Go to Jeff Salisbury LWGate Home Page.From: "Mike Gibbons" <mike@proactech.com>
Subject: RE: [CANSLIM] Re:Technicals vs Fundamentals (was: NVDA)
Date: Wed, 14 Aug 2002 08:31:02 -1000
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Thanks Katherine,
I seem to be getting more than my fair share of coaching lately, I hope others are benefiting also.
So if I've understood, you look to the technicals first to alert you to stocks that warrant more careful scrutiny, then look at the
fundamentals to screen for those that are CANSLIMish and finally do the real down and dirty due diligence ( I think I just invented
a new acronym - DDDD).
Now when you say "the bear has taught me to favor technicals first", does that mean "in a bear market, I favor technicals first" or
would this approach apply in all markets? If not, why not?
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 Katherine Malm
Sent: Wednesday, August 14, 2002 5:55 AM
To: canslim@lists.xmission.com
Subject: [CANSLIM] Re:Technicals vs Fundamentals (was: NVDA)
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.
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.
(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 -----
From: Mike Gibbons
To: canslim@lists.xmission.com
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
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.
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.
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.
Charley
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<DIV><SPAN class=3D510260918-14082002><FONT face=3DTahoma =
color=3D#000080=20
size=3D2>Thanks Katherine,</FONT></SPAN></DIV>
<DIV><SPAN class=3D510260918-14082002><FONT face=3DTahoma =
color=3D#000080=20
size=3D2></FONT></SPAN> </DIV>
<DIV><SPAN class=3D510260918-14082002><FONT face=3DTahoma =
color=3D#000080 size=3D2>I=20
seem to be getting more than my fair share of coaching lately, I hope =
others are=20
benefiting also. </FONT></SPAN></DIV>
<DIV><SPAN class=3D510260918-14082002><FONT face=3DTahoma =
color=3D#000080=20
size=3D2></FONT></SPAN> </DIV>
<DIV><SPAN class=3D510260918-14082002><FONT face=3DTahoma =
color=3D#000080 size=3D2>So if=20
I've understood, you look to the technicals first to alert you to stocks =
that=20
warrant more careful scrutiny, then look at the fundamentals to screen =
for those=20
that are CANSLIMish and finally do the real down and dirty due =
diligence (=20
I think I just invented a new acronym - DDDD).</FONT></SPAN></DIV>
<DIV><SPAN class=3D510260918-14082002><FONT face=3DTahoma =
color=3D#000080=20
size=3D2></FONT></SPAN> </DIV>
<DIV><SPAN class=3D510260918-14082002><FONT face=3DTahoma =
color=3D#000080 size=3D2>Now=20
when you say "the bear has taught me to favor technicals first", does =
that mean=20
"in a bear market, I favor technicals first" or would this approach =
apply in all=20
markets? If not, why not?</FONT></SPAN></DIV>
<DIV> </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 dir=3Dltr style=3D"MARGIN-RIGHT: 0px">
<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 </B>Katherine =
Malm<BR><B>Sent:</B> Wednesday, August 14, 2002 5:55 AM<BR><B>To:</B>=20
canslim@lists.xmission.com<BR><B>Subject:</B> [CANSLIM] Re:Technicals =
vs=20
Fundamentals (was: NVDA)<BR><BR></FONT></DIV>
<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,=20
but the entry/exit has to be in the short term, as that is the only =
period in=20
which fundamentals would have no influence on the stock movement. =
Intermediate=20
term and beyond, the fundamentals are what drive the business and =
create=20
value. In other words, the earnings and cash stream, reinvested in the =
business for growth or distributed to shareholders via dividends, =
create value=20
in the underlying investment. If trading in the short term, you would =
never=20
wait for the entire period of intermediate term consolidation to form, =
but=20
instead would take advantage of the current directional ride. For =
example, in=20
a cup & handle, you would essentially hitch a ride on the right =
side of a=20
cup. You would also trade, e.g., reversals from extremely oversold =
conditions,=20
regardless of the relative strength of the stock to the market. In =
some cases,=20
you'd be bottom fishing. That's fine in a short term trade because you =
don't=20
care what the next direction is going to be once you exit. In =
intermediate=20
term and beyond, the next direction is what matters the most, because =
you are=20
riding an underlying wave of movement that covers a longer period of =
time.=20
Essentially, the short term trader gets *really* close to the chart =
and looks=20
for ups/downs to ride. The intermediate term trader steps back 3 feet =
and=20
looks for the underlying movement, up or down, with the close up price =
wiggles=20
smoothed out. The long term trader steps back 7 feet and looks for =
underlying=20
movement, with most all 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=20
selling because fundamental indicators don't tell you that sales and =
profits=20
are deteriorating until after the fact. Look at any highflier from the =
last=20
Bull. Take CSCO as example. At the time the price peaked around 80-85 =
in 2000,=20
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=20
later 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=20
market was in an intermediate term rally within the longer term bear. =
That=20
means the exits are designed to protect capital. Despite a good =
company, the=20
majority of stocks eventually get caught in the downdraft. However, if =
you are=20
in the habit of catching things as they begin their ascent and the =
market as a=20
whole moves from Bear rally mode to sustainable Bull mode, you're on =
for the=20
ride already. That will allow you to stay with a winning position much =
longer,=20
despite the 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>=
=20
</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=20
size=3D2>an 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=20
universally true then can't the lazy one's among us (and I include =
myself in=20
that 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=20
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=20
that the technicals are more important than the fundamentals in a =
bear=20
market. I have now observed this to be true on numerous recent =
occasions,=20
but my first impulse is to look for fundamental excuses for a =
falling=20
stock price. <BR>Quoting from a book I am reading, "The =
fundamental work=20
answers the question <I>what,</I> and the technical side of the =
equation=20
answers the question <I>when." </I>, points out how important it =
is to=20
have all the facts. <BR>Thanks for calling my attention to the SEC =
investigation. It is so discouraging to learn of these repeated =
accounting=20
problems. One of these days I will stop believing in Santa Claus.=20
<BR><BR>Charley</FONT>=20
</FONT></BLOCKQUOTE></BLOCKQUOTE></BLOCKQUOTE></BODY></HTML>
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