RE: [CANSLIM] CANSLIM Hunting List 02/21/03 + Notes on CANSLIM

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: [CANSLIM] CANSLIM Hunting List 02/21/03 + Notes on CANSLIM
Date: Tue, 25 Feb 2003 10:14:50 -0600
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Hi jans & Mike,

jans... I understand Mike's question and believe he wasn't asking for
personal details and I have to admit I've asked similar questions of folks
here in the group. Namely, "how has the experience of the last few years
changed the way you trade?" I've also posted my own point of view on things
CANSLIM in the past, so I won't go into great details, but will instead just
give a quick overview of what I've been doing the last few years.

(1) No, I've not spent the entire time in cash. In April 2000 I started
shorting the market on downtrends. That's an aggressive strategy that
compliments a CANSLIM long strategy, but is decidedly not CANSLIM. However,
I kept things simple by shorting stocks in the former CANSLIM camp. That is,
stocks that were rolling over; stocks that rolled over, rose and then
started to fail again; etc. It's been an excellent learning experience, but
I have to say it was a lot easier to short in 2000-2001 than it has been in
the last 6 months. When there are no clear signals in either direction, I'll
stay in cash. I don't feel a need to trade all the time. My goal is to make
money, not trade to make my day interesting.

(2) I still use CANSLIM for long strategies and I'm about as purist as one
can get with it. The major exception that I make is that WON suggests that a
stock rise at least 25-30% from a previous base and be in an underlying
uptrend before entering a breakout. The longer the Bear goes on, the less
likely it is that one can find potential long positions meeting that
condition. For the purist of the pure CANSLIMers, that would be enough to
keep one primarily in cash for most of the last 3 years. However, WON also
suggests that once a stock's old highs are more than 1 to 1-1/2 years away,
the less the old high applies to current trading conditions. That means one
has to be alert to what I refer to as "bottoming bases." If all other
conditions are met technically (RS, relationship to 200dMA, pattern, etc.)
and the fundamentals (especially turnaround conditions) are met, then it
becomes a viable candidate.

These are the primary CANSLIM issues that I've focused my attention on in
the last few years:
(1) Rising strength is more important than "top of the heap." This means
that bottoms up stock picking is far more effective than top down. While
industry strength matters, it should never be the first stop in a selection
process, rather an indicator of the direction of the move and the potential
strength of an impending breakout (or breakdown).
(2) Reading and re-reading WON has clearly indicated that fundamentals
should be considered on the preponderance of evidence. Despite the 20 rules
of investing in the IBD, there are many exceptions to the >=25% growth, etc.
and WON has always laid them on the table as if/thens. Overly restrictive
fundamental searches leave out some of the very best candidates.
(3) Technicals first, fundamentals second. Both matter, but technicals lead
the eye to rising strength. The better one is at reading price/volume action
and technicals in general, the more they can rely on them for stock
selection and entry/exit. I rely more on the technical action of the stock
to tell me when to enter/exit. That means that the "8%" rule is generally
the last to kick in. I have a mental stop going into the trade that is set
based on the technical action of the stock. Sometimes that is 4%, sometimes
it's 10%. It depends on the market and the stock itself.
(4) Disicipline and methodical, unemotional rule-based trading is the key to
consistent profits.

This approach works in all markets--trending or sideways.

I'd be interested in what others have learned in the last few years and hope
folks will chime in with their personal observations/learning points as
well.

Katherine

- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Spencer48@aol.com
Sent: Monday, February 24, 2003 5:00 PM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] CANSLIM Hunting List 02/21/03 + Notes on CANSLIM


Mike:

     I love it when people speak for me:  It's so interesting to hear
another
person's voice attached to my apparent words.

      I agree with the latter portion of your E-mail (being grateful to
Katherine for all her work and analyses), but I don't agree with the former
(asking Katherine to tell us, in general, how she's been trading the last
couple of years).

     At any rate, I believe such a query intrudes on personal matters
(financially speaking), and is sort of like asking someone to explain
oneself
(ie. putting Katherine on the defensive).

     My point is:  I don't mind the query-it's really not directed at me,
and
Katherine can answer it or not as she chooses.  But I do mind someone when
someone says that he's speaking for me.  And especially so when he fashions
his E-mail to make it appear that I agree with all he is saying.

jans


In a message dated 2/24/2003 11:58:49 AM Eastern Standard Time,
michael_niemotka@baxter.com writes:

<< Katherine, would you be willing to share with the group the "general"
type
 of trading that you have been doing over the past couple of years, given
 the "M"?

 Have you spent the last couple years in mostly cash, or have you done some
 trading, and if so, how have you modified CANSLIM? Have you taken profits
 much more quickly, ie at 10-20%, rather than risk a ride for higher gains?
 Tightening the 8% loss rule to 5%?

 I am not expecting details, but I think I speak for the group when I say
 that we all value your insight into the application of CANSLIM.

 Thanks

 Mike
  >>

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