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How to Spot Market Bottoms

How to Spot Market Bottoms. What is a Follow Through Day? Be Ready: The biggest winners break out first Red flags . What is a Follow-Through Day?. Spotting a Follow-Through Day

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How to Spot Market Bottoms

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  1. How to Spot Market Bottoms What is a Follow Through Day? Be Ready: The biggest winners break out first Red flags

  2. What is a Follow-Through Day? • Spotting a Follow-Through Day • When the market is in a correction and makes a new low, look for the first day the market closes up from the previous day. This is normally day one of a rally attempt. As long as the index remains above the previous low, the attempted rally is in place.

  3. Follow-Through Day • Key Elements of a Follow-Through Day • At least one major index closes up around 1.5% - 2% or more on volume heavier than prior day. (Volume does NOT have to be above average; just higher than the previous day.) • Typically occurs on Day 4 or later in rally attempt. Follow-throughs can happen as early as Day 3, but generally the first 3 days of an attempted rally are too soon to judge if the market direction has truly changed.

  4. Follow-Through Video • http://ibdtv.investors.com/Default.aspx?mediaID=550117&mrt=1 • http://ibdtv.investors.com/446177/200807291335/Market-Timing-How-To-Spot-A-New-Market-Uptrend.aspx • Today’s Market

  5. Bill O’Neill Interview • http://ibdtv.investors.com/479704/200906101725/When-To-Get-Into-and8211-And-Out-Of-and8211-The-Market.aspx

  6. Red Flags for Follow-Through Days • One red flag is distribution days that arrive soon after a follow-through day. (A distribution day involves a decline in a major index in higher volume than the prior day. It indicates institutional selling.) • Research shows that a distribution day within several days of a follow-through usually results in renewed market weakness. • http://education.investors.com/article/535602/201005271600/watch-for-red-flags-in-new-uptrends.htm?Ntt=follow-through-day-fail&p=full

  7. What to do when new Market Uptrend begins • Identify leading stocks breaking out of sound bases • Get back in gradually • 50% of normal position • Up 2% add 30% to 35% • Up another 2% add rest of your position • http://ibdtv.investors.com/446179/200808111316/Market-Timing-Find-The-Best-Stocks-In-A-New-Rally.aspx

  8. Summary • Track general market indices daily • IBD Big Picture very helpful • Watch for FTD& Distribution days • Keep watchlist up to date • Get back in gradually

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