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

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: [CANSLIM] How much support is the 50 DMA? (JOSB)
Date: Tue, 6 May 2003 12:03:26 -0500

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Hi Mike,

Thanks!

I have a couple of different options for displaying charts, but wanted to be
sure to show the action since the breakout, so chose to use the more general
"Katherine's" chart instead of the chart from the watchlist itself. BSTE was
identified by our algorithm and appeared on our watchlist 3/25, with a
breakout alert on 3/26. Here it is as it appeared 3/25:

http://www.cwhcharts.com/katherine/BSTE032503.JPG

Katherine

- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of
michael_niemotka@baxter.com
Sent: Tuesday, May 06, 2003 9:28 AM
To: canslim@lists.xmission.com
Subject: RE: [CANSLIM] How much support is the 50 DMA? (JOSB)



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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