I wrote a post earlier about uptrends. I follow Investors.com very closely and love the IBD investing methodology. They use something called a Follow Through Day as a potential signal of a new uptrend. I stated its a start, but its not good enough. We also need price structure to confirm.
Well, we now have both.
BUT…BUT… anything can happen and trends change fast. But this is an important development.
First, lets look at price action on the Nasdaq.
A series of HIGHER lows AND HIGHER highs is the first completed step in a total trend change on the daily timeframe. In my book, we are now in a daily uptrend.
I don’t chase price in uptrends, but am looking to buy pullbacks in leading stocks as they come into support as long as the trend is respected. Its not easy because the overall picture still looks ugly. Economic fears are looming, Biden just contracted Covid, war, supply chain issues and a host of other problems.
BUT… remember, the stock market is a forward looking discounting machine. We are here to ride trends, not guess the future.
What about the “follow through day”?
Well, we got two of them. Back to back days of heavy volume higher then the previous day with the Nasdaq making impressive gains on Tuesday and Wednesday.
You have to look closely, but they are there. Again, does not mean to rush out and get margined. But it does mean to pay attention.
Also, we are seeing the markets shrug off bad news. The latest CPI print was hot, but didn’t cause any damage to markets. Apple warned of hiring freezes which sent the markets down on 7/18, only to quickly recover those losses and more the next day. Netflix and Tesla having positive reactions to mediocre reports are another plus while the president contracting Covid couldn’t even get the markets to stay red for half a day.
The weight of the evidence is starting to stack up and up. Anything can happen.
Stay positive, keep doing your homework and don’t ever give up.
—NS