[CANSLIM] Breakout Blues

From: "J. Lobatto" <jlobatto@nyc.rr.com>
Subject: [CANSLIM] Breakout Blues
Date: Wed, 21 Aug 2002 17:40:44 -0400
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To expand on the "are there too many Canslimers" out there, Here's what =
I note is going on recently. Breakouts have been far less successful and =
lasting than the bounce back of "oversold" stocks. WON has always =
maintained that one of the reasons for purchasing a stock at a new high =
is that there is no overhead supply to contend with. On the face of it =
this argument makes sense. However, things seem to be a bit topsy-turvy =
recently. It appears that on breakouts, you now get a tremendous amount =
of what I'll call "underfoot" supply (vs. overhead, get it?). All the =
Canslim folks and the pure technically oriented and/or momentum players =
jump into the few breakouts we see and drive them up beyond the pivot =
point. At the first hint of weakness (which for the paranoid may be =
orchestrated by market makers or specialists), a few of the momentum =
players sell, this begets further weakness until the pivot point is =
violated and finally perhaps the 8% stop holdouts.=20

At the moment, it actually seems safer to purchase stocks bouncing back =
from lower levels than to try and grab breakouts. Perhaps the rationale =
is that when a stock quickly drops from 60 down to 20, those still in =
the stock are so shell shocked they probably won't sell at all, and =
would rather go down with the ship. When the stock starts to climb back, =
these same people think. Hey, I didn't sell out at 20, so why dump it =
now at 27. Let's hold on and see what happens....

This is not to advocate buy low/sell high bargain hunting, but just a =
view of why CANSLIM may be a tough way to make money until we get lots =
of daily breakouts and all the cash devoted to various forms of the =
strategy gets spread out over a large group of stocks rather than the 4 =
or 5 breakouts a day we see now.



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<DIV><FONT face=3DArial color=3D#0000ff>To expand on the "are there too =
many=20
Canslimers" out there, Here's what I note is going on recently. =
Breakouts have=20
been far less successful and lasting than the bounce back of "oversold" =
stocks.=20
WON has always maintained that one of the reasons for purchasing a stock =
at a=20
new high is that there is no overhead supply to contend with. On the =
face of it=20
this argument makes sense. However, things seem to be a bit topsy-turvy=20
recently. It appears that on breakouts, you now get a tremendous amount =
of what=20
I'll call "underfoot" supply&nbsp;(vs. overhead, get it?). All the =
Canslim folks=20
and the pure technically oriented and/or momentum players jump into the =
few=20
breakouts we see and drive them up&nbsp;beyond the pivot point. At the =
first=20
hint of weakness (which for the paranoid may be orchestrated by market =
makers or=20
specialists), a few of the momentum players sell, this begets further =
weakness=20
until the pivot point is violated and finally perhaps the 8% stop =
holdouts.=20
</FONT></DIV>
<DIV><FONT face=3DArial color=3D#0000ff></FONT>&nbsp;</DIV>
<DIV><FONT face=3DArial color=3D#0000ff>At the moment, it actually seems =
safer to=20
purchase stocks bouncing back from lower levels than to try and grab =
breakouts.=20
Perhaps the rationale is that when a stock quickly drops from 60 down to =
20,=20
those still in the stock are so shell shocked they probably won't sell =
at all,=20
and would rather go down with the ship. When the stock starts to climb =
back,=20
these same people think. Hey, I didn't sell out at 20, so why dump it =
now at 27.=20
Let's hold on and see what happens....</FONT></DIV>
<DIV><FONT face=3DArial color=3D#0000ff></FONT>&nbsp;</DIV>
<DIV><FONT face=3DArial color=3D#0000ff>This is not to advocate buy =
low/sell high=20
bargain hunting, but just a view of why CANSLIM may be a tough way to =
make money=20
until we get lots of daily breakouts and all the cash devoted to various =
forms=20
of the strategy gets spread out over a large group of stocks rather than =
the 4=20
or 5 breakouts a day we see now.</FONT></DIV>
<DIV><FONT face=3DArial color=3D#0000ff></FONT>&nbsp;</DIV>
<DIV>&nbsp;</DIV></BODY></HTML>

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