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home | 1st Swing Point High

Step 2: Improve Attention to Detail (First Swing Point High Tops)

by Erik Grywalski

Note:  The historical stock examples given below are for EDUCATIONAL USE ONLY.  They ARE NOT to be used to make buy/sell decisions in today's market.  For more information, please read the HSR Terms of Use.

A swing point high may give you an advanced warning before a stock breaks down because many signals occur above the 10 Week Moving Average (MA).

The First Swing Point High (fSPH) is important because it represents a subtle change in a stock's character for the first time since beginning its uptrend.

If this change occurs after an extended run, it may signal the beginning of the end for a market leading stock.

Here are some important considerations to be aware of when searching for First Swing Point High signals:

1.  High-Beta vs. Low-Beta

Most fSPH signals are found in higher-beta stocks that have doubled or more. 

However, don't discount fSPH signals in lower-beta names. 

Relative to a high-beta stock, a 25-50% gain in a less glamorous name may invite profit-taking at the first sign of trouble.

Historical Stock Chart Example:  Steelcase (SCS) 2006

Click to enlarge

2.  Volume during the confirmation bar (CB).

Volume is not part of the fSPH signal, however, heavy volume can add conviction to the fSPH signal.

3.  First close below the 10 Week MA

First Swing Point High (fSPH) signals may be followed by a close below the 10 Week MA. 

For many stocks, it'll be the first close below the 10 Week MA since breaking out of a base, which may be significant if taken into context with the fSPH signal.

Historical Stock Chart Example:  Kulicke & Soffa (KLIC) 1995

Click to enlarge

4.  Failed fSPH signals may sometimes lead to a Twin Peaks Top

A Twin Peaks Top features two swing point highs next to each other after the fSPH signal fails to mark the high point for price.

When this occurs, it tells you the trend is turning weaker and choppier because the time between swing point high signals is getting shorter.

Historical Stock Chart Example:  Pulte Homes (PHM) 1983

Click to enlarge

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