Trading Places with Tom Bowley

How Can You Spot A Top In All-Time High Territory?

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I generally look to prior price highs in determining overhead resistance, but in the case of all-time highs, there are none. So where do we go next? From a bigger picture outlook, we can use pattern measurements. Based on the recent ascending triangle breakout, I'd look to 3225 to be a potential area for an intermediate-term top:

I'd look for an intermediate-term target of 3225, which would represent the breakout level of 3025 plus the 200 point measurement. But it's doubtful we'll go straight from 3025 to 3225, so where might we look for an initial pullback?

I'd rely on a 60 minute negative divergence, similar to those we've seen in recent months:

I used a line chart so that it'd be easier to spot those negative divergences (higher highs in price, but lower highs in PPO). These divergences don't guarantee us anything, they simply alert us to the possibility of slowing momentum and a short-term pause in the rally.

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Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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