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Tickers in this Article: ULTA, FDO, ROST, BBBY
For the past few weeks, many traders have been looking for a pullback with hopes of jumping in on the rally. The truth is, the strength of the rally from the October lows caught most traders off guard, and even those that did participate likely booked at least some of their profits well ahead of the recent highs. However, now that the market has pulled back for a couple of days, the idea of a pullback isn't looking as good anymore. The reason is that the pullback has happened quickly and with the backdrop of more problems with Greece and Europe. This is one of the most difficult scenarios to deal with in trading, as it is often difficult to ascertain whether a typical pullback is occurring or whether a top is forming. Often, it is better to try and block the noise and focus on price action. The markets have certainly pulled back quickly, but overall they remain in a decent position and many individual stocks are holding up well. Ulta Salon, Cosmetics & Fragrance (Nasdaq:ULTA) for instance has been hovering just under all-time highs while it consolidates a strong move from its August lows. ULTA actually looked like it was going to fall apart late in the summer as volatility increased, but buyers kept returning near the $50 level, and ULTA really gained momentum later in September as volume poured in on its rally attempt. This move likely caught a lot of traders off guard, and ULTA surprisingly reached all-time highs in just a few sessions as it rallied over 20 points. Traders should keep a close eye on the $72.50 level as this area has been acting as resistance. Any close above this level would be constructive and could lead to a follow-through. (For more, see Support & Resistance Basics.)

Bed Bath & Beyond Inc. (Nasdaq:BBBY ) is another stock that has been hovering near all-time highs after a multi-year breakout. BBBY broke above a critical multi-year resistance level near $47 early this year. It held above this level for the majority of the year, even as the markets weakened over the summer. BBBY did suffer through a steep decline in July and August, but it recovered quickly and was able to stabilize in early autumn. BBBY recently cleared another resistance level near $60 and it has remained above this level for a few sessions. It is testing $60 now as the markets pull back, but if it can find support, it may offer a great opportunity for traders that missed the original move. (For more, see Bed Bath And Beyond Goes Above And Beyond.)

Family Dollar Stores, Inc. (NYSE: FDO ) is yet another stock trading near all-time highs. FDO had cleared key resistance near $56 in October as the markets rallied off their recent lows. Notice that FDO was moving ahead of the markets, and had been setting higher lows since late August. With the market showing weakness the past few days, FDO has simply started to drift back towards its breakout area. It is likely that FDO will find buyers waiting as it approaches the mid $50s. (For more, see Family Dollar Looking For Top Dollar.)

In a recurring theme, Ross Stores, Inc. (Nasdaq: ROST ) is also at all-time highs. The weekly and monthly charts for ROST are a thing of beauty, as the stock has been a steady uptrend for years. ROST cleared the $82.50 level a few weeks ago and has been steadily trending higher since then. It is likely that ROST is too extended to chase at these levels, but this is a clear case of a stock being in a well-established uptrend on multiple timeframes. The likelihood of buyers supporting any weakness in this stock is very high due to the established trend.

The Bottom Line
Interestingly enough, I didn't start this article with the idea of listing stocks near all-time highs. However, in scanning for stocks that were showing relative strength, these stocks all had maintained relative strength compared to the rest of the market. Obviously, there is no clearer sign of strength than a stock at all-time highs. No one who is long the stock is underwater, so the pressure sits squarely on the bears.

If the last few years have proven anything, it's that the markets can melt down very quickly. This has made it very difficult for traders to stomach the idea of buying weakness, and with good reason. However, the odds are that the recent strength was not an anomaly, and that the markets will find support before cracking. The key is to wait for some sort of confirmation and then to stick with stocks that have shown strength. (For more, see What is Relative Strength?)

Charts courtesy of

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

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