Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] MWRK, microcaps, charts
Date: Fri, 3 May 2002 15:02:54 -0500
Previous Article (by Author): Re: [CANSLIM] USLB "Jim Fulling"
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Thanks, Ian. I'm relieved to hear that the parabolic rise from the base =
is an oddity and not the "norm" for most market conditions. Sure makes =
these mighty mites hard to catch unless you're on top of them prior to =
the breakout and ready to strike intraday. I'm still conditioned to play =
a conservative hand on breakouts....old habits die hard...
I completely understand what you mean about missing a good stock =
initially in your radar. Last Fall I completely overhauled my watchlist =
notation/management system for just that reason. Always drove me crazy =
to see something breakout that was in my sites and fell away through =
some unexplainable oversight.
Thanks again for the comprehensive reply,
Katherine
----- Original Message -----=20
From: Ian=20
To: canslim@lists.xmission.com=20
Sent: Friday, May 03, 2002 11:25 AM
Subject: Re: [CANSLIM] MWRK, microcaps, charts
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 -----=20
From: Katherine Malm=20
To: canslim@lists.xmission.com=20
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 >=3D$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
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<DIV>Thanks, Ian. I'm relieved to hear that the parabolic rise from the =
base is=20
an oddity and not the "norm" for most market conditions. Sure makes =
these mighty=20
mites hard to catch unless you're on top of them prior to the breakout =
and ready=20
to strike intraday. I'm still conditioned to play a conservative hand on =
breakouts....old habits die hard...</DIV>
<DIV> </DIV>
<DIV>I completely understand what you mean about missing a good stock =
initially=20
in your radar. Last Fall I completely overhauled my watchlist=20
notation/management system for just that reason. Always drove me crazy =
to see=20
something breakout that was in my sites and fell away through some =
unexplainable=20
oversight.</DIV>
<DIV> </DIV>
<DIV>Thanks again for the comprehensive reply,<BR>Katherine</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=3Dianstm@shaw.ca href=3D"mailto:ianstm@shaw.ca">Ian</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> Friday, May 03, 2002 =
11:25 AM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] MWRK, =
microcaps,=20
charts</DIV>
<DIV><BR></DIV>
<DIV><FONT size=3D2>Katherine:</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>In my experience, most strong microcaps come out =
of their=20
slumber with the same chart patterns as their larger brethren. The =
biggest=20
differences are:</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>1. The relative change in the ADV willl usually be =
at least=20
200-300% higher, and often 1000-2000% higher.</FONT></DIV>
<DIV><FONT size=3D2>2. It is not uncommon for the initial gains, in =
the first=20
few days of a breakout, to exceed 50%.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>MTHR is a bit painful for me to look at, as it was =
a 'triple=20
star' entry in my little notebook (those are quite rare) on January 22 =
at $12=20
- and for the life of me, I cannot figure out why I never followed up =
on it=20
and bought in :( The steady increase in volume following =
the March=20
1 breakout was a classic 'strong buy' indicator in these kind of =
stocks -=20
offering a great entry in the $14 - $15 range. I should never have =
missed it -=20
a major flaw or omission in my alert system.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>Regarding the April strength, I would say that the =
strength=20
of the run, from $16 to $32 is recent market anomaly, and not =
'traditional'=20
behaviour for microcaps. I believe it is a byproduct of two=20
things:</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>1. The 'need' for $15+ stocks</FONT></DIV>
<DIV><FONT size=3D2>2. The incredibly strong interest in microcaps =
right=20
now</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>Since most microcaps are struggling under the =
comfort level=20
of institutions (under $10), the rare ones that make it up to the =
$12-$14=20
range with strong bases can go parabolic in this market. MTEC is =
another great=20
recent example. Both have in the neighbourhood of 4,000,000 shares=20
outstanding. When you combine that low float with a 1000%+ =
change in=20
ADV, like MWRK and MTEC saw, it often results in the chart you=20
see.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>One other thing to note is that from a valuation=20
perspective, a $10 surge in price does not actually impact the P/S and =
P/B=20
multiples too much. I remember being in awe at how Juniper could go up =
by a=20
multiple of 10 times revenue in a day during the bubble.</FONT></DIV>
<DIV> </DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>Finally, I would agree that unlike their larger =
brethren,=20
these runs to not immediately scream 'short'. I suspect that the main =
reason=20
for this difference is valuation. Many of these stocks are coming off =
of=20
extremely low valuations relative to other high-beta stocks. The =
traditional=20
sell rules still apply though.</FONT></DIV>
<DIV> </DIV>
<DIV><FONT size=3D2>Ian</FONT></DIV>
<DIV> </DIV>
<DIV> </DIV>
<DIV> </DIV>
<DIV>----- Original Message ----- </DIV>
<BLOCKQUOTE=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=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> Friday, May 03, 2002 =
7:54=20
AM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> [CANSLIM] MWRK, =
microcaps,=20
charts</DIV>
<DIV><BR></DIV>
<DIV>Ian,</DIV>
<DIV> </DIV>
<DIV>I'm addressing this to you primarily, as you are more familiar =
with=20
microcap behavior, though others on the list may have a point of =
view on=20
this as well... I tend to stick to stocks trading >=3D$10, but =
monitor=20
lower priced stocks for the up and comers. Something I've observed =
that=20
confuses me, however, are the chart patterns for these minis as they =
begin=20
their charge ahead. A good recent example is MWRK (not a perfect =
example,=20
because it traded around 6-12 for quite a while before breakout, but =
good=20
enough for the chart example.)</DIV>
<DIV> </DIV>
<DIV>The question is this....when I look at this chart, it looks =
like a=20
classic parabolic climax run. Something I normally see after a stock =
has put=20
in its 3rd or 4th stage base and is giving up the ghost. In those =
cases, I'm=20
looking to run for cover or short. But what I've noticed lately is =
the=20
tendency for microcaps to shoot into these patterns after breaking =
from=20
their long flat slumbering bases, settle down, and then start a =
steady=20
ascent. Is that a "normal" pattern that I'm seeing for the microcaps =
or is=20
it an anomaly that you've noticed in the market over the last couple =
of=20
years? Any and all thoughts on the subject would be most =
appreciated.</DIV>
<DIV> </DIV>
<DIV>Katherine</DIV></BLOCKQUOTE></BLOCKQUOTE></BODY></HTML>
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