According to the Investor's Business Daily (IBD), a follow-through day is a significant increase in a major index's stock price and trading volume. It's a sign that a market rally is gaining momentum and that a bear market may be ending.
How does it work?
- A follow-through day usually occurs 4–7 days after an attempted rally
- It's a big up day, with a gain of 1.25% or more on at least one major index
- It occurs on rising volume
What does it mean?
- It's a sign that a bear market is fading and that a bull market may be starting
- It's a confirmation that a market rally has backing from institutional investors
What are the caveats?
- A follow-through day isn't a guarantee that a bull market is coming
- Rallies sometimes fail, and the market may even decline further
- The market may have several unsuccessful follow-throughs before a strong uptrend
Who developed the concept?
William J. O'Neil developed the concept of a follow-through day as part of his CANSLIM strategy.
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