Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: [CANSLIM] Re:Technicals vs Fundamentals (was: NVDA)
Date: Wed, 14 Aug 2002 10:55:11 -0500
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Hi Mike,
Thought I might first clear up Charley's reference to my comment about =
technicals. As I see it, technicals have *always* been important, but =
the Bear has taught me to favor technicals first in my analysis/mining =
techniques. This is a subtle shift in my thinking, maybe due to the Bear =
and maybe due to a new understanding of the CANSLIM discipline which =
continues to evolve day by day.=20
Your comments brought some things to mind:
(1) You can always make money using technicals as your only indicator, =
but the entry/exit has to be in the short term, as that is the only =
period in which fundamentals would have no influence on the stock =
movement. Intermediate term and beyond, the fundamentals are what drive =
the business and create value. In other words, the earnings and cash =
stream, reinvested in the business for growth or distributed to =
shareholders via dividends, create value in the underlying investment. =
If trading in the short term, you would never wait for the entire period =
of intermediate term consolidation to form, but instead would take =
advantage of the current directional ride. For example, in a cup & =
handle, you would essentially hitch a ride on the right side of a cup. =
You would also trade, e.g., reversals from extremely oversold =
conditions, regardless of the relative strength of the stock to the =
market. In some cases, you'd be bottom fishing. That's fine in a short =
term trade because you don't care what the next direction is going to be =
once you exit. In intermediate term and beyond, the next direction is =
what matters the most, because you are riding an underlying wave of =
movement that covers a longer period of time. Essentially, the short =
term trader gets *really* close to the chart and looks for ups/downs to =
ride. The intermediate term trader steps back 3 feet and looks for the =
underlying movement, up or down, with the close up price wiggles =
smoothed out. The long term trader steps back 7 feet and looks for =
underlying movement, with most all of the wiggles smoothed out.
(2) If you have 200 stocks with identical technicals and you are trading =
intermediate term and beyond, how would you choose between them? =
Fundamentals and due diligence allow you to assess the potential return =
on investment given (1) above. That, in turn, allows you to eliminate =
some and rank the remainder.
(3) WON's wording is "Buy on the fundamentals, sell on the technicals" =
meaning buy based on the fundamental characteristics of the company =
using technicals for entry, but on the flipside, consider only =
technicals when selling because fundamental indicators don't tell you =
that sales and profits are deteriorating until after the fact. Look at =
any highflier from the last Bull. Take CSCO as example. At the time the =
price peaked around 80-85 in 2000, the fundamentals looked peachy. ROE, =
sales/earnings growth, etc. The technicals topped and began to slide, =
but it wasn't until 3 or 4 quarters later that it be came apparent that =
fundamentals were stinky.=20
(4) When you select and enter a stock well under intermediate term =
rules, the longer the underlying upward movement in the market, the more =
likely it is that you will have a "big winner." During the Bear, the =
upward waves have been short-lived. The best you could hope for was an =
excellent move while the market was in an intermediate term rally within =
the longer term bear. That means the exits are designed to protect =
capital. Despite a good company, the majority of stocks eventually get =
caught in the downdraft. However, if you are in the habit of catching =
things as they begin their ascent and the market as a whole moves from =
Bear rally mode to sustainable Bull mode, you're on for the ride =
already. That will allow you to stay with a winning position much =
longer, despite the near term price wiggles.
Katherine
----- Original Message -----=20
From: Mike Gibbons=20
To: canslim@lists.xmission.com=20
Sent: Sunday, August 11, 2002 4:47 AM
Subject: RE: [CANSLIM] NVDA
I didn't realize what a pandora's box I was opening , but I'm glad I =
did raise the lid on NVDA.
What I learned was:
a.. an excellent "C" and "A" can be misleading=20
b.. The technicals such as RS, up/down volume, etc were indicators =
that there's something rotten in the state of Denmark, despite the =
fundamentals
Which would appear to confirm that everything you need to know is =
already in the tape.
Question: is this only true in a bear market? (I'm referring to =
Katherine's statement quoted by Charley), and if it's universally true =
then can't the lazy one's among us (and I include myself in that =
category) simply cheat by swing trading patterns, not CANSLIM =
fundamentals?
