Go to Jeff Salisbury LWGate Home Page.From: "Tom Worley" <stkguru@bellsouth.net>
Subject: Re: [CANSLIM] Breakout Blues
Date: Thu, 22 Aug 2002 07:41:43 -0400
Previous Article (by Author): Re: [CANSLIM] GISX "Tom Worley"
Articles sorted by: [Date]
[Author]
[Subject]
This is a multi-part message in MIME format. - ------=_NextPart_000_0054_01C249AF.5C7BB1F0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Robert, truth is, for those exercising good CANSLIM discipline and = adherence at least to the major rules, they have spent the past two = years almost continuously in cash. There have been some short rallies = where partial investment might have been justified, but only that. Once = it was clear that a bear market was established and continuing, then a = better adaptation was to turn CANSLIM upside down, and look for short = candidates. Much riskier, not for the novice (except on paper), but = there was some serious money to make in this time period that way. Maintaining cash, and protecting principal, is far less work than trying = to make money on the long side during a bear market. - ----- Original Message -----=20 From: RWElmer@aol.com=20 To: canslim@lists.xmission.com=20 Sent: Thursday, August 22, 2002 3:08 AM Subject: Re: [CANSLIM] Breakout Blues Greetings All,=20 The discussion of Breakouts deals with the one issue I have always had = with CANSLIM (and that *does* mean that I enthusiastically embrace the = rest of it), and that's buying only on this specific pattern and its = variants. In my humble opinion there is a proper time to use this = technique, and that's when the smart money is pouring into these stocks = and there is enough of this going on that it overwhelms any short term = trading interests. (This is the stage mentioned earlier when the swing = trader transitions to momentum.) That is why volume is so important on = Breakouts. You're intelligently riding the stampede at those times. = Times like the current environment retain the memory of all the failed = breakouts from earlier in the year and create alot of uncertainty. In = retrospect, those earlier failures were influenced by the fact that the = Market was in the process of topping off the September - January rally. = Breakouts are bound to fail when M is doing this. In fact that's a = confirming indicator of a downturn, in my book, just luck IBD's search = for succeeding Breakouts is validation for a new uptrend. The question = right now is which environment are we in? We see lots of "proper" = signals to identify at least an intermediate uptrend; be they higher = highs/higher lows, breadth, volume being heavier on up days, good stocks = forming bases or breaking out and holding, etc. But the overall volume = seems to lack conviction. The fact that there is enough hesitation both = ways, while stocks continue to climb, makes me believe we are going up = for at least another couple of weeks. I remember having this same = feeling in late September '01 thinking that the Market seemed to be = saying to get in but my emotions were listening to all the arguments = against it, backed mostly by opinion. (And yes I'm aware of the irony as = I'm giving my opinion.)=20 Back to the mechanics of the failed breakouts. I think there are swing = traders who play those breakouts exactly contrary to CANSLIMmers during = times of weakness in the Market. They buy the bottom of the handles as = the trading dries up in anticipation of the eventual move. If they're = dead wrong their stops are just underneath the lows of the handle, so = losses are minor. If they're partly wrong they sell as soon as evidence = shows the pivot point resistance is going to hold. If they're right, = they sell to the CANSLIMmers' buying of the Breakout as the candle = prints start expanding. What they've gained is the move from bottom of = the handle to above the pivot point in probably a day to three's time; = plus they've sold into excellent liquidity, namely CANSLIMmers jumping = on the Breakout. At this point all that's happened is that the trader = bought up shares in anticipation of the move, the move happens and = CANSLIM buys what the traders held, then there's nobody left to buy so = the move breaks down.=20 Other swing traders don't anticipate, they wait to see the moved = confirmed and buy after the stock's first retest of the pivot point, or = even the lows of the base. The bounce back from *that* is where maybe = the swingers become mo-mos and help the move ultimately succeed. Of = course if the Market's falling apart, you'd only have the swingers = taking advantage of inexperienced buyers chasing breakouts in a sick = Market. Something none of us do here :)) In a newly healthy Market, when = the true leaders of tomorrow start to exert their dominance, then I have = no doubt CANSLIM Breakouts work exactly as WON describes.