Go to Jeff Salisbury LWGate Home Page.From: "Robert Mansk" <robert.mansk@verizon.net>
Subject: Re: [CANSLIM] Breakout Blues
Date: Wed, 21 Aug 2002 20:54:33 -0400
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This is a multi-part message in MIME format. - ------=_NextPart_000_0055_01C24954.F405DA60 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable I was wondering if something else might be explaining the failure of = breakouts. One of the foundations of CANSLIM is that there are weak = hands and there are strong hands. What if the bear market we just went = through substantially reduced the number of weak hand out there? I know = a number of people who sold everything in July, thinking the Dow was = heading to 5000. Presumably, these people would be the weak hands.=20 If we lost enough of them, wouldn't that change the way stocks behaved = at the breakout? Is there anyone in the group who remembers a similar = action after other major market downturns? Bob ----- Original Message -----=20 From: J. Lobatto=20 To: canslim@lists.xmission.com=20 Sent: Wednesday, August 21, 2002 5:40 PM Subject: [CANSLIM] Breakout Blues 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. - ------=_NextPart_000_0055_01C24954.F405DA60 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable <!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> <HTML><HEAD> <META http-equiv=3DContent-Type content=3D"text/html; = charset=3Diso-8859-1"> <META content=3D"MSHTML 5.50.4807.2300" name=3DGENERATOR> <STYLE></STYLE> </HEAD> <BODY bgColor=3D#ffffff> <DIV><FONT face=3DArial size=3D2><FONT face=3DArial size=3D2> <P>I was wondering if something else might be explaining the failure of=20 breakouts. One of the foundations of CANSLIM is that there are weak = hands and=20 there are strong hands. What if the bear market we just went through=20 substantially reduced the number of weak hand out there? I know a number = of=20 people who sold everything in July, thinking the Dow was heading to = 5000.=20 Presumably, these people would be the weak hands. </P> <P>If we lost enough of them, wouldn’t that change the way stocks = behaved at the=20 breakout? Is there anyone in the group who remembers a similar = action after=20 other major market downturns?</P> <P>Bob</P></FONT></FONT></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=3Djlobatto@nyc.rr.com href=3D"mailto:jlobatto@nyc.rr.com">J. = Lobatto</A>=20 </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> Wednesday, August 21, = 2002 5:40=20 PM</DIV> <DIV style=3D"FONT: 10pt arial"><B>Subject:</B> [CANSLIM] Breakout = Blues</DIV> <DIV><BR></DIV> <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"=20 stocks. WON has always maintained that one of the reasons for = purchasing a=20 stock at a new high is that there is no overhead supply to contend = with. On=20 the face of it this argument makes sense. However, things seem to be a = bit=20 topsy-turvy recently. It appears that on breakouts, you now get a = tremendous=20 amount of what I'll call "underfoot" supply (vs. overhead, get = it?). All=20 the Canslim folks and the pure technically oriented and/or momentum = players=20 jump into the few breakouts we see and drive them up beyond the = pivot=20 point. At the first hint of weakness (which for the paranoid may be=20 orchestrated by market makers or specialists), a few of the momentum = players=20 sell, this begets further weakness until the pivot point is violated = and=20 finally perhaps the 8% stop holdouts. </FONT></DIV> <DIV><FONT face=3DArial color=3D#0000ff></FONT> </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=20 breakouts. Perhaps the rationale is that when a stock quickly drops = from 60=20 down to 20, those still in the stock are so shell shocked they = probably won't=20 sell at all, and would rather go down with the ship. When the stock = starts to=20 climb back, these same people think. Hey, I didn't sell out at 20, so = why dump=20 it now at 27. Let's hold on and see what happens....</FONT></DIV> <DIV><FONT face=3DArial color=3D#0000ff></FONT> </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=20 money until we get lots of daily breakouts and all the cash devoted to = various=20 forms of the strategy gets spread out over a large group of stocks = rather than=20 the 4 or 5 breakouts a day we see now.</FONT></DIV> <DIV><FONT face=3DArial color=3D#0000ff></FONT> </DIV> <DIV> </DIV></BLOCKQUOTE></BODY></HTML> - ------=_NextPart_000_0055_01C24954.F405DA60-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email.
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