On the 7th Day will God Create a Follow Through Day or Rest?
Searching for the follow through
Many charts look similar. I cannot stress how important it is for a follow through day to formulate after the March 13th low. We are simply trading sideways. The longer it takes to bounce or rally, the larger the invite for more selling.
Follow through day defined by William J. O’Neil as part of his CANSLIM strategy, which is adopted by IBD.
Timing: A follow-through day should appear on the 4th to 7th day of an attempted rally. This period historically allows the market to stabilize and prove that the initial move is not just a short-lived reaction. Rally attempts showing strong gains earlier than the 4th day are less reliable.
Index Price Increase: A major index, such as the Nasdaq, or S&P 500, must post a substantial price gain of around 1.5% to 2% or more. This upward move signals renewed buying interest and that market sentiment is shifting, with the market showing real strength after its decline. O’Neil initially considered a 1% increase as sufficient for a valid FTD. However, as institutional investors became more aware of this system, the requirement increased to a 1.5% to 2% rise to better filter out false signals.
Volume Increase: The day’s trading volume must be higher than the previous day’s. Ideally, it should be above the average daily volume, showing that big, institutional buyers are driving the price move. This heavy trading from major players is a key sign of a reliable follow-through day, as it indicates strong demand pushing the market higher.
Here is the QQQ
Closeup: we are on day 6 of an attempted rally. If the market has a shot we should see a powerful rally on Monday or Tuesday. Read on for more analysis and good luck!
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