=20 That brings about another point. I wonder if it's possible to exercise a = true CANSLIM discipline right now anyway, as the types of Leaders WON = describes typically would not have surfaced in such close proximity to a = major Bear like this one; although that's speculation on my part that = others may refute. Instead I think what we are mostly doing is using = CANSLIM to find the best stocks this Market has to give, but not the = classic early Bull Leaders yet.=20 What I find encouraging with this group is that there are several people = adapting to these Market conditions and buying before the Breakouts. I = may be way off base, but I think that's recognizing and adapting to the = competition. There is a certain, well-respected small cap guru here who = I believe has done this for a long while and who seems to do this = especially well, by what I've seen. In this Market, I think it just may = require these kinds of adjustments. But I also do believe the eventual = Bull will make a genius out of WON and C&H Breakouts once again.=20 Anyway, that's my take on things. FWIW.=20 Good investing All,=20 What I find encouraging with this group is that there's the rumblings of = those looking=20 Robert W. Elmer=20 Coldwell Banker First Shasta=20 2837 Bechelli Ln.=20 Redding, CA 96002=20 RWElmer@aol.com=20 221-9556 or 1-800-348-7939 ext.156=20 www.robertelmer.com=20 - ------=_NextPart_000_0054_01C249AF.5C7BB1F0 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 6.00.2716.2200" name=3DGENERATOR> <STYLE></STYLE> </HEAD> <BODY bgColor=3D#ffffff> <DIV><FONT face=3DArial>Robert, truth is, for those exercising good = CANSLIM=20 discipline and adherence at least to the major rules, they have spent = the past=20 two years almost continuously in cash. There have been some short = rallies where=20 partial investment might have been justified, but only that. Once it was = clear=20 that a bear market was established and continuing, then a better = adaptation was=20 to turn CANSLIM upside down, and look for short candidates. Much = riskier, not=20 for the novice (except on paper), but there was some serious money to = make in=20 this time period that way.</FONT></DIV> <DIV><FONT face=3DArial></FONT> </DIV> <DIV><FONT face=3DArial>Maintaining cash, and protecting principal, is = far less=20 work than trying to make money on the long side during a bear=20 market.</FONT></DIV> <DIV><FONT face=3DArial></FONT> </DIV> <DIV style=3D"FONT: 10pt arial">----- Original Message -----=20 <DIV style=3D"BACKGROUND: #e4e4e4; font-color: black"><B>From:</B> <A=20 title=3DRWElmer@aol.com = href=3D"mailto:RWElmer@aol.com">RWElmer@aol.com</A> </DIV> <DIV><B>To:</B> <A title=3Dcanslim@lists.xmission.com=20 href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>= </DIV> <DIV><B>Sent:</B> Thursday, August 22, 2002 3:08 AM</DIV> <DIV><B>Subject:</B> Re: [CANSLIM] Breakout Blues</DIV></DIV> <DIV><BR></DIV><FONT face=3Darial,helvetica><FONT size=3D2>Greetings = All,=20 <BR><BR>The discussion of Breakouts deals with the one issue I have = always had=20 with CANSLIM (and that *does* mean that I enthusiastically embrace the = rest of=20 it), and that's buying only on this specific pattern and its variants. = In my=20 humble opinion there is a proper time to use this technique, and that's = when the=20 smart money is pouring into these stocks and there is enough of this = going on=20 that it overwhelms any short term trading interests. (This is the stage=20 mentioned earlier when the swing trader transitions to momentum.) That = is why=20 volume is so important on Breakouts. You're intelligently riding the = stampede at=20 those times. Times like the current environment retain the memory of all = the=20 failed breakouts from earlier in the year and create alot of = uncertainty. In=20 retrospect, those earlier failures were influenced by the fact that the = Market=20 was in the process of topping off the September - January rally. = Breakouts are=20 bound to fail when M is doing this. In fact that's a confirming = indicator of a=20 downturn, in my book, just luck IBD's search for succeeding Breakouts is = validation for a new uptrend. The question right now is which = environment are we=20 in? We see lots of "proper" signals to identify at least an intermediate = uptrend; be they higher highs/higher lows, breadth, volume being heavier = on up=20 days, good stocks forming bases or breaking out and holding, etc. But = the=20 overall volume seems to lack conviction. The fact that there is enough=20 hesitation both ways, while stocks continue to climb, makes me believe = we are=20 going up for at least another couple of weeks. I remember having this = same=20 feeling in late September '01 thinking that the Market seemed to be = saying to=20 get in but my emotions were listening to all the arguments against it, = backed=20 mostly by opinion. (And yes I'm aware of the irony as I'm giving my = opinion.)