Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] breakouts - return to base
Date: Tue, 11 Dec 2001 22:23:46 -0600
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Oh my, Tom. That was the best explanation of that guideline I've ever =
heard. That bold print in HTMMIS never made a bit of sense. Why the heck =
would I sell something at 20% just because it was up 20%? I've been =
summarily ignoring it unless there were other signs of failure kicking =
in. *Now* I get it!
Katherine
----- Original Message -----=20
From: Tom Worley=20
To: canslim@lists.xmission.com=20
Sent: Tuesday, December 11, 2001 11:29 PM
Subject: Re: [CANSLIM] breakouts - return to base
Hi Chris,
In the article that I frustratingly still cannot find, but written =
from an interview with Bill O'Neil around circa 1991 or 1992 for the =
Registered Rep magazine (a trade journal for stock brokers), he =
explained the 20% rule not as an absolute, but rather as a guideline for =
newcomers to CANSLIM to teach them "how" to take profits (more than =
"when" to take them). In the same article, he spoke of letting your =
winners run once you had accumulated some profits, AND learned how to =
take profits. Then you were starting to learn "when" to take profits OR =
letting your strongest stocks continue to run, as well as hold through =
corrections, in order to eventually still own the ones that moved up =
several hundred percent.
While times certainly have changed since then, and I am commenting =
from 10 year old memory, this article and the training by his staff back =
then taught me that a gain of 20% was reason to carefully examine a =
chart, and be able to articulate why I WAS NOT selling it. In other =
words, it was a reason to sell in the absence of more reasons to hold =
it, much like Katherine's rubberband rule. It forced a conscious =
examination of both the chart, the fundamentals and forecasts, and "M", =
and then a conscious, pro-active decision making process (rather than =
the complacency of "I am up 20% so I sell" or the "I am up 20% and this =
stock will keep rising forever").
For me, that is one of the strengths of CANSLIM. By having some =
"rules" and guidelines, it forces a discipline and conscious intelligent =
process rather than just being a sheep following the herd, waiting for =
the shearing, if not the slaughter.
Tom Worley
stkguru@netside.net
AIM: TexWorley
----- Original Message -----=20
From: Chris Dempsey=20
To: canslim@lists.xmission.com=20
Sent: Monday, December 10, 2001 1:22 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>Oh my, Tom. That was the best =
explanation of that=20
guideline I've ever heard. That bold print in HTMMIS never made a bit of =
sense.=20
Why the heck would I sell something at 20% just because it was up 20%? =
I've been=20
summarily ignoring it unless there were other signs of failure kicking =
in. *Now*=20
I get it!</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Katherine</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=3Dstkguru@netside.net href=3D"mailto:stkguru@netside.net">Tom =
Worley</A>=20
</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> Tuesday, December 11, =
2001 11:29=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 size=3D2>Hi Chris,</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>In the article that I frustratingly still cannot =
find, but=20
written from an interview with Bill O'Neil around circa 1991 or 1992 =
for the=20
Registered Rep magazine (a trade journal for stock brokers), he =
explained the=20
20% rule not as an absolute, but rather as a guideline for newcomers =
to=20
CANSLIM to teach them "how" to take profits (more than "when" to take =
them).=20
In the same article, he spoke of letting your winners run once you had =
accumulated some profits, AND learned how to take profits. Then =
you were=20
starting to learn "when" to take profits OR letting your strongest =
stocks=20
continue to run, as well as hold through corrections, in order to =
eventually=20
still own the ones that moved up several hundred percent.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>While times certainly have changed since then, and =
I am=20
commenting from 10 year old memory, this article and the training by =
his staff=20
back then taught me that a gain of 20% was reason to carefully examine =
a=20
chart, and be able to articulate why I WAS NOT selling it. In other =
words, it=20
was a reason to sell in the absence of more reasons to hold it, much =
like=20
Katherine's rubberband rule. It forced a conscious examination of both =
the=20
chart, the fundamentals and forecasts, and "M", and then a conscious,=20
pro-active decision making process (rather than the complacency of "I =
am up=20
20% so I sell" or the "I am up 20% and this stock will keep rising=20
forever").</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>For me, that is one of the strengths of CANSLIM. =
By having=20
some "rules" and guidelines, it forces a discipline and conscious =
intelligent=20
process rather than just being a sheep following the herd, waiting for =
the=20
shearing, if not the slaughter.</FONT></DIV>
<DIV> </DIV>
<DIV>Tom Worley<BR><A=20
href=3D"mailto:stkguru@netside.net">stkguru@netside.net</A><BR>AIM:=20
TexWorley<BR></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=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 1:22=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 Spencer48@aol.com
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