Thursday, September 25, 2008

A Very Unconvincing Follow-Through Day in My Opinion

IBD has stated today was a follow-through day, and by the technical definition, it does indeed apply. But after going through my scans, I cannot remember a less convincing FTD ever. My price/volume scan, which looks for stocks above both their 50 and 200 day moving averages that had a 2% or more up day on heavier volume, came in at 25 today. That is not an impressive total for a regular day, let along a supposed follow-through day. Actually, it is quite pathetic.

If you want to go out and buy a bunch of stocks tomorrow, go ahead. I don't think it is smart though. I have one or two that I am watching and may try taking small positions in, but these stocks are either low-priced (under $5), fundamentally poor, or both. My gut is that today will not amount to much of anything. There just aren't the charts out there that we need to go higher. There is absolutely no leadership. None. Perhaps after a few weeks those IBD-quality charts will start showing up and from there we will move higher. Right now, however, I just don't see them. If I did, I would post them. If they start showing up, I will post them.

Here is my current watchlist - you can check them out and see if any of them excite you. Just because they are on this list doesn't mean I am looking to buy them:

QCOR, UFI, THFF, ACET, NCIT, ALO, CLNE, LRN, STSI, MER, RMG, ABMD, NPSP, HA, CREE, MED, and RCRC.

I am keeping a close eye on gold. DGP, GG, RGLD, and AEM are charts I am watching because I think they are at key levels here. I was waiting for a pullback and that looks like what has happened. I still don't see any way this bailout is beneficial to the U.S. dollar.

GOLD CHARTS
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

All in all, I have a bad feeling we are headed for more chop and more difficult trading. I would be looking to get short in a few days if the market rallies a little higher, but that has been pretty much outlawed by our government, so I don't feel comfortable so anymore. A better time will come at some point - who knows, maybe this FTD will work after a few more weeks. Being patient is very difficult and quite boring, but you have to know when it is the best strategy, and in my opinion, I still think it is best here. Good luck Friday.

7 comments:

bmbull said...

That seems ridiculous to me. There's one part of O'Neil's definition of a FTD that IBD has consistently glossed over a lot lately, that being:

The market’s volume for the day should be above its average daily volume in addtion to always being higher than the prior day’s trading.

Today was nowhere near average volume.

But hey, they're the supposed 'experts'. Although I've often thought that since their criteria are widely known that FTD's can be 'manufactured' if the big boys get the chance.

It doesn't matter much to me. I don't really trade their system anyway, so I don't buy stocks just because they say we're on a FTD.

Mac said...

I agree completely. I think that the original idea of a follow-through day is that there is just an overwhelming impression of buying, which tells you institutions are involved (which I imagine is the whole idea). I don't think we can say today gave that impression.

I guess they have to follow the system to a T but even they will say tonight (I am guessing) that just because it was technically a FTD, it doesn't mean you start buying stuff.

I was thinking if we did get a really powerful one that I would have to become more bullish. As it is, I am still neutral.

Alen said...

looking for the next stars and did some research on the last bull's golden boys as examples.

looked at the financials of apple and rimm along with the charts from 2002-2004. both broke out in 2003 and apple's 2003 financials are a joke

Paul Stiles said...

You should check out SCL. Nice lookin' chart.

Mac said...

I'll check SCL out, but looks like we will be down once again, so it is just too tough in relation to news items to do anything right now. IBD pointed that out tonight as well.

Anonymous said...

I see some mild bear flags in the solars, and it looks like JASO, STP, CSIQ, FSLR, SOLF broke through, while some of the other ones are still holding up. If it wasn't for the news potentially slapping the market one way or the other, I would be tempted to take a short if/when they bounce.

Mac said...

Anon - I see quite a few setups on the short side but I just don't feel comfortable taking them. I am fearful of the government putting more stocks on the no-short list and me getting caught in them. So I am staying out.