A distribution day 1 day after a confirmed rally spells trouble. Pages 10 and 11 of O'Neil's "How to Sell Stocks Short" talks about this, and in fact, discusses how this could be a possible shorting point. IBD's on studies confirm this as well.
Follow Through failure rate studies (presented at CANSLIM Masters Semimar). Distribution Day occurrences:
- 1-3 days after FT on sames index- High failure rate
- 4-5 days after FT on sames index- 50% failurerate
- > 5 days after FT on sames index- decreases with more days
Gary Kautbaum's radio show, "Investor's Edge" mentioned that a 1 day dist day could be as high as 90%.
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