Cautious Buyers

We’re going with a Buyer’s Caution bias after Tuesday’s Follow Through Day (FTD.)

The FTD indication comes at least after four days after a potential market bottom, with one of the major indexes rallying at least 1.7% on volume greater than the day before.

To some, this may seem like an insignificant event in the randomness of week-to-week market activity. But what it means is institutional-grade buyers have stepped up to endorse the long side of the market.

The FTD has been most famously identified by William O’Neil of Investors Business Daily, whose research has connected the event to every major rally in stocks over the past century or so. But it should be noted that not every FTD leads to a market bottom.

Think of the market as a plane and volume its thrust. Over the past several weeks the market’s downfall has occurred on heavy, or institutional, sell-volume. To stay bullish, we want to see the volume bias shift to buyers, with up days occurring on volume greater than the day before for what are known as Accumulation Days.

Thursday’s Accumulation Day on the S&P 500 is a step in the right direction. As the major averages now test ground above their 200-day moving averages we also want to see the sell-volume drop off.

We’re also encouraged by a number of Growth Stocks breaking out and sticking:

Mercadolibre (MELI), a second tier Matrix stock of ours, has clocked new highs for the last two weeks when it broke out of its two-year long technical base.

Lulumon Athletica (LULU), a first tier Matrix selection, broke out of a two-and-a-half-year base.

Akamai Technologies (AKAM), has been on for new highs for three weeks since breaking lose from its year-and-a-half long base. The company doesn’t have strong enough fundamentals to qualify for our Matrix, though has been listed in this report for weeks as an ‘A’ grade stock.

Chipotle Mexican Grill (CMG)also hit a new high this week. As an ‘A’ grade stock it’s held a volatile, upward trend toward its recent all-time high.

Deckers Outdoor (DECK), another ‘A’ stock, has also hit a new all-time high since breaking out of its year-and-a-half long base two weeks ago.

Aruba Networks (ARUN)and Ulta Salon (ULTA) also join the list after being listed here with the others last week.

The success of the above stocks will be telling of other Growth Stocks poised for breakouts. Subscribe to The Growth Stock Report for individual selections.