Go to Jeff Salisbury LWGate Home Page.From: Ian <ianstm@shaw.ca>
Subject: Re: [CANSLIM] MWRK, microcaps, charts
Date: Fri, 03 May 2002 09:25:48 -0700
Next Article (by Author): Re: [CANSLIM] USLB "Jim Fulling"
Top of Thread: Re: [CANSLIM] MWRK, microcaps, charts "Katherine Malm"
Next in Thread: Re: [CANSLIM] MWRK, microcaps, charts "Katherine Malm"
Articles sorted by: [Date]
[Author]
[Subject]
This is a multi-part message in MIME format. - --Boundary_(ID_4vKeRJOUc6KHfims2IIetQ) Content-type: text/plain; charset=iso-8859-1 Content-transfer-encoding: 7BIT Katherine: In my experience, most strong microcaps come out of their slumber with the same chart patterns as their larger brethren. The biggest differences are: 1. The relative change in the ADV willl usually be at least 200-300% higher, and often 1000-2000% higher. 2. It is not uncommon for the initial gains, in the first few days of a breakout, to exceed 50%. MTHR is a bit painful for me to look at, as it was a 'triple star' entry in my little notebook (those are quite rare) on January 22 at $12 - and for the life of me, I cannot figure out why I never followed up on it and bought in :( The steady increase in volume following the March 1 breakout was a classic 'strong buy' indicator in these kind of stocks - offering a great entry in the $14 - $15 range. I should never have missed it - a major flaw or omission in my alert system. Regarding the April strength, I would say that the strength of the run, from $16 to $32 is recent market anomaly, and not 'traditional' behaviour for microcaps. I believe it is a byproduct of two things: 1. The 'need' for $15+ stocks 2. The incredibly strong interest in microcaps right now Since most microcaps are struggling under the comfort level of institutions (under $10), the rare ones that make it up to the $12-$14 range with strong bases can go parabolic in this market. MTEC is another great recent example. Both have in the neighbourhood of 4,000,000 shares outstanding. When you combine that low float with a 1000%+ change in ADV, like MWRK and MTEC saw, it often results in the chart you see. One other thing to note is that from a valuation perspective, a $10 surge in price does not actually impact the P/S and P/B multiples too much. I remember being in awe at how Juniper could go up by a multiple of 10 times revenue in a day during the bubble. Finally, I would agree that unlike their larger brethren, these runs to not immediately scream 'short'. I suspect that the main reason for this difference is valuation. Many of these stocks are coming off of extremely low valuations relative to other high-beta stocks. The traditional sell rules still apply though. Ian - ----- Original Message ----- From: Katherine Malm To: canslim@lists.xmission.com Sent: Friday, May 03, 2002 7:54 AM Subject: [CANSLIM] MWRK, microcaps, charts Ian, I'm addressing this to you primarily, as you are more familiar with microcap behavior, though others on the list may have a point of view on this as well... I tend to stick to stocks trading >=$10, but monitor lower priced stocks for the up and comers. Something I've observed that confuses me, however, are the chart patterns for these minis as they begin their charge ahead. A good recent example is MWRK (not a perfect example, because it traded around 6-12 for quite a while before breakout, but good enough for the chart example.) The question is this....when I look at this chart, it looks like a classic parabolic climax run. Something I normally see after a stock has put in its 3rd or 4th stage base and is giving up the ghost. In those cases, I'm looking to run for cover or short. But what I've noticed lately is the tendency for microcaps to shoot into these patterns after breaking from their long flat slumbering bases, settle down, and then start a steady ascent. Is that a "normal" pattern that I'm seeing for the microcaps or is it an anomaly that you've noticed in the market over the last couple of years? Any and all thoughts on the subject would be most appreciated. Katherine - --Boundary_(ID_4vKeRJOUc6KHfims2IIetQ) Content-type: text/html; charset=iso-8859-1 Content-transfer-encoding: 7BIT <!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> <HTML><HEAD> <META content="text/html; charset=iso-8859-1" http-equiv=Content-Type> <META content="MSHTML 5.00.3314.2100" name=GENERATOR> <STYLE></STYLE> </HEAD> <BODY bgColor=#ffffff> <DIV><FONT size=2>Katherine:</FONT></DIV> <DIV> </DIV> <DIV><FONT size=2>In my experience, most strong microcaps come out of their slumber with the same chart patterns as their larger brethren. The biggest differences are:</FONT></DIV> <DIV> </DIV> <DIV><FONT size=2>1. The relative change in the ADV willl usually be at least 200-300% higher, and often 1000-2000% higher.