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When there is a market correction, it’s important to wait for a confirmation that an uptrend is underway before scaling back in. A follow-through day is the signal we are looking for.

Below is a short tutorial on how to determine when a follow-through day (FTD) has occurred. This includes the required rally days prior to an FTD as well as early signs a failure may occur. You’ll also find several annotated charts showing an index low, how to track the prerequisite rally and pinpointing where an FTD begins.

If you’d rather not get wrapped up with the specifics, you can follow me on Twitter where I’ll post as soon as we have a FTD.

Many thanks to Mike Webster for clarifications and updates.

On a recent IBD Investing podcast, Irusha Peiris and David Ryan walked through a number of clues that may indicate we are heading into a correction. The chart of QQQ was used as many of recent leaders can be found in the Nasdaq 100.

I annotated a chart of the key points and added some additional notes as it relates to the moving averages and RS Line.

It’s important to note, these same principles apply regardless of the index, so I’d recommend keeping this information handy for future reference.