest angles, the progressive steepening creates the classic acceleration signature.
The final leg launched from approximately $9, creating the reference point for understanding potential correction targets. Historical pattern behaviour suggests this level represents the minimum zone where support might develop. Some patterns have shown deeper corrections to earlier acceleration points around $6-7, though each situation differs.
The gold sector context—with widespread euphoric behaviour as prices extended 300% or more—adds educational value. When broad sector participation accompanies vertical individual moves, it illustrates the psychological elements that have historically accompanied these patterns.
Evolution Mining (EVN): Textbook 50% Final Leg
Evolution Mining demonstrates what many analysts consider a textbook vertical trend. The stock built its base over approximately three and a half years, advancing from $2 to $7. Then, in just six months, it surged from $7 to $12—a $5 move matching exactly 50% of the total advance.
This illustrates the "50% in the last leg" principle—where half the total range occurs in the final vertical phase. When measured from the start of that final acceleration, the minimum correction target sits around $7, with potential for deeper retracement to $5 if the pattern follows historical precedents of correcting to earlier acceleration points.
Five ascending trend lines preceded this vertical phase, each validated by multiple touches on weekly charts. The progression from $2 base through accelerating phases to $12 peak provides clear educational illustration of how these patterns develop systematically rather than randomly.
Life360: 75% Range in Final Leg
Life360 shows an even more extreme extension—approximately 75% of the entire advance occurred in the final vertical leg. From April to recent peaks, the stock surged from $15 to $55, dwarfing the earlier base-building phases.
This stock demonstrated leadership qualities throughout the advance, making higher lows when the broader market found bottoms in October 2022 and March 2023. These relative strength signals preceded the final vertical acceleration—illustrating how strong leadership can culminate in blow-off behaviour.
The educational question: when 75% of a move occurs in the final months after years of base-building, does historical precedent suggest proportionally larger corrections? The $15 level marks where the vertical phase began, representing the minimum reference point based on pattern study. Whether corrections extend further depends on multiple factors that vary by situation. Remember that past performance is no guarantee of future results.
DroneShield (DRO): Recent Pattern Confirmation
DroneShield provides valuable educational context because the pattern recently completed and corrected. The stock exhibited classic base development, accelerating trend lines reaching three or four distinct phases, then a vertical final leg showing aggressive momentum.
Once the pattern broke, price action retraced to test the last acceleration point—confirming the historical behaviour documented in vertical trend research. The defence sector showed coordinated weakness across multiple stocks (EOS, Austal), illustrating how sector-wide extensions can accompany individual patterns.
This recent example allows pattern students to study the complete cycle: formation, vertical extension, break, and correction to the acceleration point. Reviewing completed patterns helps inform pattern recognition when new formations develop.
JB Hi-Fi (JBH): Retail Sector Extension
JB Hi-Fi demonstrates how even stable retail businesses can form vertical trend patterns when valuations extend significantly. The stock built multiple ascending trend lines from late 2022 through 2024, with the final leg showing clear vertical characteristics.
Recent distribution patterns—selling on increasing volume—accompanied the trend line break. This volume behaviour adds confirmation to the technical pattern, as historical data shows vertical trends often break with conviction rather than on light volume.
The minimum correction target based on the last acceleration point sits near $85. This represents where the final vertical phase began its unsustainable advance. Historical pattern study suggests this level warrants attention for potential support development.
AP Eagers (APE): Compressed Time Frame
AP Eagers shows remarkable percentage gains—approximately 360%—compressed into a relatively short time frame. Most of this advance occurred in 2025, making it a faster-developing pattern compared to the multi-year bases in other examples.
Four or five ascending trend lines are visible despite the compressed timeline, demonstrating how these patterns can develop across varying time frames. Recent distribution volume at the peak mirrors behaviour seen in other examples, suggesting coordinated selling as the pattern matured.
The last swing low sits around $24, but applying the 50/80 rule framework suggests potential for deeper correction to approximately $18-19. This illustrates how historical momentum correction behaviour provides reference points for understanding potential support zones, though actual outcomes vary by situation.
