Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] stacking the odds in my favor-buying before the pivot point
Date: Wed, 12 Dec 2001 10:02:41 -0600
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David,
I might be misunderstanding your "32.50" pivot as an intended =
hypothetical here. But let me answer based on the PECS chart itself:
(1) The cup starts on 7/23 at at high of $27.45. The correction took it =
as low as $12.50. That's about 54.5%, a little deep, but we'll write =
that off to 9/11. It traveled up the right side of the cup and the high =
of the handle was set on 11/1 at $26.82. There's one troubling high =
volume day in the handle, but let me set that aside for the moment. That =
means that the pivot is set and the buy point is at $26.92. The proper =
B/O is then 11/14 when it gapped open. That day the volume was 1.8m =
shares, about 3.5 times average. What that means is that you're already =
too late at 32 to 32.5. By then, the stock's already moved almost 19% =
from the B/O. An entry here would be an extended entry into the stock. =
An entry here would also have you sitting today on a round trip ride.
(2) So let's focus on the other question, which is "should I buy early?" =
This is probably a great example. Let's say you're watching the cup form =
and you decide to enter as it reaches near the old high on the left. =
Let's say it hasn't yet formed a perfect handle. Let's say on about 11/5 =
or so, only a few days in. Let's enter at the close of the day at 25.99. =
Look what happens the next day. Big down day on big volume. Low of the =
day? 21.69. Down 16.5% from your entry. Close of the day? 22.85. Down =
12% from your entry. It would be easy to rationalize that by saying "But =
the next day it reversed and later the stock went on to breakout, so you =
would have made money." But how can you know that is going to happen on =
11/6? You don't, and stop loss rules, if you had risked the early entry, =
would have at least kept you out with a 7 or 8% loss. Nearly 1/2 the =
loss of the low of the day.
Hope that answered the question you had in mind.
Katherine
----- Original Message -----=20
From: camelot.homes@charter.net=20
To: canslim@lists.xmission.com=20
Sent: Wednesday, December 12, 2001 11:48 AM
Subject: Re: [CANSLIM] stacking the odds in my favor-buying before the =
pivot point
katherine, thank you for your answer. i didn't really ask the question =
right. i am actually talking about a fast market in a stock like PECS in =
the past. The stock has formed a nice cup and handle, the technicals and =
the fundamentals are very good. the stock gaps up at the opening, on =
very heavy volume, and the price of the stock goes up very fast. let's =
say the pivot is 32.50. Since the accumulation is so fast, that instead
of being able to buy around the pivot point, ones execution might come =
back 1-2% higher.It looks like to me in this instance, that buying =
before the pivot might be a good idea..Lets say maybe buying at 32.00 =
to 32.50. What do you think? david
----- Original Message -----=20
From: Katherine Malm=20
To: canslim@lists.xmission.com=20
Sent: Wednesday, December 12, 2001 6:14 AM
Subject: Re: [CANSLIM] stacking the odds in my favor-buying before =
the pivot point
Hi David,
I see there hasn't yet been a response to your questions. I was sure =
this one would draw some discussion.
As I don't know your own level of experience with CANSLIM and =
investing, I thought I'd answer this from a more generic point of view.
(1) The idea behind waiting for a good stock to form a solid base =
and then break out on volume is to identify that magical point at which =
Demand outstrips Supply and Price is pushed higher--essentially the old =
Supply/Demand curve from economics class. Assuming the lion's share of =
sellers have been exhausted and the stock is one that people would wish =
to own, the theory is that any additional demand for the stock will push =
the price further. In order for the Price to continue on, the underlying =
fundamentals that create value in the company have got to be sound. So =
from this point of view, waiting for the B/O is stacking the odds in =
your favor.
(2) The statistics on B/O's from various technical formations can be =
measured, but as you notice in our discussion the other day, the studies =
we were looking at in Bulkowski's book make no preselection based on =
fundamentals, as CANSLIM forces us to do. Even still, there are still =
odds that B/O's will fail. It's just the way it is.
(3) If you are extremely practiced and confident in CANSLIM =
candidate selection and can build a sound argument for the company and =
its potential, it is possible to make an early entry. Afterall, =
*some*body is buying it on the right side of the cup. Even still, it is =
less risky if the entry comes on a major change in trend or at a point =
that is very near substantial recent support. I'm not advocating this, I =
think even the best of the best get whacked when they try to do this. =
But more importantly, I don't believe that anyone who hasn't established =
a long running track record of successful selection should do this at =
all. Just way too risky.
Katherine
----- Original Message -----=20
From: camelot.homes@charter.net=20
To: canslim@lists.xmission.com=20
Sent: Tuesday, December 11, 2001 6:31 PM
Subject: [CANSLIM] stacking the odds in my favor-buying before the =
pivot point
one thing that might increase ones odds-is buying before the pivot =
point is reach, if the stock has hugh volume, great technicals and =
fundamentals. what do you all think??? david
and also
do any of you buy before the pivot point , if the volume is hugh,
and the technicals and the fundamentals are excellent, and the =
stock is
setting up to break out of a nice base pattern???
