Month: October 2018

Your question implies there is some other indicator that, when used in conjunction with the follow-through day, can provide firm evidence that the follow-through will work. The only “other indicator” we use in conjunction with a follow-through day is simply to check if there are fundamentally sound stocks breaking out of sound bases. If there are, we will begin entering the market in a measured fashion. If there aren’t, we do nothing. Many of the recent follow-throughs have been accompanied by absolutely zero stocks breaking out of sound bases. So, by definition, we are not pulled into the market in a big way, and once the follow-through rally attempt fails, we back out with a minimum of damage, or we may not even be in the market at all if we see nothing to buy. We would caution against using any other indicator because we have not seen any evidence that they will work any better than using the follow-through in conjunction with proper breakouts.

A strong base of any type should always have a price uptrend prior to the beginning of the base. A base that forms after a downtrend is prone to failure because it has a lot of overhead supply. That is, there are many holders waiting to sell as soon as the stock goes back up. Look for at least a 30% increase in price in the prior uptrend. It’s also important to have improving relative strength and a substantial increase in volume at some points in the prior uptrend.