Posted on September 22, 2008 - by andrew

Market Recap - September 19th, 2008

The markets followed up Thursday’s monster day with another session of big gains on strong volume:

• NYSE: +5.3%
• S&P 500: +4%
• Dow: +3.3%
• NASDAQ: +3.0%

Friday’s action was very encouraging. However, volume was mixed with the NYSE ending higher and the NASDAQ lower. Overall, volume was still very strong and way above average.

Seeing such strong action only adds to my confidence in the latest rally attempt that began on Thursday. If all goes well, we can start looking for a confirmation day on Tuesday, which would be Day 4 of the rally attempt.

Beware of red flags in some stocks…

After reviewing the action of a few stocks on my watch list, I noticed that a few of them reversed downwards on big volume:

• Concur Technologies (CNQR)
• Aeropostale Inc. (ARO)

This is definitely not something I like to see when buying stocks. Don’t fall in love with stocks on your watch list. If a stock you were once hot on starts flashing red flags, then stay away. I’ve learnt that they aren’t worth the risk.

If this rally is the real deal, you’re gonna see plenty of good stocks breaking out when the market takes off. It doesn’t make sense to take on unnecessary risk now. There will be plenty of fish in the sea!

Conclusion

Keep your watch list up-to-date and wait for the follow through day. Once that happens, only buy stocks from your list that break out on strong volume (i.e. at least 50% above average daily volume).