Page 700 - How to Make Money in Stocks Trilogy

White Belt: Understanding the Trend and Market Timing 7

What Starts a New Uptrend
A follow-through day signals an important change in the general market
direction from a downtrend to a new uptrend.
As an index rallies a few days off its lows, one of the major indexes will
close the day higher 1.5% or more on bigger volume than the previous day.
This signals that professional money is coming into the market, causing the
indexes and leading stocks to rise.
While not all follow-through days work, no new uptrend has started with-
out one. Stronger follow-through days will be accompanied by leading
stocks breaking out of areas of price consolidations. That is why it is a good
idea to always keep a watch list of stocks up to date during any correction
and start a position in one of the stocks that is breaking out on the follow-
through day.

How to Tell Whether a New Uptrend Has Begun
The Big Picture column in Investor’s Business Daily (IBD) has a Market
Pulse section that shows one of three stages:
1. Market in confirmed uptrend (it’s a good time to be buying stocks)
2. Uptrend under pressure (time for caution, avoid new buys)
3. Market in correction (market is under selling pressure; consider locking
in some gains on stocks that you own and avoid new buys)