The strong gain in higher volume came on the fourth day of a market rally that began with an even more impressive reversal on Feb. 9. Such action is a textbook example of the follow-through day. IBD, ever since its founding in 1984, has noted the follow-through as the most timely indicator that a market correction has ended and a new uptrend may in fact be in place.
We usually don’t see a return to confirmed uptrend this fast. I was hoping for a few boring weeks, and then are turn to conviction buying by the big boys. As it is, I feel like not enough fear was returned and thus we are likely for another downturn sooner than I would want. But, you play the hand your are dealt.
Once again, Saul’s 100% invested approach is paying off, especially with his top 3 holdings: ANET, SHOP, HUBS. Oh and PSTG, TWLO, TLND and OTKA. Seriously? You will notice how well it held up in the downturn, which we mentioned. That type of stock will usually do much better when we start moving up again. It will be interesting to see the moves Saul made.
Remember my post on “is Saul’s portfolio too cloudy”? I said if I had to sell one, it would be TLND. I was smote by the Gods of Irony and it was up 10% today.
For me, I dumped some of my weaker IBD stocks and moved money into “Saul” stocks that I have wanted to expand in: PSTG, NTNX, and of course my recent candidate, OLED.
back to the article…
Numerous highly rated companies from the tech, internet, retail and other sectors broke out or moved back above recent new buy points. When stocks from multiple sectors rise in heavy volume at the start of a potential new market uptrend, even when the overall secular bull run is long in the tooth, it’s bullish…
Not all follow-throughs work.
After market corrections in 2010, 2011, 2015 and even 2016, the first follow-through that took place after the major indexes gouged their 50-day moving averages in a vertical-like fashion tended to fail. In other words, the indexes immediately declined in the following days and weeks and undercut the low of the first up day in the new market rally.
But given the triggers, this time, I am not worried about that.
Don’t forget this as well: No major market bottom emerged in the absence of a genuine follow-through