Go to Jeff Salisbury LWGate Home Page.From: "Tom Worley" <stkguru@bellsouth.net>
Subject: Re: [CANSLIM] stop losses and profits
Date: Fri, 16 Aug 2002 22:12:10 -0400
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Mike, I will chime in on your original question. Because I buy for my
personal investing only small and micro cap stocks, many thinly traded and
most lower priced, I rarely can use a hard stop loss. But I do try to set a
stop loss point at the time of purchase (that's the best time because at
that moment you are thinking more in terms of how much you are about to
make, not how much you might lose, so emotionally easier for me to set a
stop loss unemotionally).
I tend to be aggressive in my buying, for various reasons, so often
(usually) am buying while the stock still is basing. Because I am buying
stocks that are often thinly traded, sometimes with a sizable spread, I
frequently buy using limit orders. I try to buy at or near the bottom of the
base to give me an extra cushion against time and risk, since I am
anticipating the eventual b/o.
All that said, my initial stop is typically set just under the bottom of the
base. This can allow me sometimes a stop of only 3-5% depending on how I
picked the stock up. I often buy only a partial position, then add to it as
I see the stock breaking out.
I will not normally alter my mental stop loss point unless and until I am up
20% from my average price. Once that is reached, I set a stop loss about 15%
below the then current price, and will move it up further as the price gains
altitude. But at times when I was determined to sell a portion of a high
flyer (EPIQ was one example) I have maintained a stop loss as tight as 1%
for over a week before being hit. But that was when I wanted to sell some,
and was greedy enough to want the best possible price without a clue as to
how much higher it might yet go. So I kept the stop very tight and raised it
daily until I finally sold.
- ----- Original Message -----
From: <michael_niemotka@baxter.com>
To: <canslim@lists.xmission.com>
Sent: Friday, August 16, 2002 3:54 PM
Subject: Re: [CANSLIM] stop losses and profits
Katherine,
I knew I could count on you for a good answer. As a follow up to your
answer #4, if you made 10-15% in one week, how low would you allow the
stock to drop on low volume and still buy more, as opposed to selling out?
Put another way, if it ran up 15% in a week, would you allow it to go below
your original buy point, even if it was at low volume?
Have a great weekend everyone!
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
"Katherine Malm"
<kmalm@earthlink.net> To:
canslim@lists.xmission.com
Sent by: cc:
owner-canslim@lists.xm Subject: Re: [CANSLIM]
stop losses and profits
ission.com
08/16/2002 02:31 PM
Please respond to
canslim
Hi Nancy,
Let me try and clear up some of your confusion:
1. A stock's "rise" does not occur *in* a base, but *between* bases. While
the price will fluctuate up and down within the base itself, the amount of
fluctuation will vary depending on the severity of correction and the time
it takes to form the area of consolidation. The stock is essentially
*absorbing* the gains of its previous advance.
2. When you purchase a stock, you will always purchase it as it *breaks
out*
of that base. This preferred buy point is referred to as the "pivot" and is
again defined by the pattern that the base forms.
4. When a stock begins a healthy rising pattern after it breaks out, it can
rise *any* amount before it consolidates (bases) again. There is no hard
and
fast rule as to how much it will rise before basing, though WON suggests
that if it is >=25%, the next base would then be considered a "new stage
base." This is only important in that his studies show that most stocks
can't muster the oomph to keep going after they've reached the 3rd or 4th
stage base.
3. Mike's question about a sell rule is not dependent on *which* base in
the
base count we are evaluating. A base is a base. If the stock breaks out as
it should and begins to rise, how are you going to handle selling it
when/if
the time comes?
4. WON suggests that, if you buy correctly at the pivot (or no more than 5%
above it), that you should never have to suffer a loss of more than 8%.
This
is because, in his studies, he has found that a healthy stock never falls
more than 8% below the pivot before continuing a healthy advance.
5. Mike's question, specifically, was "if a stock breaks out of a base,
then
rises 10-15%, then falls back, where do you place your sell stop? 8% below
your buy price or something other than that?" In other words, should you be
willing to accept *any* loss if a stock has managed to rise 10-15% in 6
wks,
then falls back to where you bought it. My vote is, if it takes 6 wks to
rise and then erases the entire advance, I don't want to take an 8% loss.
If
it rose 10-15% in *one* week and then fell back on low volume, I'd look at
that as "normal" and might consider it a second chance to *buy* more.
Katherine
- ----- Original Message -----
From: "NANCY POLCARO" <zillagirl@msn.com>
To: <canslim@lists.xmission.com>
Sent: Friday, August 16, 2002 1:47 PM
Subject: Re: [CANSLIM] stop losses and profits
| Katherine-let me see if I am following correctly please. My question is
| that previously I understood that after the third rise in a base
formation
a
| stock may correct by dropping below the previous base and then starting
up
| again if all is well with the stock. Then the bases start to be
recounted
| again. In this case, if you just bought in during the third rise in the
| base, which from my understanding would probably go up between 15%(Mikes
| figure) and 25%( the amount of each rise in a base of a healthy stock)
you
| would sell(not you personally but someone with my amount of experience or
| the like) before the 8% drop, to protect your gain. Then follow the
stock
| and watch for a buy in again at some point depending on how the stock
acts
| from this point on? Is that close to correct ??? Thanks for your
thoughts
| Nancy
|
|
| >From: "Katherine Malm" <kmalm@earthlink.net>
| >Reply-To: canslim@lists.xmission.com
| >To: <canslim@lists.xmission.com>
| >Subject: Re: [CANSLIM] stop losses and profits
| >Date: Fri, 16 Aug 2002 13:09:30 -0500
| >
| >HI Mike,
| >
| >I think you'll get a hundred different answers on this one, so I'll just
| >answer from my personal point of view.
| >
| >If a stock breaks out of a well-formed base on volume, then takes 6
weeks
| >to
| >rise 10 or 15 percent, then I sure wouldn't want to risk 8% loss at that
| >point, even if it were falling back "normally" as you suggest. To me
that
| >means that no sell signals were triggered on the way up, and that the
| >general pattern included up days on higher volume than down days,
support
| >at
| >the 50 day moving average, etc. My personal preference, however, would
be
| >to
| >move my stop to breakeven or slightly below (3-4% max, depending on
market
| >conditions) if the stock had risen like this.
| >
| >Katherine
| >
| >
| >----- Original Message -----
| >From: <michael_niemotka@baxter.com>
| >To: <canslim@lists.xmission.com>
| >Sent: Friday, August 16, 2002 9:17 AM
| >Subject: [CANSLIM] stop losses and profits
| >
| >
| >| Group,
| >|
| >| In reading WON, he makes a statement that you should never let a stock
in
| >| which you are up 10-15% turn into a loss, but I was wondering you have
| >| interpreted that along with the sell at no more than an 8% loss rule.
| >|
| >| Say you buy a stock, at a breakout, and it rises 10-15% over a few (6+
| >| weeks), and then is started to correct....Do you sell at you break
even
| >| point, or do you allow it to go to your 8% loss point before selling?
| >This
| >| is assuming that the stock is NOT giving any strong sell signals, but
| >| appears to be pulling back "normally".
| >|
| >| 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
| >|
| >|
| >|
| >| -
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