RE: RSR-Rubberband Sell Rule (was:[CANSLIM] hitk)

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: RSR-Rubberband Sell Rule (was:[CANSLIM] hitk)
Date: Thu, 30 Jan 2003 08:37:12 -0600
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Hi Mike,

While the name of the sell rule is mine, I originally ran across the notion
at TradingMarkets.com several years ago based on comments made by Greg Kuhn
and Kevin Marder, and as I later discovered, it actually has deeper roots
back to Ian Woodward of HGS (he calls it "rust"). I'm sure that it has even
deeper roots, as "all things have been thought of before; the trouble is to
think of them again."*

I count it as a yellow flag, not as an outright sell rule. If I get this
signal in combination with other yellow sell flags, then it will trigger.
And yes, you're right that it is a warning of a possible pullback, as once a
stock becomes extended, traders will see it ripe for the picking and will
tend to yank it back to the trend line, thus the name "rubberband" sell
rule. As jans pointed out in his quote from the IBD, there is no reason that
a stock can't continue to go up when it is well extended beyond its trailing
50 and 200dMA's, but I think there is far less tolerance for extended stocks
than there was in the late 90's, so it's far more likely you'll see snap
backs in the range I quoted than those jans quoted from the 95-97 market.

Katherine

*John Ruskin 1819-1900

- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of
michael_niemotka@baxter.com
Sent: Thursday, January 30, 2003 7:04 AM
To: canslim@lists.xmission.com
Subject: RE: [CANSLIM] hitk



Katherine,

Is the "rubberband" rule one of your own making?  It sounds sorta familiar,
but I can't remember where I came across it.  In terms of "strength" of
sell rules, does this one rank  as a yellow light, warning of a possible
pullback?

Thanks

Mike

Mike Niemotka , PE
Sr. Principal Engineer
Baxter Healthcare Corporation
Route 120 & Wilson Road
Round Lake, IL 60073
Tel (847) 270-4075
Fax (847) 270-4525
michael_niemotka@baxter.com



                    "Katherine Malm"
                    <kmalm@earthlink.net>         To:
canslim@lists.xmission.com
                    Sent by:                      cc:
                    owner-canslim@lists.xm        Subject:     RE: [CANSLIM]
hitk
                    ission.com


                    01/29/2003 06:28 PM
                    Please respond to
                    canslim






Hi jans,

Thank you for pointing out the difference in the RSLine on my chart and
DGO,
as it lead to the discovery that our RSLine data had not been adjusted
after
the recent split. That means that my comments earlier today on the recent
decline in the RSLine aren't valid. I've made a few notes on the corrected
chart as a result.

http://www.cwhcharts.com/katherine/HITK012903Revised.JPG

I agree with you that HITK is somewhat extended, as it's a hair's breath
away from Rubberband Sell Rule territory (Price >= 25% of 50dMA + >= 70% of
200dMA). It certainly was in territory at its recent high and gives some
explanation for the recent pullback. Whether or not the pullback continues
to the current trend line or stops at the 50dMA is anybody's guess, but
either way, my earlier comments about the stock being in no-man's land are
still valid, and given the market backdrop, I would definitely wait until a
valid consolidation and breakout were formed before making an entry.

As to the availability of the U/D information over time, this is something
that I found to be missing on the DGO charts and the reason I originally
asked Mike to add them to our charts even before joining him at the
website.
I find it gives one additional clue as to the price/volume action and
seeing
it trend over time is more useful to me than seeing it as a single data
point. That's my same reasoning for seeing the RSRank plotted over time, as
I can easily go back and see the stock's condition during prior bases.
We've
made the charts available to folks on the CANSLIM list, so you can see this
when you need it by going to the site and entering your stock into the box
at the top right of our home page (www.cwhcharts.com) or via the direct
CANSLIM list link we've set up at
http://www.cwhcharts.com/charts/kmchart.php.

Katherine

- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Spencer48@aol.com
Sent: Wednesday, January 29, 2003 1:09 PM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] hitk


Katherine:

     Very nice chart analysis of HITK.  Notice that on DGO, HITK's daily
RS-line is up at the recent troughs in January.  This led me to believe
that
it was strong (as a matter of fact, I categorized its RS-line as being in
Strong Divergence).  This, in turn, led me to believe that this was a
worthwhile stock to buy (assuming the market turned up) on its Break Out.

     However, your chart's downtrend in the Up/Down ratio since October/02
has given me pause.  Moreover, HITK's Weekly shows that it is way
overextended (when it broke out in Sept. at 9 [it is now at around 19]), so
perhaps this means that HITK is in a temporary top, and that its Weekly is
reflecting its Up/Down trend-decline .  (But notice that even now, the
weekly
RS-line shows a lot of strength in its steepness and the RS-line's strong
divergence at the top compared to a few weeks earlier).

     As I mentioned, HITK looked strong to me also, until you noted (in the
chart) its declining Up/Down ratio.  Is there a database on-line where I
can
gather this past information on the Up/Down Ratio (and Accum/Distribution
Ratings also, if possible?)

jans

In a message dated 1/29/2003 12:04:41 PM Eastern Standard Time,
kmalm@earthlink.net writes:

<< HITK is not currently in a definable base, and so doesn't yet provide a
clear
 entry point. See my annotated chart at:

 http://www.cwhcharts.com/katherine/HITK012903.JPG

 Katherine >>

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