Go to Jeff Salisbury LWGate Home Page.From: "Tom Worley" <stkguru@bellsouth.net>
Subject: Re: [CANSLIM] Today's WebLink
Date: Sun, 2 Jun 2002 21:01:18 -0400
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Hi Michael,
For various reasons, I don't buy on the breakouts, rather buying in the base
on flat line bases mostly. However, once a breakout does occur, I think you
need to maintain tight stops until you are up sufficient to give a stock
some more room to roam. I don't think you have to wait until you are losing
8% to sell, in fact both WON and David Ryan have spoken of selling when they
are only down 2 or 3%, with 8% being a max limit. But then you also have to
be pretty good at identifying when a b/o has actually failed, vs undergoing
minor correction. Many will correct back to the base, for instance. And, of
course, when "M" is as lousy as at present, you probably shouldn't be buying
anything.
Going back to your basic question, how much time do you give a stock? I
always want to be able to give it at least 2 months, preferably 3 months.
That takes me thru another earnings report. Of course, if the base is
failing and costing me money, I may not wait that long. But I generally am
buying stocks with the idea of owning them for a year or two, so several
months is no time at all.
- ----- Original Message -----
From: <michael_niemotka@baxter.com>
To: <canslim@lists.xmission.com>
Sent: Thursday, May 30, 2002 11:21 AM
Subject: Re: [CANSLIM] Today's WebLink
Katherine,
VERY well put.
I would ask this question to the group: How much time do you give a new
position to grow, assuming that you bought it at a breakout point. I guess
another way to phase the question is: how long after an breakout attempt do
you wait before backing out of the position (minus commisions of course) to
get the capital back for entry into another possible winner?
Do any of you have any "rules" like: Need to see an X% gain within the
first 4 weeks
Other than the 7-8% loss rule I wonder if other get out sooner if it looks
like the breakout failed, or do you hold on for a few weeks.
Thanks
Mike Niemotka , PE
Sr. Principal Engineer
Baxter Healthcare Corporation
Route 120 & Wilson Road
Round Lake, IL 60073
Tel (847) 270-4075
Fax (847) 270-4525
michael_niemotka@baxter.com
"Katherine Malm"
<kmalm@earthlink.net> To:
canslim@lists.xmission.com
Sent by: cc:
owner-canslim@lists.xm Subject: Re: [CANSLIM]
Today's WebLink
ission.com
05/30/2002 09:33 AM
Please respond to
canslim
Hi Duke,
Churning is a well documented sign of distribution at the top and isn't
something pulled out of the air by the author. Below I've sited some
resources from TradingMarkets.com (Loren F. used to write for the IBD) and
from Investors.com.
With respect to HOV in general, just goes to show that sell rules aren't
all that cut and dried. Most of the sell "rules are actually guidelines and
are used to "stack up" the evidence so to speak.
With HOV, I would go through a what-if similar to this:
- -Breakout from sound base? Yes 2/26, approx. $22.40
- -Run up of >=20% in less than 8 wks? Yes. By 4/19 was up 38%
- -At this point, a subset of sell rules start to kick in: That is, if the
stocks runs up >=20% in 8 wks, you "may" want to sit through the first
correction. (from HTMMIS, paraphrased)
- -May comes along and HOV gets its first bout of churning and distribution
( 5/6 heavy dist., 5/7 churning, 5/8 heavy dist.)
- -What to do?
-Step 1: stack up the evidence
pro: leading group, high RS and rising, market had FTD
con: group has been on a long run since early 2000, may be
finished, many stocks breaking down
Choice 1: Weigh in, make a descision to hold on based on the >=20%
in 8 wks guideline. Evidence you'll be looking for thereafter--support at
50dMA, action of other stocks, etc. (similar to the Weblink article)
-Choice 2: 2 days of heaving distribution + 1 churning = heavy
evidence of unloading in 5 short days. Sell.
As far as I've been able to figure out, sell rules are *not* cut and dried.
The individual's interpretation of the evidence, their tolerance for pain,
their profit goals in entering the position, the length of time they've
held the stock and current gains will weigh in to the decision. So, two
people decide completely differently given the same chart AND the same set
of WON/CANSLIM sell rules. Darn, wish it were more clear. I'd love to do a
calculation and punch a button in/out. Now wouldn't *that* be keen?
