RE: [CANSLIM] How much support is the 50 DMA? (JOSB)

From: michael_niemotka@baxter.com
Subject: RE: [CANSLIM] How much support is the 50 DMA? (JOSB)
Date: Tue, 6 May 2003 10:28:11 -0500

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Katherine,

Great answer, as usual. One question about BSTE. What about it's chart
kept it from being identified as a cwh with your algorithms? The chart did
not slow left lip, low point, pivot...

Just curious

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] How much support is the 50 DMA? (JOSB)
ission.com

05/06/2003 09:56 AM
Please respond to
canslim

Hi Chris,

I see several folks have already commented on the discipline of selling, so
thought I'd focus on a slightly different angle. That is, something I call
"wiggle room" or "the best selling rule is to buy right."

The biggest problem I see with your JOSB situation is that by buying late,
you took away all your wiggle room. JOSB set up with a pivot established
3/21 at $25.51. It put in a poor handle which didn't drift down, indicating
a possible lack of shakeout, then staged a wimpy breakout on 4/2 (though it
did show some follow through action the next day). With those credentials,
buying right is particularly important. Odds favor, at minimum, a pullback
at least to the original breakout area around 25-26. Sure enough, that's
what happened. As your purchase was late, when the stock was already 13%
extended from the breakout price, you have no wiggle room to survive a
pullback without triggering your 8% rule. Notice that your original mental
stop at $27 was above the logical support area. See an annotated chart at:

http://www.cwhcharts.com/katherine/JOSB050603.JPG

These kinds of pullbacks are fairly common. BSTE did the same thing
recently and if purchased correctly, one could've sat out the minor
correction without triggering sell rules. Take a look at the reward:

http://www.cwhcharts.com/katherine/BSTE050603.JPG

Katherine
-----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Chris Jones
Sent: Monday, May 05, 2003 3:45 PM
To: CANSLIM
Subject: [CANSLIM] How much support is the 50 DMA? (JOSB)

I have a dilemma - I bought JOSB a few weeks back and put a mental
stop in at $27 (8%). When I checked today after the market closed, I
saw it had dropped $1.88, and is now at $25.51. I'm a little mad that
I only placed a mental stop, which could have avoided this, however I
can't change that now. Normally I would sell right at the market
since my loss has now dropped to 12%, but the stock now sits about
$.25 above it's 50 DMA. Should I hang on and hope institutions will
step in? IBD says "many institutions view the 50-day line as a level
at which they can add to their positions at a reasonable price. That's
why many strong stocks find "support" at this line." However, it
seems that the 50 DMA hasn't been too much of a support/resistance for
JOSB in the past. I hate to wait and hope, since that's exactly what
O'Neil said bad investors do, but the 50 DMA adds an interesting
twist. Should I sell at the market, or wait to see if it bounces
back? Opinions are appreciated!

Thanks so much!

Chris

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