For example, once the Philadelphia Semiconductor Index (SOX) hit 430-ish in mid-February, I thought it had gone far enough. It then came down to tag the uptrend line and went on to make a higher high, and it's finally broken the uptrend line -- as you can see -- and has a potential head-and-shoulders top in place. If you review many of the individual stock charts in the semiconductor group, I am sure you'll see how many failed to make higher highs within the SOX in mid-March.

The number of stocks making new highs does matter. Over time, a decline in this statistic means lower highs, and that points to the formation of tops.

At the time of publication, Meisler had no positions in the securities mentioned.

Helene Meisler writes a daily technical analysis column and Top Stocks. For more information, click here. Meisler trained at several Wall Street firms, including Goldman Sachs and SG Cowen, and has worked with the equity trading department at Cargill. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback; click here to send her an email.

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