I am doing some research on rally attempts and FTDs to help myself learn a bit more about this.  I have grown somewhat weary of the false positives when the FTD is weak per WON's guidelines on % Price Chg and Volume (which I have assessed as >=+ 2.0% price change & Volume >= 20% above 50 DMA line between the 4th-7th day...will share the historical precendent data soon.)  So, when an initial and/or  subsequent rallies fail, I have noticed the 1st day gets reset.  My question is what are the exact guidelines for resetting the 1st day ?

I have heard Scott say as the rally starts to fail and the price drops below the prior market low, then it is reset.  I would think we would also want to factor in the DD count of 5 within the 20 day period to reset this also?? 

With this guideline clearer I hope to start a dialoque about when a FTD is a bit weak on volume though has a significant price change say >= 2.0%, what would a second confirming FTD look like and what time period is historically valid ?

Thanks Guys/Gals

     Great topic.  I was just starting to research in greater detail the M in CANSLIM and was looking at the three failed FTDs in the summer of 2010.  I haven't had a chance to look at the failed FTD in 2011.

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     I have been reading Gerald Appel's book on Technical Analysis and it does go into depth on Market Timing indicators.  I was wondering if I can use some of these as secondary indicators to help in sizing my positions.

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     Looking forward to seeing the historical data.  Hopefully will be able to contribute over the next few months.

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     Could you explain what you mean when you are referring to the guidelines for resetting the 1st day.  I did a search for "Resetting the 1st day" and "Resetting the first day" on investors.com and it came back with nothing.  Are you referring to when a Market goes changes from a market in Uptrend to a Market Under pressure and finally to a Market in Correction?

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Robert Paluszak

Here is a better explanation of the situation : the market has rallied for months, then incurs 5-6 DDs in 20 days and corrects down.  The market starts its first rally and the first day is either (1) the day closes higher than the prior day close at the market low point or (2) the day the market closes higher after a selloff earlier in the day.  Say that rally fizzles out and the market heads downward again.  The new first day can be established if the market uncuts the prior first day.   What if the market does not drop below the prior market low but incurrs 5 DDs when it corrected ?   Does that reset the first day ? Example : Look at the NASDAQ daily chart, is 11/28/2011 a new first day ?  ( DD count hit 5 on 11/09 and mkt made a small correction but NOT below prior market low on 10/04/2011)

Upon further review of this, I have ran across a detailed analysis of IBD's FTD strategy that does most of what I was trying to achieve here.  Take a look at this site for multiple analysis of FTDs....quite interesting :

http://quantifiableedges.blogspot.com/2008/07/follow-through-days-quantified.html

     The article by quantifiableedges.blogspot.com is Interesting but flawed.  I can immediately see several flaws.

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     First, he is using it to trade an index blindly.  IBD's research is based on the greatest winning stocks.  As you have experienced as a growth stock investor, while an index may make a 10% move, a leading growth stock could make a 20-25% move.  And using good seel rules you should be able to improve on your losses.  This will alter the win loss ratios. 

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     Second, when I see a FTD day, I use that as a green light to LOOK at buying stocks, not to jump in 100% as he is doing.  This has kept me in cash for a number of FTD's that did not have breakouts from leading stocks and subsequently failed.  He does not take into account the action of leading stocks or other indicators for the stength of a FTD.

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     Fiinally, The way he defines an exit/sell strategy does not match that which is used in the CAN SLIM style.  He should be looking for distribution days and topping actions.  Also he should be using appropiate stock sell signals.  These would completely change the results of the analysis and render his findings useless.

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     This is only from a few minutes of looking at his analysis. I found several other comments I believe are incorrect, but did not feel it worth the time to further investigate.  If I am wrong on any of these points, please let me know and where I can see these issues accounted for in his analysis.

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Robert Paluszak

Leader of The Villages, FL, IBD Meetup

     I am starting to do some analysis myself on the M in CAN SLIM.  To answer the question about failed attempted rallies, it would be best to look at some examples.  To narrow the model book, we only need to look at dates when the market is in a correction.  A market correction will contain a number of attempted rallies that fail before we have a successful end to the correction with a FTD.

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     Do you have a list of what corrections you are looking at?  You mentioned providing some historical precedent data, do you have any data that you could share.  I am currently building a table of the recent IBD changes to the market condition (Market in Correction, Market in Uptrend, Market Under Pressure).  I will use this to build a model book for further research.  Next, I will look at the corrections for the attempted rallies, which will either fail or become confirmed uptrends with a FTD.  Once I have identified the confirmed uptrends, I want to look at the distribution counts that lead to a market under pressure and ultimately a market in correction.  Any help would be appreciated. 

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     Does anybody have a table with the dates that IBD changed the current outlook?  If so, email me at the address below.

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Robert Paluszak

Leader of The Villages, IBD Meetup

mv5b-tctg <at> spamex.com

Hey Robert

I agree with your findings and concluded the same  .   There are two data sets that I used to develop understand the Strong FTD better and second, a weak FTD followed by a confirming FTD that leads to a successful rally.   Here are the dates of those two sets :

Strong FTD :

Confirming FTD :

You may have to view in full screen mode ti see all that data.

Paul,  Send me your email.  I have an Excel file with the information you are looking for.

Don.  dthomas240@aol.com

I meant Robert! Don

Somehow the HTML that is imbedded in a prior post has affacted how I can view this forum thread, making it difficult to read the postings.  As such, I will post my reply in a new message thread.

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Robert Paluszak

Organizer of the IBD Meetup in The Villages, FL