Trading Places with Tom Bowley

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

Tom Bowley

Tom Bowley

Chief Market Strategist, EarningsBeats.com

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 of EarningsBeats.com, a company providing a research and educational platform for both investment professionals and individual investors. Tom writes a comprehensive Daily Market Report (DMR), providing guidance to EB.com members every day that the stock market is open. Tom has contributed technical expertise here at StockCharts.com since 2006 and has a fundamental background in public accounting as well, blending a unique skill set to approach the U.S. stock market. Learn More