Lessons learnt in market crash – Part 2

Hello travel traders

Good morning from Hyderabad India. Nov 6th is a big day for the USA. it is sunny at about 10:00 am here.

Part 1 can be found here

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FFTY is the growth stocks ETF. It is passively managed fund and tracks the IBD 50 – The best growth stocks in the market. the holdings are updated weekly

you see, Growth stocks break down about 2 – 2 1/2 times that of market. as the market is falling they hold up well for 3-4 days and are resilient. But they start collapsing the faster as the bear market sets in. Why? because market drops 4 times faster then it goes up – because markets climb the wall of worry and fall of the cliff.

Look at the bearish engulfing candle stick pattern at the  tops Рa solid red candle after a small green one.

Along with $S5FI this is a reliable portent.

For market  bottoms Growth stocks are first to break out after a follow through day.

Follow-through signals are more likely to fail if distribution days occur in the first few days of a new uptrend. This is one key red flag. A distribution day, which points to institutional selling, involves a drop of 0.2% or more in the Nasdaq or the S&P 500 in higher volume.

Generally, a distribution day within a few days of a follow-through leads to a failed rally. The risk drops off sharply after the fifth day.

A second red flag? In the early stages of a new uptrend, strong action among leading stocks is crucial. Top-rated stocks should be breaking out of bases in big volume. This is a clear sign that professional investors are stepping back in to buy stocks.

have a wonderful day and please vote!