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Subject: Re: [CANSLIM] low volume breakouts
Date: Mon, 10 Dec 2001 09:48:51 -0600
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hi katherine , thank you so much for this very good information! when =
bulkowski states that stocks retrace back to the b/o piont 75% of the =
time is he talking about high or low volume breakouts? and where is the =
best place to get a copy of his book? david
----- Original Message -----=20
From: Katherine Malm=20
To: canslim@lists.xmission.com=20
Sent: Monday, December 10, 2001 5:10 AM
Subject: Re: [CANSLIM] low volume breakouts
Hi David,
The question you ask is a good one. Demanding controlled study proof =
of a guideline like this is important, as it makes an underlying =
assumption about technical patterns which may or may not trigger a buy. =
I pulled out my "Encyclopedia of Chart Patterns" by Thomas Bulkowski to =
answer this question. In this book, the author does statistical studies =
on chart formation and there is an entire chapter devoted to the C&H. =
(pp.135-152).
Before I state the author's conclusions, a general overview of WON's =
theory as to why volume should be high on the breakout. That is, you are =
looking for the point at which demand so outweighs supply that the price =
moves up and onward. In my own personal experience, low volume breakouts =
seem to fall back more often than not. But these are "odds" not =
specifics. SONC is a good example from recent discussions on the list. =
Take a look at the daily chart from 10/3 to now. You can see that SONC =
tried very hard on several days to break out of its consolidation, but =
fell back and eventually gapped down. The low volume B/O's don't always =
mean the stock will fail, just that it's not yet ready to move on. I =
like to have the odds in my favor, so I'm always willing to wait until =
there's proof of the pudding.
Back to Bulkowski. In the C&H formation, the failure rate is 26%. If =
you wait for an upside breakout, the failure rate falls to 10%. Stocks =
retrace back to the B/O point 75% of the time (average time 12 days). =
Waiting for the throwback increases the success rate another 1%. Typical =
B/O volume is 180% above the prior day and stays high for the following =
week. Interestingly, he says removing the high volume B/O criteria does =
hurt performance, but only minimally. This is an excellent chapter on =
C&H and, based on the statistical evidence, the author makes other =
conclusions that lead to particular trading tactics. There are several =
additional criteria that WON would require of a stock forming a C&H and =
then breaking out, such as rising RS, high group RS, underlying =
fundamental characteristics, etc. that are not included in the author's =
study. My own conclusions, anecdotally, are that if these other criteria =
are met AND you get a high volume B/O, the odds are in your favor. (No =
statistical studies to back that up, however!)
Katherine
----- Original Message -----=20
From: camelot.homes@charter.net=20
To: canslim@xmission.com=20
Sent: Sunday, December 09, 2001 5:44 PM
Subject: [CANSLIM] low volume breakouts
how often does a low volume breakout succeed past the pivot point =
versus a high volume breakout past the pivot point? david
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<BODY bgColor=3D#ffffff>
<DIV><FONT face=3DArial size=3D2>hi katherine , thank you so much for =
this very good=20
information! when bulkowski states that stocks retrace back to the b/o =
piont 75%=20
of the time is he talking about high or low volume breakouts? and where =
is the=20
best place to get a copy of his book? david</FONT></DIV>
<BLOCKQUOTE dir=3Dltr=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A title=3Dkmalm@earthlink.net =
href=3D"mailto:kmalm@earthlink.net">Katherine=20
Malm</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Monday, December 10, 2001 =
5:10=20
AM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] low =
volume=20
breakouts</DIV>
<DIV><BR></DIV>
<DIV><FONT face=3DArial size=3D2>Hi David,</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>The question you ask is a good one. =
Demanding=20
controlled study proof of a guideline like this is important, as it =
makes an=20
underlying assumption about technical patterns which may or may not =
trigger a=20
buy. I pulled out my "Encyclopedia of Chart Patterns" by Thomas =
Bulkowski to=20
answer this question. In this book, the author does statistical =
studies on=20
chart formation and there is an entire chapter devoted to the C&H. =
(pp.135-152).</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Before I state the author's =
conclusions, a=20
general overview of WON's theory as to why volume should be high on =
the=20
breakout. That is, you are looking for the point at which demand so =
outweighs=20
supply that the price moves up and onward. In my own personal =
experience, low=20
volume breakouts seem to fall back more often than not. But these are =
"odds"=20
not specifics. SONC is a good example from recent discussions on =
the=20
list. Take a look at the daily chart from 10/3 to now. You can see =
that SONC=20
tried very hard on several days to break out of its consolidation, but =
fell=20
back and eventually gapped down. The low volume B/O's don't always =
mean the=20
stock will fail, just that it's not yet ready to move on. I like to =
have the=20
odds in my favor, so I'm always willing to wait until there's proof of =
the=20
pudding.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Back to Bulkowski. In the C&H =
formation, the=20
failure rate is 26%. If you wait for an upside breakout, the failure =
rate=20
falls to 10%. Stocks retrace back to the B/O point 75% of the time =
(average=20
time 12 days). Waiting for the throwback increases the success rate =
another=20
1%. Typical B/O volume is 180% above the prior day and stays high for =
the=20
following week. Interestingly, he says removing the high volume B/O =
criteria=20
does hurt performance, but only minimally. This is an excellent =
chapter on=20
C&H and, based on the statistical evidence, the author makes =
other=20
conclusions that lead to particular trading tactics. There are several =
additional criteria that WON would require of a stock forming a =
C&H and=20
then breaking out, such as rising RS, high group RS, underlying =
fundamental=20
characteristics, etc. that are not included in the author's study. My =
own=20
conclusions, anecdotally, are that if these other criteria are met AND =
you get=20
a high volume B/O, the odds are in your favor. (No statistical studies =
to back=20
that up, however!)</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Katherine</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV>----- Original Message ----- </DIV>
<BLOCKQUOTE dir=3Dltr=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A title=3Dcamelot.homes@charter.net=20
=
href=3D"mailto:camelot.homes@charter.net">camelot.homes@charter.net</A> =
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3Dcanslim@xmission.com=20
href=3D"mailto:canslim@xmission.com">canslim@xmission.com</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Sunday, December 09, =
2001 5:44=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> [CANSLIM] low volume =
breakouts</DIV>
<DIV><BR></DIV>
<DIV><FONT face=3DArial size=3D2>how often does a low volume =
breakout=20
succeed past the pivot point versus a high volume =
breakout past=20
the pivot point? =
david</FONT></DIV></BLOCKQUOTE></BLOCKQUOTE></BODY></HTML>
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Next Article (by Date): Re: [CANSLIM] low volume breakouts Spencer48@aol.com
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