It’s still early in the day, but today could be day 9 of a follow-through attempt, using 8/26/2015 as the first traditional up day. Typically, the most powerful follow-through days happen between days 4-7, but anything is possible given recent market conditions.

 

By definition, a follow-through day (FTD) is when the general market changes from a correction to an up-trending period. It requires only one of the major indices to close up above 1.25% on larger volume than the prior day.

 

 A follow-through day should feel like a powerful lift off from the most recent market lows, accompanied by stocks breaking out of bases. One additional component of a FTD is strong institutional participation. The larger institutions should step into the market and buy-back any shares they might have sold off during the correction. Given the Nasdaq’s recent intra-day low of roughly 18% off highs, institutional participation is the crucial component needed for today’s follow-through attempt to succeed.

 

If the market receives a follow-through, our philosophy is to buy at least one pilot position in a leading stock to get a feel for the potential of the rally ( See Scott O'Neil's Webinar). One way to identify potential leaders it to look for stocks building bases. An easy way to do this is to check the stocks in the MarketSmith Growth 250 Near Pivot list today. Any stock that can build a sound base while the market corrects is a definite candidate for your watch list.

 

Remember to use your rules when you enter the market. Do not buy your entire position all at once; wade in and wait for feedback from the market to prove your purchase is correct. If you received confirmation, then slowly add to the position until action on the stock proves otherwise. If your first purchase proves to be incorrect, use your selling rules to exit, then wait until the market firms up, which become apparent when a number of stocks start breaking out of bases.

 

Keep in mind, too, that it’s best not to jump-the-gun on this follow-through day attempt. Wait until it gets closer to the end of the trading day to make your decisions. As always, if you have any questions about follow-through days or finding stocks still in bases, please contact your product coach at 800-424-9033, or email us at reachus@MarketSmith.com

 

Happy hunting,
The MarketSmith Team