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Subject: Re: [CANSLIM] breakouts - return to base
Date: Mon, 10 Dec 2001 18:24:42 -0600
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katherine and chris, sorry i have been away. i always wonder if the most =
likely breakout will rise 5 to 20%-is it better to take those small =
profits on alot of stocks, then wait longer for possible bigger profits? =
david
----- Original Message -----=20
From: Katherine Malm=20
To: canslim@lists.xmission.com=20
Sent: Monday, December 10, 2001 12:40 PM
Subject: Re: [CANSLIM] breakouts - return to base
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.=20
(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 -----=20
From: Chris Dempsey=20
To: canslim@lists.xmission.com=20
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.=20
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 -----=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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<DIV><FONT face=3DArial size=3D2>katherine and chris, sorry i have been =
away. i=20
always wonder if the most likely breakout will rise 5 to 20%-is =
it better=20
to take those small profits on alot of stocks, then wait longer for =
possible=20
bigger profits? 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 =
12:40=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] =
breakouts - return=20
to base</DIV>
<DIV><BR></DIV>
<DIV><FONT face=3DArial size=3D2>Chris,</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Just a clarification. The 75% return =
rate is a=20
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=20
beyond throwback and falls into "normal price action" =
territory.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>With regard to the WON 20% rule and =
profit=20
taking. Bulkowski gives some statistics that I think throw some light. =
He says=20
that 47% of stocks reach a high after breakout in less than 3 months. =
35% take=20
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=20
larger the average gain.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>So think about what that means in =
terms of WON=20
sell guidelines. </FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>(1) If the stock rises 20% in less =
than 8 weeks,=20
suggests you hold on through the first correction</FONT></DIV>
<DIV><FONT face=3DArial size=3D2>(2) Once it reaches 25% (and I'm =
assuming he then=20
means, if it takes longer than 8 weeks to do that), THEN =
suggests taking=20
some profits.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>But I also look for =
accumulation/distribution=20
during these rises to assess whether the uptrend is persistent enough =
to carry=20
the stock further than the 25%.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>In that context, makes a lot more=20
sense!</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Katherine</FONT></DIV>
<DIV> </DIV>
<DIV> </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=3Dcdempsey@houston.oilfield.slb.com=20
href=3D"mailto:cdempsey@houston.oilfield.slb.com">Chris Dempsey</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>=
=20
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Monday, December 10, =
2001 12:22=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> RE: [CANSLIM] =
breakouts -=20
return to base</DIV>
<DIV><BR></DIV>
<DIV><FONT face=3DArial color=3D#0000ff size=3D2><SPAN=20
class=3D619121018-10122001>Katherine, David, and All others=20
interested</SPAN></FONT></DIV>
<DIV><FONT face=3DArial color=3D#0000ff size=3D2><SPAN=20
class=3D619121018-10122001></SPAN></FONT> </DIV>
<DIV><FONT face=3DArial color=3D#0000ff size=3D2><SPAN =
class=3D619121018-10122001>I=20
remember reading that WON says 40% of breakouts return to the base. =
I=20
believe it is more than that. I'm not sure that it is 75%, but it =
might be.=20
For that reason WON states in his book you must take some profits =
when they=20
hit 20%. On one of the IBD tapes they state to profits in 1/2 of =
positions=20
reaching 25%. These are because of the high rate of pull backs. If =
you don't=20
do this then you are forced to use the rule, don't let a winner turn =
into a=20
loser. </SPAN></FONT></DIV>
<DIV><FONT face=3DArial color=3D#0000ff size=3D2><SPAN=20
class=3D619121018-10122001></SPAN></FONT> </DIV>
<DIV><FONT face=3DArial color=3D#0000ff size=3D2><SPAN=20
class=3D619121018-10122001>SCUR appears to be an example of a stock=20
returning/nearly returning to the base.</SPAN></FONT></DIV>
<BLOCKQUOTE dir=3Dltr style=3D"MARGIN-RIGHT: 0px">
<DIV class=3DOutlookMessageHeader dir=3Dltr align=3Dleft><FONT =
face=3DTahoma=20
size=3D2>-----Original Message-----<BR><B>From:</B>=20
owner-canslim@lists.xmission.com=20
[mailto:owner-canslim@lists.xmission.com]<B>On Behalf Of=20
</B>camelot.homes@charter.net<BR><B>Sent:</B> Monday, December 10, =
2001=20
9:49 AM<BR><B>To:</B> =
canslim@lists.xmission.com<BR><B>Subject:</B> Re:=20
[CANSLIM] low volume breakouts<BR><BR></FONT></DIV>
<DIV><FONT face=3DArial size=3D2>hi katherine , thank you so much =
for this=20
very good information! when bulkowski states that stocks retrace =
back to=20
the b/o piont 75% of the time is he talking about high or low =
volume=20
breakouts? and where is the best place to get a copy of his book?=20
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=20
title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
=20
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Monday, December =
10, 2001=20
5:10 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.=20
Demanding controlled study proof of a guideline like this is =
important,=20
as it makes an underlying assumption about technical patterns =
which may=20
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=20
author does statistical studies on chart formation and there is =
an=20
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=20
outweighs supply that the price moves up and onward. In my own =
personal=20
experience, low volume breakouts seem to fall back more often =
than not.=20
But these are "odds" not specifics. SONC is a good example =
from=20
recent discussions on the list. Take a look at the daily chart =
from 10/3=20
to now. You can see that SONC tried very hard on several days to =
break=20
out of its consolidation, but fell back and eventually gapped =
down. The=20
low volume B/O's don't always mean the stock will fail, just =
that it's=20
not yet ready to move on. I like to have the odds in my favor, =
so I'm=20
always willing to wait until there's proof of the =
pudding.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Back to Bulkowski. In the =
C&H=20
formation, the failure rate is 26%. If you wait for an upside =
breakout,=20
the failure rate falls to 10%. Stocks retrace back to the B/O =
point 75%=20
of the time (average time 12 days). Waiting for the throwback =
increases=20
the success rate another 1%. Typical B/O volume is 180% above =
the prior=20
day and stays high for the following week. Interestingly, he =
says=20
removing the high volume B/O criteria does hurt performance, but =
only=20
minimally. This is an excellent chapter on C&H and, based on =
the=20
statistical evidence, the author makes other conclusions =
that lead=20
to particular trading tactics. There are several additional =
criteria=20
that WON would require of a stock forming a C&H and then =
breaking=20
out, such as rising RS, high group RS, underlying fundamental=20
characteristics, etc. that are not included in the author's =
study. My=20
own conclusions, anecdotally, are that if these other criteria =
are met=20
AND you get a high volume B/O, the odds are in your favor. (No=20
statistical studies to back 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>=20
</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=20
5:44 PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> [CANSLIM] low =
volume=20
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=20
past the pivot point?=20
=
david</FONT></DIV></BLOCKQUOTE></BLOCKQUOTE></BLOCKQUOTE></BLOCKQUOTE></B=
LOCKQUOTE></BODY></HTML>
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Next Article (by Author): Re: [CANSLIM] breakouts - return to base "Katherine Malm"
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