Eric Krull: What Makes A Follow-Through Day Successful? | Investing With IBD

TL;DR

Follow-through days are a key concept in investing, but their success rates may be lower than commonly thought. The current market rally appears to be a slog, with limited gains and no additional follow-through days. IPOs, such as Airbnb and Dutch Bros, are in the institutional due diligence phase and require more time to show positive growth and strong chart patterns.

Transcript

welcome everyone to the investing with ibd podcast sponsored by north coast it's justin nielsen here and we also have arusha pierce from o'neill global advisors a portfolio manager there as always it's april 20th 2022 and our special guest this week is eric crawl he's also the manager and founder of crawl asset management he was a meet-up leader fr... Read More

Key Insights

• 🥳 Follow-through days may not have as high a success rate as commonly believed, requiring further analysis of factors such as length of the rally and percentage gain.
• 🥳 The current market rally is showing characteristics of a slog, with limited gains and no subsequent follow-through days indicating caution.
• ⌛ IPOs like Airbnb and Dutch Bros are in the institutional due diligence phase, requiring time to demonstrate positive growth before potential buying opportunities arise.
• 💪 Retail establishments with strong potential for nationwide expansion, such as Dutch Bros, have historically provided significant gains for investors.

Questions & Answers

Q: How can investors determine the success of a follow-through day?

Success can be determined by analyzing factors such as the length of the rally, percentage gain, and volume. Generally, a rally should last at least 15 trading days and have a gain of at least 3% to be considered successful.

Q: What are some indicators that suggest a rally may fail?

Professional distribution, where the index drops more than 0.2% on higher volume, is a concerning sign post-follow-through day. Additionally, if the index closes below the low of the follow-through day within the first 15 days, it indicates an increased likelihood of failure.

Q: Why is the current market rally considered a slog?

The market has not seen any subsequent follow-through days since the initial follow-through day, suggesting a lack of strong conviction. Additionally, the index has only gained around 2.2% since the follow-through day, which is below the expected range for successful rallies.

Q: What potential opportunities are presented by IPOs like Airbnb and Dutch Bros?

Both companies are in the institutional due diligence phase, where fundamental factors such as earnings and revenue growth are evaluated. Observing the stock's behavior, waiting for a proper base formation, and a breakout in heavy volume are key steps to consider.

Summary & Key Takeaways

• Follow-through days are a crucial component of the CAN SLIM method, indicating the start of a potential rally. However, their success rates may be lower than commonly believed.

• The current market rally is showing characteristics of a slog, with limited gains and no subsequent follow-through days. This suggests caution and a need for further analysis.

• IPOs, such as Airbnb and Dutch Bros, are in the institutional due diligence phase, where their earnings growth and chart patterns are evaluated before potential buying opportunities arise.