</FONT></DIV> <DIV><FONT size=2>2. It is not uncommon for the initial gains, in the first few days of a breakout, to exceed 50%.</FONT></DIV> <DIV> </DIV> <DIV><FONT size=2>MTHR is a bit painful for me to look at, as it was a 'triple star' entry in my little notebook (those are quite rare) on January 22 at $12 - and for the life of me, I cannot figure out why I never followed up on it and bought in :( The steady increase in volume following the March 1 breakout was a classic 'strong buy' indicator in these kind of stocks - offering a great entry in the $14 - $15 range. I should never have missed it - a major flaw or omission in my alert system.</FONT></DIV> <DIV> </DIV> <DIV><FONT size=2>Regarding the April strength, I would say that the strength of the run, from $16 to $32 is recent market anomaly, and not 'traditional' behaviour for microcaps. I believe it is a byproduct of two things:</FONT></DIV> <DIV> </DIV> <DIV><FONT size=2>1. The 'need' for $15+ stocks</FONT></DIV> <DIV><FONT size=2>2. The incredibly strong interest in microcaps right now</FONT></DIV> <DIV> </DIV> <DIV><FONT size=2>Since most microcaps are struggling under the comfort level of institutions (under $10), the rare ones that make it up to the $12-$14 range with strong bases can go parabolic in this market. MTEC is another great recent example. Both have in the neighbourhood of 4,000,000 shares outstanding. When you combine that low float with a 1000%+ change in ADV, like MWRK and MTEC saw, it often results in the chart you see.</FONT></DIV> <DIV> </DIV> <DIV><FONT size=2>One other thing to note is that from a valuation perspective, a $10 surge in price does not actually impact the P/S and P/B multiples too much. I remember being in awe at how Juniper could go up by a multiple of 10 times revenue in a day during the bubble.</FONT></DIV> <DIV> </DIV> <DIV> </DIV> <DIV><FONT size=2>Finally, I would agree that unlike their larger brethren, these runs to not immediately scream 'short'. I suspect that the main reason for this difference is valuation. Many of these stocks are coming off of extremely low valuations relative to other high-beta stocks. The traditional sell rules still apply though.</FONT></DIV> <DIV> </DIV> <DIV><FONT size=2>Ian</FONT></DIV> <DIV> </DIV> <DIV> </DIV> <DIV> </DIV> <DIV>----- Original Message ----- </DIV> <BLOCKQUOTE style="BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-RIGHT: 0px"> <DIV style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B> <A href="mailto:kmalm@earthlink.net" title=kmalm@earthlink.net>Katherine Malm</A> </DIV> <DIV style="FONT: 10pt arial"><B>To:</B> <A href="mailto:canslim@lists.xmission.com" title=canslim@lists.xmission.com>canslim@lists.xmission.com</A> </DIV> <DIV style="FONT: 10pt arial"><B>Sent:</B> Friday, May 03, 2002 7:54 AM</DIV> <DIV style="FONT: 10pt arial"><B>Subject:</B> [CANSLIM] MWRK, microcaps, charts</DIV> <DIV><BR></DIV> <DIV>Ian,</DIV> <DIV> </DIV> <DIV>I'm addressing this to you primarily, as you are more familiar with microcap behavior, though others on the list may have a point of view on this as well... I tend to stick to stocks trading >=$10, but monitor lower priced stocks for the up and comers. Something I've observed that confuses me, however, are the chart patterns for these minis as they begin their charge ahead. A good recent example is MWRK (not a perfect example, because it traded around 6-12 for quite a while before breakout, but good enough for the chart example.)</DIV> <DIV> </DIV> <DIV>The question is this....when I look at this chart, it looks like a classic parabolic climax run. Something I normally see after a stock has put in its 3rd or 4th stage base and is giving up the ghost. In those cases, I'm looking to run for cover or short. But what I've noticed lately is the tendency for microcaps to shoot into these patterns after breaking from their long flat slumbering bases, settle down, and then start a steady ascent. Is that a "normal" pattern that I'm seeing for the microcaps or is it an anomaly that you've noticed in the market over the last couple of years? Any and all thoughts on the subject would be most appreciated.</DIV> <DIV> </DIV> <DIV>Katherine</DIV></BLOCKQUOTE></BODY></HTML> - --Boundary_(ID_4vKeRJOUc6KHfims2IIetQ)-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email.
Next Article (by Author): Re: [CANSLIM] USLB "Jim Fulling"
Top of Thread: Re: [CANSLIM] MWRK, microcaps, charts "Katherine Malm"
Next in Thread: Re: [CANSLIM] MWRK, microcaps, charts "Katherine Malm"
Articles sorted by: [Date]
[Author]
[Subject]