This Is How You’ll Know The Rally Is For Real

  • March 13, 2003
  • Tim Truebenbach

Another rally attempt is in our
midst! After the first two
days, there seems to be real buying power behind the move.


 

We are looking for a follow-through day on the rally that
began Wednesday. If this occurs, we
will be looking to buy leading companies that break out of sound base
structures. At this time, it is still
important to insist on the follow-through day before moving into the market.
It is the final confirmation that institutions are accumulating stocks
rather than just making a few re-balancing moves or covering shorts.

The rally that the market has been attempting since
Wednesday’s reversal has come on with good power.
On occasion, a new rally can begin and post a confirmation in as little
as three days if each day comes on large gains, such as we have been seeing,
and heavier volume each day. If we see
at least a 2% gain on heavier volume Friday, then we will have our
follow-through. Otherwise, we will look
for this confirmation through next Thursday. 

In early January, I was recommending Ebay

(
EBAY |
Quote |
Chart |
News |
PowerRating) and a few other leading names before the market starting showing
heavy distribution. Most of these names
took the hit, but Ebay has held up and even pushed higher from its breakout
point of 70.95. I don’t regret
selling shares of it because every other stock got hit and the risk/reward was
too great. But when we get into a
prolonged rally, stocks like Ebay and others will consistently push higher
with only brief periods of consolidation and few pullbacks.
Over the past two months, the market has been too choppy for buying
stocks, but when it firms up, 12-point gains over a month or two in names like
Ebay will be much more common following a solid breakout.


 

 

It will be important to do a lot of homework over this
weekend.  It’ll be important to
have a nice watch list ready if the market does give us our follow-through
day. Keep an eye on your watch list and
see which stocks may offer the best gains. 

Have a productive weekend!

Tim Truebenbach