The broader averages had a strong rally Thursday out of a nice pullback. The volume and market internals verified the rally. Up volume-down volume is about 4 to 1.  That is exactly what I look for coming out of a pullback. Plus, the semiconductor sector had one of the better days in quiet awhile. All these are putting the odds in our favor for the market to continue higher.

Abercrombie and Fitch (ANF) had a nice rally beginning late October and running to last week. Notice it started its pullback and the volume was less than average, which gives me confidence that it was nothing more than a pullback.

Abercrombie and Fitch - Daily

Also today's action saw it sell off right out of the gate, but it steadily crawled back to positive ground by day's end. Again this tells me that there are people out there willing to buy. So if Friday takes out the highs from Thursday, I feel the next leg up should continue.

Abercrombie and Fitch - Intraday

Today's action is exactly what momentum traders dream about a strong rally: a relief pullback on less volume and a continuation rally accompanied by market internals. Even though the odds look favorable, I strongly suggest that you use stops to protect your profits and principal.

Tom Incorvia is a swing trader with 18 years of experience in the financial markets.  E-mail him at tincorvia@gmail.com.