[CANSLIM] Breakouts

From: michael_niemotka@baxter.com
Subject: [CANSLIM] Breakouts
Date: Thu, 27 Jun 2002 08:59:12 -0500

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All,

I have  just finished reading the 24 Essential Rules, and am starting on
the 3rd edition of How to make money... and I have a couple of question
regarding breakouts and adding shares to a position.

1. WON talks about only purchasing 1/2 of your position at the breakout,
and then if the stock moves up 2-3% you can add a bit more, etc. But the
part that confuses me is : what is the stock breaks out, and rises 6% on
the breakout. Then by the overextended rule, you would not want to buy
more, since it is more than 5% over the pivot price.  Would you end up
waiting for the stock to go thru a pullback, and then buy more?

It seems to me, that one of the trickiest parts to using this system is
being able to determine if a stock is pulling back in a normal fashion, or
if it is headed down.

2. If you buy at the first breakout, and the stock rises, lets say 15%, and
then starts to go into a new cwh , that might consolidate 20-30%, would you
end up watching the charts and sell out and lock in profits, then buy back
in at the next breakout? what about the case where the stock is up 30% from
the first breakout. Do you end up riding it down to 0% gain,  (not selling
because it is not a 7-8% loss) and hang on for the long term?

TIA

Mike

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



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