Darvas Stocks Surging Higher

by Darrin Donnelly on March 30, 2011

Click on chart to enlarge.

Click on chart to enlarge.

While still technically trading within the “neutral zone” range of 2800 and 2725, the NASDAQ is showing clear signs of strength as it has recorded three Accumulation Days (moving up in price on increased volume) over the past six sessions. 

Also adding to the optimism is the fact that several Darvas stocks are acting very strong; either extending gains or breaking out of sound bases on increased volume. 

When in doubt about the health of the market, always trust the behavior of your leading stocks over the action of the indexes.

Still, there is reason to remain cautious. 

We’re now 10 days into a rally attempt and only one of those sessions has come on above-average volume (and that session was actually a Distribution Day on March 18th as the NASDAQ reversed sharply off its highs in heavy volume). 

This type of lower-volume action doesn’t mean that we can’t enter a new uptrend, but it certainly isn’t typical behavior for the start of a strong uptrend.  You normally want to see an uptrend confirmed with one or more days of big gains on above-average volume.  Lower-than-normal volume tells us there’s still some hesitation among institutional investors.

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{ 3 comments… read them below or add one }

Dan March 30, 2011 at 7:36 pm

Nope….read IBD again. The first day of an attempted rally begins on the 1st up closing day or alternatively, a red bar day which reverses and closes near the high of the day. May 23 is technically correct as the 1st day of the attempted rally. Why not May 22?. Because May 23 undercut the low of May22. So we are officially only at day 6 of the attempted rally.

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Dan March 30, 2011 at 7:40 pm

Typo …that is May 23 undercut the low of the original rally attempt day 1 of May 21(not May22).

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Darrin Donnelly March 31, 2011 at 11:14 am

Hi Dan,

Thank you for your comments.

First off, I assume you’re talking about March and not May.

Secondly, I’m not real clear on how you’re defining the start of a rally attempt, but here we define the start of a rally attempt with the first up day after a new low is put it in for the correction. (Or, a down day that finishes well off its lows after a correction’s low has been established.) The low of this correction came at 2603 on March 16th. March 17th was the first day of the rally attempt.

It’s important to not confuse the start of a rally with a “follow through day”, which usually occurs a few days after a rally attempt has begun.

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