After spiking up to 11 last Friday the Quantifiable Edges Capitulative Breadth Indicator (CBI) dropped back down to 1 on Thursday’s close. (I noted this on Twitter http://twitter.com/qerob ) I’ve discussed for years how buying selloffs when the CBI reaches 10 or higher and then selling when it returns to 3 or lower is a reasonable approach to taking advantage of the CBI. In Monday’s blog I listed all 26 instances and the results of taking this approach. We now have one more to add to the list. Buying on the spike to 11 on Friday the 18th and exiting the trade at yesterday’s close would have meant about a 2% gain.
So now that the CBI is back to neutral, what might traders want to be on the lookout for? One obvious answer is an IBD Follow Through Day (FTD). There are many, many FTD studies on the blog, and if one arrives I will be sure to note and discuss it.