Re: [CANSLIM] On RS

From: Zoran Mitrovski <zmitrov@ee.rochester.edu>
Subject: Re: [CANSLIM] On RS
Date: Sun, 22 Jun 1997 09:12:24 -0400 (EDT)

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Tom wrote:

> Zoran, it isn't often I need to "jump in" and correct you, but this
> is one. Your brochure provides a simplistic view of how RS is
> calculated, thus distorting your example. First, it is not a
> straight line comparison by percentage change. More weight is
> applied (40%) to the most recent qtr, with lesser weight (20% each)
> the other three qtrs. Secondly, my understanding is that the
> calculations and comparisions are done on a smoothed (weighed)
> daily basis, thus avoiding the sharp changes a brief price spike
> (or drop) your example would suggest. Third, it is my understanding
> that this is still a simplistic description of the actual formula
> used (which is proprietary).

Thanks much, Tom. I suspected this much and it makes perfect sense.
I guess O'Neil/IBD cherish their RS formula so much that they want 
to ensure noone out there gets any food for thought by reading the 
descriptions they give out. They are even reluctant to state/repeat 
that the RS calculation involves something proprietary. That's where 
the over-simplification in interpretation comes from. But little did 
they know that I had my food for thought all night last night.

My gray matter employed itself to solve for the "price/RS blip" problem 
stated in the example (and more), and a wonderful self-inflicted 
brainstorm occured that forced me out of bed couple of times in 
the middle of the night to write things down on a piece of paper. 

Cheers,
Zoran
http://www.seas.rochester.edu:8080/ee/users/zmitrov/home.html

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