Re: [CANSLIM] cup-without-handle; "tightness" questions

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] cup-without-handle; "tightness" questions
Date: Wed, 7 Aug 2002 11:33:26 -0500

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Hi Ann....

Thought I'd cherry pick one of your questions...i.e., "churning"

Strangely enough, I recently found that the calculations I was using to
identify "churning" on my watchlist were leading me astray. I was using a
simple mathematical test to alert me to churning in the context of "subtle
distribution at the top" so was testing for price/volume action near the 52
wk highs. Problem is, a handle can form near the 52 wk highs, so in that
context, a little "churning" so to speak may not be bad.

Long story short, churning/stalling is in reference to action *after* a
stock or index has been rising, nears its highs, then starts acting odd.
That is, large volume is no longer accompanied by significant upward price
movement. In that sense, it is subtle distribution and is a sign that the
stock may be topping and/or beginning a consolidating period.

When a stock has already formed an area of consolidation and is then forming
a handle, the same price/volume action may be nothing at all. While you'd
prefer to see "drifting down" action on each and every day in the handle, it
seems that it's not all that uncommon to see some days where there is quite
a bit of volume, but no upward price movement. In a lengthier handle, I
don't see this as an issue. If I were to see too many of these days in
succession, however, I might worry about the health of the handle and the
base.

Katherine

- ----- Original Message -----
From: "Ann" <annholly@attbi.com>
To: "CANSLIM Listserv" <canslim@lists.xmission.com>
Sent: Wednesday, August 07, 2002 9:25 AM
Subject: [CANSLIM] cup-without-handle; "tightness" questions


> I have been going through HTMMIS and compiling notes from
Investors'Corner,
> ibd &A, etc., and have a question about the cup-without-handle
> formation--especially because more of these may be formed in this M.
>
> Q: How do you know when you should wait for the handle to form? If you
wait
> too long, you might miss the breakout?
>
> Does it have to do with volume?
>
> In my notes (sorry: don't know from where), it says that with a
> cup-w/o-handle, the volume should dry up when the price comes to within
> 5-10% of its old high (R-side). And, with the cup-WITH-handle, don't we
want
> the volume strong on the R-side as the price picks up?
>
> Yet on page 161 of HTMMIS (3rd ed.), on the chart for Fairchild, the
volume
> is strong on the R-side of the cup near the rim.
>
> Q: WON (HTMMIS) talks about wanting tightness in price closes at the
bottom
> of cup with strong volume, R-side, in handle. What is the difference
between
> this and churning? Isn't churning strong volume with little or no price
> increases? Is the difference that churning happens after a strong uptrend
> (signaling topping), and tightness of closes happens during basing?
>
> Thank you ahead of time for clarifications anyone can give.
>
> Ann
>
>
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