Follow-Through Day Concept
System developed by William J. O’Neil to identify an important change in general market direction from a definite downtrend to a new uptrend.
A follow-through day occurs during a market correction when a major index closes significantly higher than the previous day, and in greater volume. It happens Day 4 or later of an attempted rally. Leading up to a follow-through day, an attempted rally takes place during a downtrend when a major index closes with a gain. The rally attempt continues intact as long as the index doesn’t make a new low.
Follow-through day variables include: an index closing sufficiently above 1% on increased volume, positive behavior of leading stocks, and improved market action regarding support vs. resistance levels. The most powerful follow-through days often happen Day 4 through Day 7 of an attempted rally.
In the wake of a follow-through day, the market should continue to add gains in strong volume, with breakouts by top stocks. This is further confirmation a new uptrend is underway.
View more information: https://education.investors.com/financial-dictionary/ibd-terms/follow–through-day-concept