Just after a few weeks of a market correction the NASDAQ notches a follow-through day. A late day push from buyers helped edge the NASDAQ enough to meet the technical requirement of a follow-through day. Yesterday we did see a few market Leaders breakout and today a few more a positive signal this market does have some legs to continue to move higher. How far, it is anyone’s guess, but as always we’ll use price and volume as our guide. We got the go ahead to look for longs and we are on top of our game.
Last week we saw the number of AAII bulls drop below 30%, but this week we saw bulls regain some members. It appears two Tuesday’s ago move to the new low was a day of capitulation as bulls rushed for the exits. The recent rally did not start off as well as we would have liked. Back to back gap reversals put a dent in the appeal of the rally. Appeal is simply an opinion and opinions mean very little and now with a follow-through day, despite its apparent flaws we’ll jump aboard the long side.
RIMM stock plunged in after-hours trading after it reported disappointing earnings. Unfortunately, RIMM stock continues to be a laggard and a company that lacks innovation. Compare AAPL stock and RIMM stock it is clear who the leader is and it is no wonder why RIMM continues to lag. On the other hand, ORCL stock reported a better than expected quarter. The stock ended the after-hours session up more than 4%. The tale of two stocks, proves sticking with market leaders is the way to go. Leave laggards behind and stock with strength.
We have a market follow-through and how high it goes is anyone’s guess. We must take our clues from the market and be prudent. Cut your losses and enjoy the weekend!
The above was BigWaveTraders take. Here is my additional thoughts:
Today was definitely a technical follow-through day to the upside and that being said we all need to be on the lookout to buy stocks that have strong fundamentals with a solid chart pattern. This being said I need to remind everyone that 3 out of 4 Follow-Through Days fail but no bull market has ever started without an FTD. One key ingredient I have always recognized between the best follow-through days and the ones that fail is volume. Volume is always above average on the FTD where they work. FTDs that come with volume below the 50 day volume average have, during my personal 16 years of experience in the stock market, eventually failed either right out of the gate or after a short rally. But just because this rally might not work should not prevent us from buying stocks if the chart patterns warrant it. I was long 25 stocks coming into today and all of them but one (EBIX the big loser) had a strong day. The stocks leading this FTD are oils, metals, drugs, medical, diversified services, and food related. Those are bear market leaders, historically over the past 130 years, folks. I have a feeling this FTD will fail quickly. But my feelings don’t mean anything to me. They are useless and dumb. I will follow my charts and do what the market tells me to do.