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<HTML><HEAD>
<META http-equiv=3DContent-Type content=3D"text/html; =
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<BODY bgColor=3D#ffffff>
<DIV><FONT face=3DArial size=3D2>David,</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>I might be misunderstanding your =
"32.50" pivot as=20
an intended hypothetical here. But let me answer based on the PECS =
chart=20
itself:</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>(1) The cup starts on 7/23 at at high =
of $27.45.=20
The correction took it as low as $12.50. That's about 54.5%, a little =
deep, but=20
we'll write that off to 9/11. It traveled up the right side of the cup =
and the=20
high of the handle was set on 11/1 at $26.82. There's one troubling high =
volume=20
day in the handle, but let me set that aside for the moment. That means =
that the=20
pivot is set and the <STRONG>buy point is at $26.92</STRONG>. The proper =
B/O is=20
then 11/14 when it gapped open. That day the volume was 1.8m shares, =
about 3.5=20
times average. What that means is that you're already too late at 32 to =
32.5. By=20
then, the stock's already moved almost <STRONG>19% from the =
B/O</STRONG>. An=20
entry here would be an extended entry into the stock. An entry here =
would also=20
have you sitting today on a round trip ride.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>(2) So let's focus on the other =
question, which is=20
"should I buy early?" This is probably a great example. Let's say you're =
watching the cup form and you decide to enter as it reaches near the old =
high on=20
the left. Let's say it hasn't yet formed a perfect handle. Let's say on =
about=20
11/5 or so, only a few days in. Let's enter at the close of the day =
at=20
25.99. Look what happens the next day. Big down day on big volume. =
Low of=20
the day? 21.69. <STRONG>Down 16.5%</STRONG> from your entry. Close of =
the day?=20
22.85. <STRONG>Down 12%</STRONG> from your entry. It would be easy to=20
rationalize that by saying "But the next day it reversed and later the =
stock=20
went on to breakout, so you would have made money." But how can you know =
that is=20
going to happen on 11/6? You don't, and stop loss rules, if you had =
risked the=20
early entry, would have at least kept you out with a 7 or 8% loss. =
Nearly=20
<STRONG>1/2 the loss</STRONG> of the low of the day.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Hope that answered the question you had =
in=20
mind.</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=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@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> Wednesday, December 12, =
2001 11:48=20
AM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] stacking =
the odds=20
in my favor-buying before the pivot point</DIV>
<DIV><BR></DIV>
<DIV><FONT face=3DArial size=3D2>katherine, thank you for your answer. =
i didn't=20
really ask the question right. i am actually talking about a fast =
market in a=20
stock like PECS in the past. The stock has formed a nice cup and =
handle,=20
the technicals and the fundamentals are very good. the stock gaps up =
at the=20
opening, on very heavy volume, and the price of the stock goes up very =
fast.=20
let's say the pivot is 32.50. Since the accumulation is so fast, that=20
instead</FONT></DIV>
<DIV><FONT face=3DArial size=3D2>of being able to buy around the pivot =
point, ones=20
execution might come back 1-2% higher.It looks like to me in this =
instance,=20
that buying before the pivot might be a good idea..Lets say maybe =
buying=20
at 32.00 to 32.50. What do you think? 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>=
=20
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Wednesday, December 12, =
2001 6:14=20
AM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] =
stacking the=20
odds in my favor-buying before the pivot point</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>I see there hasn't yet been a =
response to your=20
questions. I was sure this one would draw some =
discussion.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>As I don't know your own level of =
experience=20
with CANSLIM and investing, I thought I'd answer this from a more =
generic=20
point of view.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>(1) The idea behind waiting for a =
good stock to=20
form a solid base and then break out on volume is to identify that =
magical=20
point at which Demand outstrips Supply and Price is pushed=20
higher--essentially the old Supply/Demand curve from=20
economics class. Assuming the lion's share of =
sellers have=20
been exhausted and the stock is one that people would wish to =
own, the=20
theory is that any additional demand for the stock will push the =
price=20
further. In order for the Price to continue on, the underlying =
fundamentals=20
that create value in the company have got to be sound. So from this =
point of=20
view, waiting for the B/O is stacking the odds in your =
favor.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>(2) The statistics on B/O's from =
various=20
technical formations can be measured, but as you notice in our=20
discussion the other day, the studies we were looking at in =
Bulkowski's book=20
make no preselection based on fundamentals, as CANSLIM forces us to =
do. Even=20
still, there are still odds that B/O's will fail. It's just the way =
it=20
is.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>(3) If you are extremely practiced =
and=20
confident in CANSLIM candidate selection and can build a sound =
argument for=20
the company and its potential, it is possible to make an early =
entry.=20
Afterall, *some*body is buying it on the right side of the cup. Even =
still,=20
it is less risky if the entry comes on a major change in trend or at =
a point=20
that is very near substantial recent support. I'm not advocating =
this, I=20
think even the best of the best get whacked when they try to do =
this. But=20
more importantly, I don't believe that anyone who hasn't established =
a long=20
running track record of successful selection should do this at all. =
Just way=20
too risky.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Katherine</FONT></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=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=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> Tuesday, December 11, =
2001 6:31=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> [CANSLIM] stacking =
the odds=20
in my favor-buying before the pivot point</DIV>
<DIV><BR></DIV>
<DIV><FONT face=3DArial size=3D2>one thing that might increase =
ones odds-is=20
buying before the pivot point is reach, if the stock has hugh =
volume,=20
great technicals and fundamentals. what do you all think???=20
david</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>and also</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV>do any of you buy before the pivot point , if the =
volume is=20
hugh,<BR>and the technicals and the fundamentals are excellent, =
and the=20
stock is<BR>setting up to break out of a nice base=20
=
pattern???<BR></DIV></BLOCKQUOTE></BLOCKQUOTE></BLOCKQUOTE></BODY></HTML>=
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