Go to Jeff Salisbury LWGate Home Page.From: "Tom Worley" <stkguru@netside.net>
Subject: Re: [CANSLIM] stacking the odds in my favor-buying before the pivot point
Date: Sat, 22 Dec 2001 00:02:44 -0500
Previous Article (by Subject): Re: [CANSLIM] stacking the odds in my favor-buying before the pivot point "Dave Squires"
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I apologize for my enforced absence from group discussion, my aging PC =
took another hit, and the modem dumped all its info, including the dial =
up number for my ISP (naturally, in accordance with Murphy's law, I =
didn't have it written down anywhere I could find). Tonight, before I =
left work, I used my work internet connection to at least pick up and =
read everything on the ISP's server, looks like you are doing nicely =
without my comments.
Since I am mentioned in this thread, I just wanted to explain why I tend =
to buy "too early". The obvious reason, of course, is that I get too =
busy and distracted at work to even begin to be able to watch my stocks =
or "hot watch list candidates" instead of doing my day job. But on top =
of that is my propensity for small and micro cap stocks, usually thinly =
traded and with a very tiny float. This means that I am trying to be =
involved with stocks that can have extremely high volatility, both to =
the upside, and the downside. The only "insurance policy" I have is that =
rarely are there large holdings by funds. So, a sharp spike downward is =
likely to be retail related, and that can reverse in a heartbeat =
(measured as something less than a full trading day in time).
More important to me is that I am at least as rooted in fundamentals as =
in pure CANSLIM. I am a patient, long term investor. It does not scare =
me to own an unknown stock for several years, waiting for my big payday. =
I believe strongly that good (and growing) fundamentals will eventually =
bring recognition, and a financial reward for my patience and risk to my =
capital.
For someone trading / investing in highly liquid stocks in higher price =
brackets, I cannot encourage you to buy before acceptable breakout =
parameters are met. This is especially true if you are trying to snatch =
a 5 or 10, or even 20%, profit off the table. And this is paramount if =
you are also trying to trade short term (which I define as a few days to =
a few weeks max). If you combine this with an uncertain (or negative) =
market condition ("M"), then it is even more true, as you need momentum =
AND volume on your side. This has already been well hashed over in =
Katherine's "devil's advocate" thread on momentum vs fundies.
If you are trying to trade short term, time is not your friend. You must =
catch the movement reasonably precisely, and exit accordingly. While "M" =
is still important, momentum of the stock, and its group, is far more =
important. And it certainly appears that there are many more investors =
these days aware of the terms of "breakout", "pivot point", "support", =
and so forth, even if they do not understand these terms. Thus, =
volatility is likely to remain high on a particular stock showing =
promise, or even beginning to b/o. Doesn't make it logical, or rational. =
Because of the nature of the stocks I choose for my investments, I also =
accept the possibility, heck, even probability, of tying up my capital =
for an extended period without any results to show for it. Most =
investors are not comfortable with that, especially if that capital is =
tied up at a loss. This is only one of the reasons why I enforce =
diversification in my personal investing.=20
Buying before the pivot point b/o on heavy volume is not wise for most =
investors. I can get away with it because I am already working in a very =
small, very high risk niche of the investment community. And I have more =
years experience doing this than I care to admit (and most of those =
years cost me tuition money).
