The reason I say this is because by the time the breadth and other indicators mentioned above confirm a change in the intermediate term trend of the market indexes the stocks that are going to appreciate the most percentage wise would have already broken into new high ground and look very extended. So your chance to initiate a low risk buy and get position would be long gone!
The most important indicators of a turn in the markets are 1) the number of "leading" stocks setting up in bases and close to touching buy points and 2) the number of stocks breaking into new highs and working during the first few days of a rally attempt. So in my view, one should take positions in the stocks attempting to break out during a rally attempt granted that several stocks are setting up and breaking out on volume. Then look for the markets to confirm a new uptrend after already being long stocks. With prudent risk management if the rally attempt fails then your drawdown should me minimal.
The reason for this is that it is very rare in my experience for the markets to be starting a new powerful rally without a number of leading stocks breaking out simultaneously. If you look back at the stocks that lead the rallies from the start of 2009 to present you will see that they all with the exception a few broke out a couple days before on the follow through day. So that after the follow through day and hence confirmation of a new up trend these stocks would have in most instances already been 5%- 10% above the optimal buy points.
If you are not willing to take this approach that I have suggested. Then my recommendation is that you still buy these "extended" stocks but use wider stops with smaller position size. Instead of trading stocks that break out after follow through as these stocks do not most of the time appreaciate in price and where close to that which the true leaders do.
Take for example, APKT, this was one of the leading stocks from the previous up trend that begun in late February - early March 2010. The green arrow on the chart of the NASDAQ marks the follow through day and the green on the chart of APKT marks the optimal buy point.
We can see that APKT was already 24% extended from its optimal buy point which came ten days before the NASDAQ confirmed the start of a new up trend! At this point, most CANSLIM traders would dismiss APKT as being a risky buy since it was "too extended from a proper base". However, even buying APKT after it was already 24% extended from a base would have outperformed most stocks that did not break out at that point in time.
So it is much better take positions and let your unrealized profits/losses tell you if the markets are truly on the verge of starting a new uptrend or if the rally attempt is just a dud. That is what happened to me last week. I got long of APKT as it and a few other leaders like VMW, ORLY, and SNDK were alse breaking out. After already positioning my self long the number one leading stock at what I thought was likely a turning a point in the markets and I was then looking for follow through. Instead I saw heavy distribution in the indexes and lost money. Therefore I stood aside and continue to do so now.
As I see almost zero leading stocks setting up in beautiful bases with lots of high volume up side on the right sides of the base on verge of breaking out. In addition, the markets are selling down very easily on very wide range days with leading stocks slicing through pivot points and in some instances 50 day MA's on heavy volume. Hence my belief that is very likely that we will see further down side in the markets. None the less a there will be a point when institutions will start accumulating stocks again and the process will begin. So always keep your eyes on the leaders for a signal that the tide may be changing.
Good luck and good trading!