IBD Follow-Through Days
For IBD Investor, on every Market Correction the investor will start to stand at side way and wait for the market to turn around to Confirmed Uptrend with follow-through day appear before consider go in again to the market. During these period of market correction, we still have to follow on the market condition and building our watchlist. Below are the definition of Follow-Through Days from IBD,
System developed by William J. O’Neil to identify an important change in general market direction from a definite downtrend to a new uptrend.
A follow-through day occurs during a market correction when a major index closes significantly higher than the previous day, and in greater volume. It happens Day 4 or later of an attempted rally. Leading up to a follow-through day, an attempted rally takes place during a downtrend when a major index closes with a gain. The rally attempt continues intact as long as the index doesn’t make a new low.
Follow-through day variables include: an index closing sufficiently above 1% on increased volume, positive behavior of leading stocks, and improved market action regarding support vs. resistance levels. The most powerful follow-through days often happen Day 4 through Day 7 of an attempted rally.
In the wake of a follow-through day, the market should continue to add gains in strong volume, with breakouts by top stocks. This is further confirmation a new uptrend is underway.
On last Friday’s Big Picture, these are the four clues that we can monitor to evaluate the next trend after the follow-through days arrived.
Four Clues of next trend following Follow-Through Day
Clue No. 1: The market itself must avoid triggering pressure signals after the follow-through day.
Clue No. 2: Monitor the new highs list and new highs should more than new lows, not the other way round.
Clue No. 3: IBD 50 and Big Cap 20 list by IBD should have more growth stocks in the list rather than defensive stocks.
Clue No. 4: Quality breakouts of stock leaders.