=20
Tom Worley
stkguru@netside.net
AIM: TexWorley
----- Original Message -----=20
From: Dan Forant=20
To: canslim@lists.xmission.com=20
Sent: Friday, December 21, 2001 7:54 PM
Subject: Re: [CANSLIM] stacking the odds in my favor-buying before the =
pivot point
That's one of the beauties of Quote Tracker. You can get volume and =
price alerts with cell phones
=20
DanF
----- Original Message -----=20
From: Dave Squires=20
To: canslim@lists.xmission.com=20
Sent: Friday, December 21, 2001 11:16 AM
Subject: Re: [CANSLIM] stacking the odds in my favor-buying before =
the pivot point
>>I still think that these things could be done with stop-limit =
orders for entry and therefore wouldn't require screen-sitting all day =
long.<<
I agreed. I have said this many times before on this and other CS =
lists. While I am skeptical about stop limits I think stop market orders =
placed after the first 15-30 minutes will cover people who can't watch =
the screen all day or set alarms. CS requires very good timing and =
buying the next day is often a recipe for a stop out on any normal =
pullback or pivot test. I believe most serious IT traders are now buying =
before the breakout as it has become a very obvious point. Still in a =
good market with quality leadership the handle high pivot will work =
fine. If you don't have constant access to the market buying before the =
break can be dangerous because you don't know the volume situation and =
you are technically buying the top of a trading range, which is a =
dangerous entry if a breakout does not result.=20
=20
DSquires
----- Original Message -----=20
From: Katherine Malm=20
To: canslim@lists.xmission.com=20
Sent: Friday, December 21, 2001 9:07 AM
Subject: Re: [CANSLIM] stacking the odds in my favor-buying before =
the pivot point
Good question, Warren. It is at this very spot where "theory" and =
"practice" meet that the individual has to apply some reasonable =
assumptions, analytical tools, and executable steps. A fancy way of =
saying, "I know that price has a probability of moving up when demand =
outstrips supply, and I can use chart patterns to identify that point." =
But....for each person, that "point" may be a little different. I think =
that's what Tom has been referring to in his own posts. He has a comfort =
with microcaps and under-followed stocks in general, so he has adjusted =
his entries to match the typical behavior of these stocks. As I have =
become more comfortable with technical patterns and more confident in my =
own candidate selection process, I have modified these entries a bit. I =
am much more willing to take entries on patterns other than the =
traditional C&H or flat base near old highs. I control risk by =
decreasing my lot size and then adding to positions as the stock =
continues to show strength and then pulls back to the intermediate term =
trend. That's not to say I don't have to pull the plug every now and =
then, and then possibly re-enter when the smoke clears. But that's about =
personal style in the spirit of CANSLIM and in the spirit of "the =
balance between supply and demand." In general, I still think that these =
things could be done with stop-limit orders for entry and therefore =
wouldn't require screen-sitting all day long. I have the luxury of being =
at home all day as well, but I really don't find it interesting to =
"watch" the market. I let my alarms tell me when/if the time is near, =
then place a market order when it's right. Again, personal style, but =
not a requirement.
Katherine
----- Original Message -----=20
From: Warren Keuffel=20
To: canslim@lists.xmission.com=20
Sent: Friday, December 21, 2001 8:47 AM
Subject: Re: [CANSLIM] stacking the odds in my favor-buying =
before the pivot point
Katherine,
This is the Theory, and it is Good. But in Practice, being able =
to
identify the B/O and get in before it is too extended is where =
the
rubber really meets the road. Hence, I am starting to favor an =
earlier
entry (and I believe Tom mentioned that he does this as well) =
because
IMHO only those glued to their screens all day long, with =
sophisticated
alarms, etc. can react quickly enough to act at the ideal entry =
point.
Maybe it's not as hard as I make it out to be, but I have not =
had many
successes with ideal entry points, and I work from home so am =
seldom far
from my computer. How about you? Are you able to repeatably =
time your
entries optimally?
Warren
Katherine Malm wrote:
<snip>
> (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.
<snip>
-
-To subscribe/unsubscribe, email "majordomo@xmission.com"
-In the email body, write "subscribe canslim" or
-"unsubscribe canslim". Do not use quotes in your email.