=20 <BR><BR>Back to the mechanics of the failed breakouts. I think there are = swing=20 traders who play those breakouts exactly contrary to CANSLIMmers during = times of=20 weakness in the Market. They buy the bottom of the handles as the = trading dries=20 up in anticipation of the eventual move. If they're dead wrong their = stops are=20 just underneath the lows of the handle, so losses are minor. If they're = partly=20 wrong they sell as soon as evidence shows the pivot point resistance is = going to=20 hold. If they're right, they sell to the CANSLIMmers' buying of the = Breakout as=20 the candle prints start expanding. What they've gained is the move from = bottom=20 of the handle to above the pivot point in probably a day to three's = time; plus=20 they've sold into excellent liquidity, namely CANSLIMmers jumping on the = Breakout. At this point all that's happened is that the trader bought up = shares=20 in anticipation of the move, the move happens and CANSLIM buys what the = traders=20 held, then there's nobody left to buy so the move breaks down. = <BR><BR>Other=20 swing traders don't anticipate, they wait to see the moved confirmed and = buy=20 after the stock's first retest of the pivot point, or even the lows of = the base.=20 The bounce back from *that* is where maybe the swingers become mo-mos = and help=20 the move ultimately succeed. Of course if the Market's falling apart, = you'd only=20 have the swingers taking advantage of inexperienced buyers chasing = breakouts in=20 a sick Market. Something none of us do here :)) In a newly healthy = Market, when=20 the true leaders of tomorrow start to exert their dominance, then I have = no=20 doubt CANSLIM Breakouts work exactly as WON describes. <BR><BR>That = brings about=20 another point. I wonder if it's possible to exercise a true CANSLIM = discipline=20 right now anyway, as the types of Leaders WON describes typically would = not have=20 surfaced in such close proximity to a major Bear like this one; although = that's=20 speculation on my part that others may refute. Instead I think what we = are=20 mostly doing is using CANSLIM to find the best stocks this Market has to = give,=20 but not the classic early Bull Leaders yet. <BR><BR>What I find = encouraging with=20 this group is that there are several people adapting to these Market = conditions=20 and buying before the Breakouts. I may be way off base, but I think = that's=20 recognizing and adapting to the competition. There is a certain, = well-respected=20 small cap guru here who I believe has done this for a long while and who = seems=20 to do this especially well, by what I've seen. In this Market, I think = it just=20 may require these kinds of adjustments. But I also do believe the = eventual Bull=20 will make a genius out of WON and C&H Breakouts once again. = <BR><BR>Anyway,=20 that's my take on things. FWIW. <BR><BR>Good investing All, <BR><BR>What = I find=20 encouraging with this group is that there's the rumblings of those = looking=20 <BR><BR><B>Robert W. Elmer <BR>Coldwell Banker First Shasta <BR>2837 = Bechelli=20 Ln. <BR>Redding, CA 96002</B> <BR></FONT><FONT lang=3D0 face=3DArial = color=3D#0080ff=20 size=3D2 FAMILY=3D"SANSSERIF"><B>RWElmer@aol.com</FONT><FONT lang=3D0 = face=3DArial=20 color=3D#000000 size=3D2 FAMILY=3D"SANSSERIF"></B> <BR></FONT><FONT = lang=3D0 face=3DArial=20 color=3D#0000ff size=3D2 FAMILY=3D"SANSSERIF"><B>221-9556 or = 1-800-348-7939=20 ext.156</FONT><FONT lang=3D0 face=3DArial color=3D#000000 size=3D2=20 FAMILY=3D"SANSSERIF"></B> <BR></FONT><FONT lang=3D0 face=3DArial = color=3D#800080 size=3D2=20 FAMILY=3D"SANSSERIF"><B>www.robertelmer.com</B></FONT> = </FONT></BODY></HTML> - ------=_NextPart_000_0054_01C249AF.5C7BB1F0-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email.
Previous Article (by Author): Re: [CANSLIM] GISX "Tom Worley"
Articles sorted by: [Date]
[Author]
[Subject]