Aloha,
Mike Gibbons
Proactive Technologies, LLC
http://www.proactech.com
-----Original Message-----
From: owner-canslim@lists.xmission.com =
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Chazmoore@aol.com
Sent: Saturday, August 10, 2002 5:49 PM
To: canslim@lists.xmission.com
Subject: [CANSLIM] NVDA
A week or so ago, (time passes so fast), Katherine made a statement =
to the effect that the technicals are more important than the =
fundamentals in a bear market. I have now observed this to be true on =
numerous recent occasions, but my first impulse is to look for =
fundamental excuses for a falling stock price.=20
Quoting from a book I am reading, "The fundamental work answers the =
question what, and the technical side of the equation answers the =
question when." , points out how important it is to have all the facts.=20
Thanks for calling my attention to the SEC investigation. It is so =
discouraging to learn of these repeated accounting problems. One of =
these days I will stop believing in Santa Claus.=20
Charley=20
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<DIV>
<DIV>Hi Mike,</DIV>
<DIV> </DIV>
<DIV>Thought I might first clear up Charley's reference to my comment =
about=20
technicals. As I see it, technicals have *always* been important, but =
the Bear=20
has taught me to favor technicals first in my analysis/mining =
techniques. This=20
is a subtle shift in my thinking, maybe due to the Bear and maybe due to =
a new=20
understanding of the CANSLIM discipline which continues to evolve =
day by=20
day. </DIV>
<DIV> </DIV>
<DIV>Your comments brought some things to mind:</DIV>
<DIV> </DIV>
<DIV>(1) You can always make money using technicals as your only =
indicator, but=20
the entry/exit has to be in the short term, as that is the only period =
in which=20
fundamentals would have no influence on the stock movement. Intermediate =
term=20
and beyond, the fundamentals are what drive the business and create =
value. In=20
other words, the earnings and cash stream, reinvested in the business =
for growth=20
or distributed to shareholders via dividends, create value in the =
underlying=20
investment. If trading in the short term, you would never wait for the =
entire=20
period of intermediate term consolidation to form, but instead would =
take=20
advantage of the current directional ride. For example, in a cup & =
handle,=20
you would essentially hitch a ride on the right side of a cup. You would =
also=20
trade, e.g., reversals from extremely oversold conditions, regardless of =
the=20
relative strength of the stock to the market. In some cases, you'd be =
bottom=20
fishing. That's fine in a short term trade because you don't care what =
the next=20
direction is going to be once you exit. In intermediate term and beyond, =
the=20
next direction is what matters the most, because you are riding an =
underlying=20
wave of movement that covers a longer period of time. Essentially, the =
short=20
term trader gets *really* close to the chart and looks for ups/downs to =
ride.=20
The intermediate term trader steps back 3 feet and looks for the =
underlying=20
movement, up or down, with the close up price wiggles smoothed out. The =
long=20
term trader steps back 7 feet and looks for underlying movement, with =
most all=20
of the wiggles smoothed out.</DIV>
<DIV> </DIV>
<DIV>(2) If you have 200 stocks with identical technicals and you are =
trading=20
intermediate term and beyond, how would you choose between them? =
Fundamentals=20
and due diligence allow you to assess the potential return on investment =
given=20
(1) above. That, in turn, allows you to eliminate some and rank the=20
remainder.</DIV>
<DIV> </DIV>
<DIV>(3) WON's wording is "Buy on the fundamentals, sell on the =
technicals"=20
meaning buy based on the fundamental characteristics of the company =
using=20
technicals for entry, but on the flipside, consider only technicals when =
selling=20
because fundamental indicators don't tell you that sales and profits are =
deteriorating until after the fact. Look at any highflier from the last =
Bull.=20
Take CSCO as example. At the time the price peaked around 80-85 in 2000, =
the fundamentals looked peachy. ROE, sales/earnings growth, etc. =
The=20
technicals topped and began to slide, but it wasn't until 3 or 4 =
quarters later=20
that it be came apparent that fundamentals were stinky. </DIV>
<DIV> </DIV>
<DIV>(4) When you select and enter a stock well under intermediate term =
rules,=20
the longer the underlying upward movement in the market, the more likely =
