Learn to "TIME" the Market
IBD (Investors Business Daily) declares a 'Follow Thru Day' when the market attains a bottom and is attempting to rally. That is the TIMING signal that Growth Stock Investors look for to slowly test out the market once again. It could take anywhere from the 4th day to the 11th day of attempted rally before we could have a confirmed change in the direction of the market. Quite often the market could rally strongly and we could face a confirmed uptrend within 3 days sometimes. Friday we saw a very strong attempted rally with the Growth Stock index $QQQ. Volume traded was 3 times the normal average daily trading volume. That indicated a strong conviction from the institutions in the market. $QQQ rallied +1.50% while the $SPY and $DJI both rallied even strongly by +1.85%.
'Follow Thru' Day' occur when we least expect it. I can still remember when our nation was focused on fighting Iraq when Saddam Hussein had annexed Kuwait. We had almost 1/2 a million troops in the Persian gulf and the media was hyper focused on analysis and the video coverage of the war. We had the market rally and some of the leading Growth Stocks went on to make huge gains within weeks when IBD (Investors Business Daily) declared a 'Follow Thru' day. Retail investors that did their homework and deciphered the stock charts, ended up attaining substantial gains in the market.
Hopefully you were not paying much attention to the media highlighting inflation, yield curve and sector rotation. Your time would have been better spent raising CASH instead by harvesting profits from the stocks that had attained +20% to +25% profits. Hopefully most retail traders learnt a painful lesson once again to scale down stock positions as the $QQQ heads down below the 21 day sma. Last 3 weeks was the time to refine your Stock Watch List and just remain on the sidelines until the market shook out all the weak holders. There is going to be $1.9 Trillion stimulus money dispersed into the economy before the end of this month. March and April are 2 of our most strongest months in the market.
Could we be in for a very pleasant surprise once again with a powerful rally this week?
Do you have an action plan in place to take advantage of it?
Exactly a year ago when the nation and the rest of the world was getting locked down from Covid virus, we all thought that the world was coming to an end. We were all scared and stunned while the market was dropping 1% per day for 35 days in a row. Just as quickly we had a "Follow Thru Day" declared on April 2nd with the $SPY followed by the $QQQ just days later on April 6th. Like most retail traders, it was even hard for me to engage with the market at that time. $QQQ was residing below the 50 day sma(simple moving average) and that was a suspect for me. To our surprise the market just took off and never looked back. 2020 ended up being one of the best years in the market.
Stock Watch List
In my post last week, I shared a list of 35 Growth Stocks that were leading the market. This week I have refined the list after the powerful rally we experienced last Friday. I am looking for just a handful of stocks to take a very small position when IBD declares a 'Follow Thru Day'. The list is of stocks that have an RS ratings of 90 or above, the RS line is attaining an all time high or pointing in an upward direction. Most of these stocks are trading above the 34 day ema(exponential moving average). They have withstood the market correction. That's an indication that institutions would prefer to hold onto these stocks. They are certainly stretched beyond the 50 day sma. I have indicated price in parenthesis to be support/resistance area or the price I would prefer the stock to retrace to.
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