Re: [CANSLIM] CSTR CVH Failed breakouts Post Analysis

From: James Bond <james_bond_3rd@yahoo.com>
Subject: Re: [CANSLIM] CSTR CVH Failed breakouts Post Analysis
Date: Thu, 5 Sep 2002 18:35:56 -0700 (PDT)

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- --- NANCY POLCARO <ZILLAGIRL@msn.com> wrote:
> How can you tell that this was the market makers
> clearing out all the stop orders and not the stock
> failing??  In the first part of 2001 the stock looks
> like it was close to 46.00 and  has a similar move
> then continued down?? Thanks nancy  
>   
Nancy,
The first clue of course is whether the stock ended
the day up or down. It ended the day up. Then one has
to look at the intraday chart and its relation to
daily chart. Because of the gap up two days earlier,
there were likely many stop orders just below the gap
- - the place every TA book tells you to place the stop
order. When a market maker receives a big buy order,
and he doesn't have that many shares to fill the
order, and it was a slow day with only a handful of
bids and asks (so he can't get the shares needed even
if he runs the price up). Now two points below the
current price there are a ton of stop orders. What is
the natural thing for him to do?

It's hard to see much from the action of the drop,
because the volume can be either high or low depending
on the number of stop orders hit. But the drop must be
sudden with no hesitation. Pause during the drop would
usually mean real selling rather than a shakeout. The
key is the action on the bounce back. It needs to have
convincing volume, to be sustained instead of erratic,
and needs to come back to the high of the day. The
bounce back doesn't have to happen immediately.
Sometimes it happens on the next day.

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