Educational Principles: Pattern Recognition Framework
Studying these seven examples reveals consistent elements that appear across vertical trend patterns:
Progressive Acceleration: Three or more ascending trend lines on weekly charts, each steeper than the previous. Multiple touches validate each trend line rather than just two points creating a line.
Final Leg Dominance: The vertical phase frequently represents 50% or more of the total advance, compressed into a fraction of the time required to build the earlier base. This disproportionate gain in the final phase creates the "blow-off" characteristic.
Volume Patterns: Distribution often accompanies the peak and initial break—higher volume on declining days compared to the lighter volume that may have characterised the earlier steady advance.
Minimum Correction Levels: Historical data shows these patterns have typically retraced at least to where the final vertical leg began—the "last acceleration point." Some patterns have shown deeper corrections to earlier acceleration points, particularly when multiple ascending trend lines precede the vertical phase.
Sector Coordination: When multiple stocks within a sector simultaneously exhibit these patterns (as currently observed in gold stocks, defence stocks), it adds educational context about broad sector behaviour versus isolated occurrences.
The Psychology Behind Vertical Trends
Understanding the psychological drivers helps explain why these patterns form repeatedly across market cycles. Rather than buying during base development when stocks show early accumulation signs, participants often rush in after 200-300% advances. This behaviour reflects greed and fear of missing out taking precedence over disciplined analysis.
Historical examples include Amazon's 2021 peak, the NASDAQ 2000 blow-off, and numerous individual stocks across decades. Each exhibited the same characteristics: extended base-building followed by vertical acceleration accompanied by euphoric sentiment. The patterns repeat because human psychology remains consistent even as specific market conditions change.
Studying these formations educates traders about distinguishing normal momentum—buying strength at new highs within sustainable trend structures—from potentially terminal phases where that strength becomes vertical and unsustainable. The line between healthy momentum and dangerous extension lies in the technical structure: sustainable trends maintain consistent ascending patterns, while blow-offs show progressive acceleration culminating in vertical moves.
Practical Educational Application
Applying these educational concepts requires systematic observation rather than reactive decision-making. The framework involves:
Weekly Chart Analysis: Focus on weekly rather than daily timeframes to identify the broader trend structure. Count ascending trend lines and verify multiple touch points validate each phase.
Final Leg Measurement: Calculate what percentage of the total advance occurred in the most recent vertical phase. Extensions beyond 50% warrant particular study based on historical pattern behaviour.
Acceleration Point Identification: Mark exactly where each trend line steepens beyond the previous angle. The point where the final vertical leg begins provides the primary reference level based on historical correction patterns.
Volume Assessment: Observe whether volume patterns show distribution characteristics—higher volume on declining days after the pattern matures. This adds confirmation to the technical structure.
Sector Context: Consider whether the pattern appears in isolation or alongside similar formations across a sector. Coordinated sector extensions add educational insight about broader market psychology.
Key Takeaways
Blow-off top patterns provide valuable educational study for understanding how momentum can transition from sustainable to potentially unsustainable. The framework centres on three ascending trend lines showing progressive steepening, measuring the extension in the final leg, and understanding historical correction behaviour to the last acceleration point.
Seven current ASX stocks exhibit these technical characteristics: NEU, CMM, EVN, Life360, DRO, JBH, and APE. Each shows varying degrees of extension but shares the vertical price action and multiple ascending trend line structure documented in historical pattern research.
The educational value extends beyond pattern recognition to understanding market psychology—why participants often buy after major advances rather than during base-building, how euphoric sentiment accompanies vertical trends, and why these patterns have appeared repeatedly across market cycles despite changing market conditions.
The 50/80 rule provides statistical context: historical data shows approximately 80% of momentum leaders corrected at least 50%, with about 50% showing 70-80% corrections. This framework doesn't predict specific outcomes but informs risk assessment when evaluating positions in stocks showing vertical characteristics. Remember that past performance is no guarantee of future results, and all trading involves risk.
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Educational Disclaimer: This content is for educational purposes only and does not constitute financial advice. Past performance is no guarantee of future results. Consider your financial situation and seek professional advice before making investment decisions.
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