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<BODY bgColor=3D#ffffff>
<DIV><FONT size=3D2>I apologize for my enforced absence from group =
discussion, my=20
aging PC took another hit, and the modem dumped all its info, including =
the dial=20
up number for my ISP (naturally, in accordance with Murphy's law, I =
didn't have=20
it written down anywhere I could find). Tonight, before I left work, I =
used my=20
work internet connection to at least pick up and read everything on the =
ISP's=20
server, looks like you are doing nicely without my =
comments.</FONT></DIV>
<DIV><FONT size=3D2></FONT> </DIV>
<DIV><FONT size=3D2>Since I am mentioned in this thread, I just wanted =
to explain=20
why I tend to buy "too early". The obvious reason, of course, is that I =
get too=20
busy and distracted at work to even begin to be able to watch my stocks =
or "hot=20
watch list candidates" instead of doing my day job. But on top of that =
is my=20
propensity for small and micro cap stocks, usually thinly traded and =
with a very=20
tiny float. This means that I am trying to be involved with stocks that =
can have=20
extremely high volatility, both to the upside, and the downside. The =
only=20
"insurance policy" I have is that rarely are there large holdings by =
funds. So,=20
a sharp spike downward is likely to be retail related, and that can =
reverse in a=20
heartbeat (measured as something less than a full trading day in=20
time).</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>More important to me is that I am at least as rooted =
in=20
fundamentals as in pure CANSLIM. I am a patient, long term investor. It =
does not=20
scare me to own an unknown stock for several years, waiting for my big =
payday. I=20
believe strongly that good (and growing) fundamentals will eventually =
bring=20
recognition, and a financial reward for my patience and risk to my=20
capital.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>For someone trading / investing in highly liquid =
stocks in=20
higher price brackets, I cannot encourage you to buy before acceptable =
breakout=20
parameters are met. This is especially true if you are trying to snatch =
a 5 or=20
10, or even 20%, profit off the table. And this is paramount if you are =
also=20
trying to trade short term (which I define as a few days to a few weeks =
max). If=20
you combine this with an uncertain (or negative) market condition ("M"), =
then it=20
is even more true, as you need momentum AND volume on your side. This =
has=20
already been well hashed over in Katherine's "devil's advocate" thread =
on=20
momentum vs fundies.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>If you are trying to trade short term, time is not =
your=20
friend. You must catch the movement reasonably precisely, and exit =
accordingly.=20
While "M" is still important, momentum of the stock, and its group, is =
far more=20
important. And it certainly appears that there are many more investors =
these=20
days aware of the terms of "breakout", "pivot point", "support", =
and so=20
forth, even if they do not understand these terms. Thus, volatility is =
likely to=20
remain high on a particular stock showing promise, or even beginning to =
b/o.=20
Doesn't make it logical, or rational. </FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>Because of the nature of the stocks I choose for my=20
investments, I also accept the possibility, heck, even probability, of =
tying up=20
my capital for an extended period without any results to show for it. =
Most=20
investors are not comfortable with that, especially if that capital is =
tied up=20
at a loss. This is only one of the reasons why I enforce diversification =
in my=20
personal investing. </FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>Buying before the pivot point b/o on heavy volume is =
not wise=20
for most investors. I can get away with it because I am already working =
in a=20
very small, very high risk niche of the investment community. And I have =
more=20
years experience doing this than I care to admit (and most of those =
years cost=20
me tuition money).</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:dforant1@nycap.rr.com" =
title=3Ddforant1@nycap.rr.com>Dan=20
Forant</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> Friday, December 21, 2001 =
7:54=20
PM</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>That's one of the beauties of Quote =
Tracker. You=20
can get volume and price alerts with cell phones</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>DanF</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:dcsquires1@home.com" =
title=3Ddcsquires1@home.com>Dave=20
Squires</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> Friday, December 21, =
2001 11:16=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> >>I still think that these things could be done =
with=20
stop-limit orders for entry and therefore wouldn't require =
screen-sitting=20
all day long.<<</DIV>
<DIV> </DIV>
<DIV><FONT face=3DArial size=3D2>I agreed. I have said this many =
times before on=20