- -Katherine
Here are a few articles I've uploaded on the subject:
http://WallStreet-LLC.com/canslim/NewHighLightVol011901.JPG
http://WallStreet-LLC.com/canslim/NewHighsWeakVol060600.JPG
http://WallStreet-LLC.com/canslim/BuySellTipsVol102301.JPG
http://WallStreet-LLC.com/canslim/StickWithLeaders101000.JPG
=========
Q: Eric S. Hill: How is it that a stock can trade many times its average
volume on a given day with hardly any price hange? Is this to be considered
bullish or bearish?
Loren Fleckenstein:
A: Eric: You cannot apply a mechanical rule that applies to all
siutations. However, generally speaking, what you're describing is called
"churning." Churning after a stock has made an extended advance could be
bearish and a tip-off of a major price decline to come. Churning after a
stock has suffered a major downturn could be bullish and signal that the
stock is near a bottom.
======
Question (Ask Bill O'Neil):
How do I know when to sell a well-performing stock to protect my gains?
Answer:
Many investors don't pay much attention to sell rules. But they are just as
important as buy rules. After a stock has had a significant run-up, look
for signs of fatigue.
One is what we call "churning." That's when the stock trades on
comparatively heavy volume but can't manage to make meaningful price gains.
Another red flag is when the stock makes a new price high on low volume.
Also troubling is when the stock repeatedly falls as volume increases.
Some stocks that double or go even higher over several months will peak in
a "climax top" characterized by a couple of weeks in which the price bursts
up 25% to 50% or more on heavy volume. Also watch for weakness in the
stock's industry group, as well as the general market.
----- Original Message -----
From: Tom Worley
To: canslim@lists.xmission.com
Sent: Thursday, May 30, 2002 8:43 AM
Subject: Re: [CANSLIM] Today's WebLink
Duke, I would be a lot more impressed with IBD if they had reported that
potential sell signal just a day or two later, rather than weeks later.
On the other hand, I would disagree that selling the next day was
necessarily the right action. We see many signals, both buy and sell, as
well as hold. It is the collective accumulation of those signals that
should trigger an action, in most cases (the 8% stop loss rule being one
of the few that stands on its own).
I realize that IBD is not being paid for specific investment advice, and
likely would not want to precipitate a correction by reporting every sell
signal immediately. But I do agree, all these new rules they seem to be
coming up with, are they their interpretation of CANSLIM, or is this
actually coming from WON?
----- Original Message -----
From: Duke Miller
To: CANSLIM
Sent: Thursday, May 30, 2002 9:02 AM
Subject: [CANSLIM] Today's WebLink
Bulletin: Here we go again with some new CANSLIM tactics springing from
WON's perfect hindsight in today's WebLink on HOV. I quote:
But on May 8, the stock notched a new intraday high on quiet trade and
finished lower that day (Point 4). New highs on low volume are one sign
that demand is waning and pose as a key sell signal. However, given that
the stock was only in the 10th week of its advance, it can be worth
waiting to see if a rally still has juice. Over the next week and a half,
Hovnanian fell hard and clipped its 50-day line on heavy trade (Point 5).
On May 16, the stock closed below its 50-day for the first time since
November. But from the next day, it began clawing its way back above the
key intermediate trend line.
The first new lesson (to me, anyway) is couched in the statement, "But
(operative word) on May 8...a new intraday high on quiet trade...a key
sell signal." When I look at the chart on May 8, I see something
different: It tells me the stock closed down that day on low volume. I
thought this was a good sign. But now its a bad sign, because it reached
a new "intraday" high on light volume. Maybe I was in the men's room
during the advanced seminar when they covered this. :)
My point is, if you new about the "intraday high on low volume sell rule,"
wouldn't you have SOLD the next morning at the open? (If you didn't, then
today's Investor's Corner is for naught.)
But wait a minute, lo and behold, yet another new rule surfaces:
"However, given that the stock was only in the 10th week of its advance,
it can be worth waiting to see if the rally still has juice." Where in
the 24 Rules is that hidden? I searched the whole Investors.com for
"rally juice" and nada.
In hindsight, the fact remains, if you held HOV, you would be wise to have
sold on the new intraday high on low volume. That is, if you knew about
that rule.
I guess we learn something new every day, don't we? Where oh where did I
put that darn time machine!
Duke
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