Re: [CANSLIM] breakouts - return to base

From: Kent Norman <kent_norman@yahoo.com>
Subject: Re: [CANSLIM] breakouts - return to base
Date: Mon, 10 Dec 2001 11:46:37 -0800 (PST)
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Thanks Katherine 
You are putting some flesh on the bones. Makes it more
meaningful.

Kent Norman

- --- Katherine Malm <kmalm@earthlink.net> wrote:
> Chris,
> 
> Just a clarification. The 75% return rate is a
> pullback within the first 12 days (this is the
> average for the study). Bulkowski states  that none
> take longer than 30 days. After that, it goes beyond
> throwback and falls into "normal price action"
> territory.
> 
> With regard to the WON 20% rule and profit taking.
> Bulkowski gives some statistics that I think throw
> some light. He says that 47% of stocks reach a high
> after breakout in less than 3 months. 35% take
> longer than 6 months. Most likely rise? 10-20%.
> Average rise? 38%. His frequency distribution shows
> that the longer it takes to reach the peak, the
> larger the average gain.
> 
> So think about what that means in terms of WON sell
> guidelines. 
> 
> (1) If the stock rises 20% in less than 8 weeks,
> suggests you hold on through the first correction
> (2) Once it reaches 25% (and I'm assuming he then
> means, if it takes longer than 8 weeks to do that),
> THEN suggests taking some profits.
> 
> But I also look for accumulation/distribution during
> these rises to assess whether the uptrend is
> persistent enough to carry the stock further than
> the 25%.
> 
> In that context, makes a lot more sense!
> 
> Katherine
> 
> 
> ----- Original Message ----- 
>   From: Chris Dempsey 
>   To: canslim@lists.xmission.com 
>   Sent: Monday, December 10, 2001 12:22 PM
>   Subject: RE: [CANSLIM] breakouts - return to base
> 
> 
>   Katherine, David, and All others interested
> 
>   I remember reading that WON says 40% of breakouts
> return to the base. I believe it is more than that.
> I'm not sure that it is 75%, but it might be. For
> that reason WON states in his book you must take
> some profits when they hit 20%. On one of the IBD
> tapes they state to profits in 1/2 of positions
> reaching 25%. These are because of the high rate of
> pull backs. If you don't do this then you are forced
> to use the rule, don't let a winner turn into a
> loser. 
> 
>   SCUR appears to be an example of a stock
> returning/nearly returning to the base.
>     -----Original Message-----
>     From: owner-canslim@lists.xmission.com
> [mailto:owner-canslim@lists.xmission.com]On Behalf
> Of camelot.homes@charter.net
>     Sent: Monday, December 10, 2001 9:49 AM
>     To: canslim@lists.xmission.com
>     Subject: Re: [CANSLIM] low volume breakouts
> 
> 
>     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 ----- 
>       From: Katherine Malm 
>       To: canslim@lists.xmission.com 
>       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 ----- 
>         From: camelot.homes@charter.net 
>         To: canslim@xmission.com 
>         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
> 


=====
Opportunities always look bigger going than coming.

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