The first break in a major trendline that follows a big move flags the end of a rally and beginning of sideways congestion. Momentum-based positions should be exited until conditions once again favor rapid price change. In this environment, consider countertrend swing trades when other forces favor success. But stand aside as volatility slowly dissipates and crowd participation fades.

Traders avoid unnecessary losses when they stay prepared and recognize the type of range being drawn after an extended rally. Observant chartists quickly discover that the second corrective range of a dynamic uptrend tends to carve out the more complex formation. This suggests the basing process often found right near old highs will complete more quickly than expected.

No trend lasts forever. Inevitably, crowd enthusiasm outpaces a stock's fundamentals and the rally stalls. But topping formations do not end uptrends all by themselves. These stopping points may only signal short pauses that lead to higher prices. Then again, they could be long-term highs just before a major breakdown.
 

Rule of Alternation: When complex basing occurs early in a dynamic uptrend, alternation predicts major price thrusts with few retracements. This CMGI parabolic move supports that theory. Note the extended range at the right shoulder of the Inverse Head and Shoulders pattern, probably driven by inadequate accumulation. Once the building process was complete, price ejected into an astounding