Re: [CANSLIM] Breakout Blues

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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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.



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<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&#8217;t that change the way stocks =
behaved at the=20
breakout? Is there anyone in the group&nbsp;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&nbsp;(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&nbsp;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>&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=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>&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=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>&nbsp;</DIV>
  <DIV>&nbsp;</DIV></BLOCKQUOTE></BODY></HTML>

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