Does Volume Matters When Stock Making a New Highs?

 

Indeed, a stock making new highs on low volume has likely surpassed any overhead supply that would otherwise have weighed down the stock’s advance. However, any time a new high comes on weak volume, it is a red flag. Simply put, when a stock climbs on low volume, it is telling you there are fewer investors willing to pay the higher price for the stock.

How to confirm a strong follow through day?

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.

Is a base pattern valid if it starts after a downtrend instead of an uptrend?

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.

Does the news of a pending stock split have any effect on the price of the stock?

We haven’t been able to discern any consistent or reliable reaction that a stock has to a pending stock split. However, I would note that a stock with an excessive number of stock splits within a relatively short period of time, or a number of large splits such as 3-for-1 or larger should be checked for signs of topping. Often, this occurs after a stock has had a large upward move. A stock split does not fundamentally impact the company in terms of earnings per share and a host of other fundamental measurements. However, companies will often split their shares in order to bring down the price of the stock as a way of making it more appealing and/or accessible to investors. Also, splitting the stock will increase the float, which may make it more accessible to institutional investors.

Can Reletive Price Strength Rating determine stock price?

 

No, you should not be concerned if a stock’s Relative Price Strength Rating hits a new high when the actual stock price is not at a new high. In fact, it is generally a positive sign when a stock’s relative strength (shown either by the RS Rating or the relative strength line) goes into new high ground prior to the stock breaking out of it’s base. A high relative strength indicates the stock is performing relatively well in the current market environment, which is an indication of demand.