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home | Price Acceleration

Step 2: Improve Attention to Detail (Price Acceleration 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.

Stocks don't always show signs of distribution before they top out.

Instead, their character changes, which may take the place of classic distribution signals.

A price acceleration above a rising 10 Week Moving Average is one example of a change of character that's been associated with significant tops in stocks.

However, there's one distinction to be aware of when looking for a price acceleration; the acceleration should occur AFTER a stock has already had a large move to the upside.

Why is this important?

Because in a price acceleration, it's best to have a prior leg up to compare to the current trend (see Chart 1).   

This can help you identify steep advances when price accelerates higher.

In contrast, a stock that has an acceleration following a base breakout usually has no reference point to make the same comparison (see Chart 2).

Keep in mind that this doesn't mean that a stock can't top out on a price acceleration shortly after breaking out.

I mention this not to confuse you, but to point out the different looks that the market can give you during price acceleration tops.

For example, a stock may break out and have a multifold move in a short period of time that ends with an acceleration into a top.

This exact scenario happened to some stocks during the Nasdaq's parabolic rise into its March 2000 top (see Chart 3).

Here are three (3) historical stock charts that highlight some of the differences between price accelerations:

Chart 1

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Chart 2

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Chart 3

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Please >>CLICK HERE<< for the historical chart examples of Price Acceleration Tops.

Please >>CLICK HERE<< to go to Price Reversal Tops.