this and other CS lists. While I am skeptical about stop limits I =
think stop=20
market orders placed after the first 15-30 minutes will cover=20
people who can't watch the screen all day or set alarms. CS =
requires=20
very good timing and buying the next day is often a recipe =
for a stop=20
out on any normal pullback or pivot test. I believe most serious IT =
traders=20
are now buying before the breakout as it has become a very obvious =
point.=20
Still in a good market with quality leadership the handle high pivot =
will=20
work fine. If you don't have constant access to the market buying =
before the=20
break can be dangerous because you don't know the volume situation =
and you=20
are technically buying the top of a trading range, which is a =
dangerous=20
entry if a breakout does not result. </FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>DSquires</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" =
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> Friday, December 21, =
2001 9:07=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>Good question, Warren. It is at this very spot where "theory" =
and=20
"practice" meet that the individual has to apply some reasonable=20
assumptions, analytical tools, and executable steps. A fancy way =
of=20
saying, "I know that price has a probability of moving up when =
demand=20
outstrips supply, and I can use chart patterns to identify that =
point."=20
But....for each person, that "point" may be a little different. I =
think=20
that's what Tom has been referring to in his own posts. He has a =
comfort=20
with microcaps and under-followed stocks in general, so he has =
adjusted=20
his entries to match the typical behavior of these stocks. As I =
have=20
become more comfortable with technical patterns and more confident =
in my=20
own candidate selection process, I have modified these entries a =
bit. I am=20
much more willing to take entries on patterns other than the =
traditional=20
C&H or flat base near old highs. I control risk by decreasing =
my lot=20
size and then adding to positions as the stock continues to show =
strength=20
and then pulls back to the intermediate term trend. That's not to =
say I=20
don't have to pull the plug every now and then, and then possibly =
re-enter=20
when the smoke clears. But that's about personal style in the =
spirit of=20
CANSLIM and in the spirit of "the balance between supply and =
demand." In=20
general, I still think that these things could be done with =
stop-limit=20
orders for entry and therefore wouldn't require screen-sitting all =
day=20
long. I have the luxury of being at home all day as well, but I =
really=20
don't find it interesting to "watch" the market. I let my alarms =
tell me=20
when/if the time is near, then place a market order when it's =
right.=20
Again, personal style, but not a requirement.</DIV>
<DIV> </DIV>
<DIV>Katherine</DIV>
<BLOCKQUOTE=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:wkeuffel@xmission.com"=20
title=3Dwkeuffel@xmission.com>Warren Keuffel</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> Friday, December =
21, 2001=20
8:47 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>Katherine,<BR><BR>This is the Theory, and it is=20
Good. But in Practice, being able to<BR>identify the B/O =
and get=20
in before it is too extended is where the<BR>rubber really meets =
the=20
road. Hence, I am starting to favor an earlier<BR>entry =
(and I=20
believe Tom mentioned that he does this as well) because<BR>IMHO =
only=20
those glued to their screens all day long, with =
sophisticated<BR>alarms,=20
etc. can react quickly enough to act at the ideal entry=20
point.<BR><BR>Maybe it's not as hard as I make it out to be, but =
I have=20
not had many<BR>successes with ideal entry points, and I work =
from home=20
so am seldom far<BR>from my computer. How about you? =
Are you=20
able to repeatably time your<BR>entries=20
optimally?<BR><BR>Warren<BR><BR>Katherine Malm=20
wrote:<BR><BR><snip><BR><BR>> (1) The idea behind =
waiting=20
for a good stock to form a solid base and<BR>> then break out =
on=20
volume is to identify that magical point at which<BR>> Demand =
outstrips Supply and Price is pushed higher--essentially =
the<BR>> old=20
Supply/Demand curve from economics class. Assuming the=20
lion's<BR>> share of sellers have been exhausted and =
the stock=20
is one that people<BR>> would wish to own, the theory is that =
any=20
additional demand for the<BR>> stock will push the price =
further. In=20
order for the Price to continue<BR>> on, the underlying =
fundamentals=20
that create value in the company have<BR>> got to be sound. =
So from=20
this point of view, waiting for the B/O is<BR>> stacking the =
odds in=20
your favor.<BR><BR><snip><BR><BR><BR><BR>-<BR>-To=20
subscribe/unsubscribe, email "<A=20
=
href=3D"mailto:majordomo@xmission.com">majordomo@xmission.com</A>"<BR>-In=
=20
the email body, write "subscribe canslim" or<BR>-"unsubscribe=20
canslim". Do not use quotes in your=20
=
email.</BLOCKQUOTE></BLOCKQUOTE></BLOCKQUOTE></BLOCKQUOTE></BODY></HTML>
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