Go to Jeff Salisbury LWGate Home Page.From: "Tom Worley" <stkguru@netside.net>
Subject: Re: [CANSLIM] breakouts - return to base
Date: Wed, 12 Dec 2001 01:21:49 -0500
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That makes at least two lightbulbs clicking on tonight. Pretty soon we =
will light up the country! Maybe instead of collaborating on a book, we =
should start a newspaper, and respect the words of our members?
Sometimes I impress even myself with my "golden words". The part I like =
best is the sheep / shearing / slaughter part. Glad my individualized =
training so many years ago by O'neil's staffers paid off.
Tom Worley
stkguru@netside.net
AIM: TexWorley
----- Original Message -----=20
From: Katherine Malm=20
To: canslim@lists.xmission.com=20
Sent: Tuesday, December 11, 2001 11:23 PM
Subject: Re: [CANSLIM] breakouts - return to base
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!
=20
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
=20
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
=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,
=20
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).
=20
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.
=20
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!)
=20
Katherine
=20
=20
----- 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 size=3D2>That makes at least two lightbulbs clicking on =
tonight. Pretty=20
soon we will light up the country! Maybe instead of collaborating on a =
book, we=20
should start a newspaper, and respect the words of our =
members?</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>Sometimes I impress even myself with my "golden =
words". The=20
part I like best is the sheep / shearing / slaughter part. Glad my=20
individualized training so many years ago by O'neil's staffers paid=20
off.</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"BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: =
0px; PADDING-LEFT: 5px; PADDING-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 href=3D"mailto:kmalm@earthlink.net" =
title=3Dkmalm@earthlink.net>Katherine=20
Malm</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A=20
href=3D"mailto:canslim@lists.xmission.com"=20
title=3Dcanslim@lists.xmission.com>canslim@lists.xmission.com</A> =
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Tuesday, December 11, =
2001 11:23=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>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=20
sense. Why the heck would I sell something at 20% just because it was =
up 20%?=20
I've been summarily ignoring it unless there were other signs of =
failure=20
kicking in. *Now* 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"BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; =
MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-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 href=3D"mailto:stkguru@netside.net" =
title=3Dstkguru@netside.net>Tom=20
Worley</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A=20
href=3D"mailto:canslim@lists.xmission.com"=20
title=3Dcanslim@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 -=20
return 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=20
the 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=20
accumulated some profits, AND learned how to take profits. Then =
you=20
were starting to learn "when" to take profits OR letting your =
strongest=20
stocks continue to run, as well as hold through corrections, in =
order to=20
eventually still own the ones that moved up several hundred=20
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=20
staff back then taught me that a gain of 20% was reason to carefully =
examine=20
a chart, and be able to articulate why I WAS NOT selling it. In =
other words,=20
it 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=20
intelligent process rather than just being a sheep following the =
herd,=20
waiting for the 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"BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; =
MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-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 href=3D"mailto:cdempsey@houston.oilfield.slb.com"=20
title=3Dcdempsey@houston.oilfield.slb.com>Chris Dempsey</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A=20
href=3D"mailto:canslim@lists.xmission.com"=20
title=3Dcanslim@lists.xmission.com>canslim@lists.xmission.com</A> =
</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 color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D619121018-10122001>Katherine, David, and All others=20
interested</SPAN></FONT></DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D619121018-10122001></SPAN></FONT> </DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D619121018-10122001>I remember reading that WON says 40% of =
breakouts=20
return to the base. I believe it is more than that. I'm not sure =
that it=20
is 75%, but it might be. For that reason WON states in his book =
you must=20
take some profits when they hit 20%. On one of the IBD tapes they =
state to=20
profits in 1/2 of positions reaching 25%. These are because of the =
high=20
rate of pull backs. If you don't do this then you are forced to =
use the=20
rule, don't let a winner turn into a loser. </SPAN></FONT></DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D619121018-10122001></SPAN></FONT> </DIV>
<DIV><FONT color=3D#0000ff face=3DArial 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 align=3Dleft class=3DOutlookMessageHeader dir=3Dltr><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"BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; =
MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-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 href=3D"mailto:kmalm@earthlink.net"=20
title=3Dkmalm@earthlink.net>Katherine Malm</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A=20
href=3D"mailto:canslim@lists.xmission.com"=20
=
title=3Dcanslim@lists.xmission.com>canslim@lists.xmission.com</A> </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=20
important, as it makes an underlying assumption about =
technical=20
patterns which may or may not trigger a buy. I pulled out my=20
"Encyclopedia of Chart Patterns" by Thomas Bulkowski to answer =
this=20
question. In this book, the author does statistical studies on =
chart=20
formation and there is an entire chapter devoted to the =
C&H.=20
(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,=20
a general overview of WON's theory as to why volume should be =
high on=20
the breakout. That is, you are looking for the point at which =
demand=20
so outweighs supply that the price moves up and onward. In my =
own=20
personal experience, low volume breakouts seem to fall back =
more often=20
than not. But these are "odds" not specifics. SONC is a =
good=20
example from recent discussions on the list. Take a look at =
the daily=20
chart from 10/3 to now. You can see that SONC tried very hard =
on=20
several days to break out of its consolidation, but fell back =
and=20
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=20
have the odds in my favor, so I'm always willing to wait until =
there's=20
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=20
breakout, the failure rate falls to 10%. Stocks retrace back =
to the=20
B/O point 75% of the time (average time 12 days). Waiting for =
the=20
throwback increases the success rate another 1%. Typical B/O =
volume is=20
180% above the prior day and stays high for the following =
week.=20
Interestingly, he says removing the high volume B/O criteria =
does hurt=20
performance, but only minimally. This is an excellent chapter =
on=20
C&H and, based on the statistical evidence, the =
author makes=20
other conclusions that lead to particular trading tactics. =
There are=20
several additional criteria that WON would require of a stock =
forming=20
a C&H and then breaking out, such as rising RS, high group =
RS,=20
underlying fundamental characteristics, etc. that are not =
included in=20
the author's study. My own conclusions, anecdotally, are that =
if these=20
other criteria are met AND you get a high volume B/O, the odds =
are in=20
your favor. (No statistical studies to back that up,=20
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"BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; =
MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-RIGHT: 0px">
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A href=3D"mailto:camelot.homes@charter.net"=20
=
title=3Dcamelot.homes@charter.net>camelot.homes@charter.net</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A=20
href=3D"mailto:canslim@xmission.com"=20
title=3Dcanslim@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=20
breakout past the pivot point?=20
=
david</FONT></DIV></BLOCKQUOTE></BLOCKQUOTE></BLOCKQUOTE></BLOCKQUOTE></B=
LOCKQUOTE></BLOCKQUOTE></BODY></HTML>
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