Re: [CANSLIM] CSTR CVH Failed breakouts Post Analysis

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] CSTR CVH Failed breakouts Post Analysis
Date: Thu, 5 Sep 2002 08:10:02 -0500
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Hi James,

I'll add to John's "thanks for a great post" as it's info like this that
helps bring out the more subtle clues when making buy/sell decisions. I've
only recently gotten into the habit of looking at hourly charts, as DGO
didn't have this feature in the older version. Your post is a great insight
as to how this can be helpful as a sanity check on price/volume action.

Here's a resource I use regularly which also helps pick up on the more
subtle aspects of  buying/selling in the market:

http://makeashorterlink.com/?J1B8643B1 (Thomspon I-Watch, view 8/22)


This shows the trend in institutional vs. retail buying/selling over a
period of time. The link above is for the view on 8/22, where it's clear
there's heavy sell interest by institutions. (that day, about 3:1
Institutions:Retail activity, and 2:1 for the month to that point.) Click to
a monthly view and the heavy sell interest shows up leading into the gap
down.

http://makeashorterlink.com/?N6C8523B1 (view to date, 1 month)

Katherine

- ----- Original Message -----
From: "John Calkins" <jcalkins@olypen.com>
To: <canslim@lists.xmission.com>
Sent: Thursday, September 05, 2002 7:16 AM
Subject: Re: [CANSLIM] CSTR CVH Failed breakouts Post Analysis


| Hi James,
|
| Thanks for your incredible responce to my Failed Breakout and Stops!  I've
| tried to look at the intraday charts before but didn't take them seriously
| enough I guess.  I have noted before that big moves on high volume during
| the day seemed to be connected to some news or something, but was afraid
it
| was just market makers or day trading.  I can't get more than 10 days ago
at
| BigCharts for a history on CSTR for the time frame but I think I
understand
| that when you see a CWH pattern within a 5 day  then watch for a handle to
| form or breakdown or up in price with high volume.  Do you look at
BigCharts
| for this intraday charting and what is you setting preference, such as 5
or
| 10 day/ 1 hour or 15 min.?  I had been getting my volume/price information
| each day from my telephone service with TD Waterhouse but it looks like
your
| intra-day charts work much better.
|
|
|
|
|
|
| ---- Original Message -----
| From: "James Bond" <james_bond_3rd@yahoo.com>
| To: <canslim@lists.xmission.com>
| Sent: Tuesday, September 03, 2002 6:44 PM
| Subject: Re: [CANSLIM] CSTR CVH Failed breakouts Post Analysis
|
|
| > CSTR presents an interesting example of the importance
| > of intraday charts. There is no clue of impending
| > trouble on the daily chart until the stock broke down.
| > The intraday chart, however, telegraphed the bad news
| > well in advance.
| >
| > Like many other people, I too cannot follow the market
| > during the day and have to check charts during the
| > evening. When I have a position open, I check the
| > chart every night with no exception.
| >
| > On Thursday, Aug 22, when this rally was still
| > advancing, I was surprised that evening to see many
| > bearish charts among the leading stocks. For example,
| > FCN had a deterioting relative strength, CCR made a
| > new high but its relative strength lagged, DORL gapped
| > to a new high but saw no progress in daily price
| > (distribution), and PIXR had formed an evening star
| > candlestick pattern. If one or two stocks were acting
| > poorly it probably wouldn't have bothered me so much.
| > When most of the leading stocks were showing signs of
| > weakness the market was in trouble. At that time I was
| > long CCR, CSTR, DORL, NUTR, and PIXR. My first
| > decision was to sell CCR, DORL and PIXR at the open
| > next morning, and but to keep CSTR and NUTR.
| >
| > I changed my mind when I looked at the intraday chart
| > for CSTR. On the daily chart, CSTR had formed an
| > impeccible CwH base, with pp at 31.22. The breakout
| > was on very good volume, and reached a high of 34.2.
| > Because of a little overhead resistance (as mentioned
| > by others), it was expected to form a second handle
| > before breaking out to new highs. This was also noted
| > by the issue of IBD the day after its breakout. It
| > consolidated between 32 and 34 the next 5 days, with
| > nothing extraordinary shown on the daily chart. I was
| > several times tempted to add shares when it pulled to
| > low 32's but thougt better of it. My plan was to add
| > to my position when it broke out of the second handle.
| > I wasn't even thinking about selling it before I
| > looked at the intraday chart.
| >
| > I was alarmed by the intraday chart. On the intraday
| > chart, the consolidation between 32 and 34 showed up
| > as a five day CwH formation, with the appropriate
| > volume actions (large volume on left and right sides,
| > dryups on bottom and in handle). Handle high was 33.76
| > which was the intraday high on Thursday. Everything
| > was great except for the last hour or so of Thursday.
| > Some heavy selling came in and broke the handle
| > formation (little did I know that the Off Wall Street
| > report was issued to its clients on that Thursday).
| > WON told us that heavy selling in handle was a sign of
| > trouble, and a good short can be entered when the
| > handle low was broken as the volume picked up. Of
| > course he was refering to daily charts. Intraday
| > charts work the same way except its validity is much
| > shorter in duration. If the market were healthy, I
| > probably would have expected CSTR to pullback and test
| > the pp and a decision could be made after the test.
| > But with the other leading stocks weakening, there was
| > no question at that point that CSTR was going to break
| > below its pivot point. So I decided to sell it the
| > next morning along with the others for a small profit.
| >
| > I was kicking myself a few days later when CSTR barely
| > dipped below the pp and then rallied past my sell
| > price. But that lasted only one day. Thank goodness
| > the intraday chart gave me the only clue there was.
| >
| > As far as CVH was concerned, I ruled it out as a buy
| > candidate early on. There were several issues with
| > CVH. First was the lack of confirming strength in the
| > group - although the group ranking was high, other
| > stocks in the group either didn't have a proper base
| > (SIE), or had a wide and loose base (MME). I avoid
| > groups like this. Second CVH was overowned by
| > institutions - over 90% of ownership. WON's rule was
| > less than 50% institutional ownership. Third was a
| > non-CANSLIM issue: CVH was being investigated for
| > overcharging government. Although it was an old issue,
| > as long as it remained unresolved, there could always
| > be surprises.
| >
| > One final note. I don't think taking a 7% loss on
| > every losing trade is ok. If one takes a 7% loss in a
| > string of 5 trades (a finite probability), that's a
| > third of capital lost - too much for any trading
| > method, considering how hard it is to have a 50%
| > return (the amount needed to come back). My
| > understanding of it is that WON didn't intend 7% to be
| > where you place the stop order. Instead it's the
| > maximum allowable loss for a single trade. Usually it
| > should take a screwup to have a 7% loss. If one buys a
| > stock correctly, a 2-3% loss is achievable if the
| > stock fails. Sometimes one can even exit with a small
| > profit if the chart is read correctly.
| >
| > __________________________________________________
| > Do You Yahoo!?
| > Yahoo! Finance - Get real-time stock quotes
| > http://finance.yahoo.com
| >
| > -
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|
|
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