it is=20
that you will have a "big winner." During the Bear, the upward waves =
have been=20
short-lived. The best you could hope for was an excellent move while the =
market=20
was in an intermediate term rally within the longer term bear. That =
means the=20
exits are designed to protect capital. Despite a good company, the =
majority of=20
stocks eventually get caught in the downdraft. However, if you are in =
the habit=20
of catching things as they begin their ascent and the market as a whole =
moves=20
from Bear rally mode to sustainable Bull mode, you're on for the ride =
already.=20
That will allow you to stay with a winning position much longer, despite =
the=20
near term price wiggles.</DIV>
<DIV> </DIV>
<DIV>Katherine</DIV></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=3Dmikegibbons@proactech.com=20
href=3D"mailto:mikegibbons@proactech.com">Mike Gibbons</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> Sunday, August 11, 2002 =
4:47=20
AM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> RE: [CANSLIM] =
NVDA</DIV>
<DIV><BR></DIV>
<DIV><SPAN class=3D500042409-11082002><FONT face=3DTahoma =
color=3D#000080 size=3D2>I=20
didn't realize what a pandora's box I was opening , but I'm glad I did =
raise=20
the lid on NVDA.</FONT></SPAN></DIV>
<DIV><SPAN class=3D500042409-11082002><FONT face=3DTahoma =
color=3D#000080=20
size=3D2></FONT></SPAN> </DIV>
<DIV><SPAN class=3D500042409-11082002><FONT face=3DTahoma =
color=3D#000080=20
size=3D2>What I learned was:</FONT></SPAN></DIV>
<UL>
<LI><SPAN class=3D500042409-11082002><FONT face=3DTahoma =
color=3D#000080 size=3D2>an=20
excellent "C" and "A" can be misleading</FONT></SPAN>=20
<LI><SPAN class=3D500042409-11082002></SPAN><FONT face=3DTahoma =
color=3D#000080=20
size=3D2><SPAN class=3D500042409-11082002>The technicals such as RS, =
up/down=20
volume, etc were indicators that there's something rotten in the =
state of=20
Denmark, despite the fundamentals</SPAN></FONT></LI></UL>
<DIV><FONT face=3DTahoma color=3D#000080 size=3D2><SPAN=20
class=3D500042409-11082002>Which would appear to confirm that =
everything you=20
need to know is already in the tape.</SPAN></FONT></DIV>
<DIV><FONT face=3DTahoma color=3D#000080 size=3D2><SPAN=20
class=3D500042409-11082002></SPAN></FONT> </DIV>
<DIV><FONT face=3DTahoma color=3D#000080 size=3D2><SPAN=20
class=3D500042409-11082002>Question: is this only true in a bear =
market? (I'm=20
referring to Katherine's statement quoted by Charley), and if it's =
universally=20
true then can't the lazy one's among us (and I include myself in that=20
category) simply cheat by swing trading patterns, not CANSLIM=20
fundamentals?</SPAN></FONT></DIV>
<DIV><FONT face=3DTahoma color=3D#000080 size=3D2><SPAN=20
class=3D500042409-11082002></SPAN></FONT> </DIV>
<DIV><FONT face=3DTahoma color=3D#000080 size=3D2>Aloha,</FONT></DIV>
<DIV><FONT face=3DTahoma color=3D#000080 size=3D2></FONT> </DIV>
<DIV><FONT face=3DTahoma color=3D#000080 size=3D2>Mike =
Gibbons</FONT></DIV>
<DIV><FONT face=3DTahoma color=3D#000080 size=3D2>Proactive =
Technologies,=20
LLC</FONT></DIV>
<DIV><FONT face=3DTahoma color=3D#000080=20
size=3D2>http://www.proactech.com</FONT></DIV>
<BLOCKQUOTE>
<DIV class=3DOutlookMessageHeader dir=3Dltr align=3Dleft><FONT =
face=3DTahoma=20
size=3D2>-----Original Message-----<BR><B>From:</B>=20
owner-canslim@lists.xmission.com=20
[mailto:owner-canslim@lists.xmission.com]<B>On Behalf Of=20
</B>Chazmoore@aol.com<BR><B>Sent:</B> Saturday, August 10, 2002 5:49 =
PM<BR><B>To:</B> canslim@lists.xmission.com<BR><B>Subject:</B> =
[CANSLIM]=20
NVDA<BR><BR></FONT></DIV><FONT face=3Darial,helvetica><FONT =
size=3D2>A week or=20
so ago, (time passes so fast), Katherine made a statement to the =
effect that=20
the technicals are more important than the fundamentals in a bear =
market. I=20
have now observed this to be true on numerous recent occasions, but =
my first=20
impulse is to look for fundamental excuses for a falling stock =
price.=20
<BR>Quoting from a book I am reading, "The fundamental work answers =
the=20
question <I>what,</I> and the technical side of the equation answers =
the=20
question <I>when." </I>, points out how important it is to have all =
the=20
facts. <BR>Thanks for calling my attention to the SEC investigation. =
It is=20
so discouraging to learn of these repeated accounting problems. One =
of these=20
days I will stop believing in Santa Claus. <BR><BR>Charley</FONT>=20
</FONT></BLOCKQUOTE></BLOCKQUOTE></BODY></HTML>
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