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Topping Tails On Key Stocks Spell Sharp Drop For Market

As a Chief Market Strategist, swing trader and day trader, I watch the markets like a hawk every second of every day. Time and time again, I have seen stocks go parabolic since the February 5th, 2010 low.  They have soared to levels not seen since the good old days in 2007.

Then, just yesterday I saw major stocks making key topping tails.  A topping tail is a major bearish candle pattern that is known to signal a top in a stock or a market with a high probability.  The first stocks I saw the topping tail on was The Home Depot, Inc. (NYSE:HD).  HD has soared in recent months moving back towards the 2007 highs.  Yesterday, early on, HD hit a high of $37.03.  By the end of the day, it closed at $36.49.  The chart on the daily had a clear topping tail and a major reversal signal in place.

The next stock I had to check was Lowe's Companies, Inc. (NYSE:LOW). I wanted to see if this sister company confirmed what I was seeing on HD.  Sure enough, it did.  LOW hit a high yesterday of $28.54 before closing at the lows of the day at $28.16.  The builders and anything having to do with growth has been ripping of late on the seemingly obvious government spending rebound in the economy.  This was a big signal to me.

Other stocks showed the same pattern.  In fact, many out there.  Just to name a few, take a look at Prudential Financial, Inc. (NYSE:PRU) and Hartford Financial Services (NYSE:HIG).  Both of these had beautiful topping tails yesterday and are getting crushed today.

Home Depot and Lowe's are both down over 2% today as well. The topping tail signal is one of the best in the technical arsenal for a swing trader or day trader.  I alerted all my members in the Research Center and Intra Day Stock Chat to these formations yesterday.  They are enjoying the profits today!

Gareth Soloway
Chief Market Strategist