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

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: [CANSLIM] RE:Handles (was:How much support is the 50 DMA? (JOSB))
Date: Tue, 6 May 2003 22:11:58 -0500
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LOL!

No, my dad's the Virgo in the family. The material is collected from what
I've learned over the years from the IBD and WON's teachings. I'll leave the
books to him.

Katherine

- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Karen White
Sent: Tuesday, May 06, 2003 9:12 PM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] RE:Handles (was:How much support is the 50 DMA?
(JOSB))


Hi Katherine,,,, now with all that info on a handle I have to ask if you
are a Virgo and secondly, have you ever considered a book?  Amazed Karen

At 09:58 PM 5/6/2003 -0500, you wrote:
>"urn:schemas-microsoft-com:vml" xmlns:o =
>"urn:schemas-microsoft-com:office:office" xmlns:w =
>"urn:schemas-microsoft-com:office:word">
>Hi Roger,
>
>An "ideal" handle will drift down on decreasing volume. WON considers this
>drifting down to be one of the most important factors in a good handle. If
>there is a shake out day or two on high volume *within* the handle, that's
>a good thing, especially if the days end in the upper part of their range.
>(Plenty more handle characteristics--see a more complete list at the end
>of this email ).
>
>That said, it's honestly rare that you get "perfection" in a handle. My
>comment on JOSB was that the lack of drift down and/or shakeout *within*
>the handle made it a "poor quality" handle. That generally adds to your
>risk, but plenty of breakouts occur from less than perfect bases and less
>than perfect handles. It's all a matter of odds--just part of the decision
>process when determining whether to take a breakout or not. My overall
>point on JOSB is that given the lack of drift down in the handle, the risk
>of a pullback *after* breakout then increases. That's essentially what
>happened. Buying late after a higher risk breakout increases your odds of
>getting caught in a pullback.
>
>Katherine       ...handle info follows:
>
>
>----- Original Message -----
>
>From: <mailto:kmalm@earthlink.net>Katherine Malm
>
>To: <mailto:canslim@lists.xmission.com>canslim@lists.xmission.com
>
>Sent: Friday, August 16, 2002 4:53 PM
>
>Subject: [CANSLIM] Re: Handles, A list of Characteristics
>
>HANDLES
>
>General Requirements:
>
>1. Handles most often begin to form lower than the left side of the base,
>generally when the stock has climbed within 5-15% of the high.
>
>2. The midpoint of a good handle should be higher than the midpoint of the
>base.
>
>3. The handle should form in the upper half of the base.
>
>4. The handle should form above the 200 day MA, but trade may often lull
>below the 50 day MA.
>
>5. The handle should drift sideways or lower. Upward "wedging" handles are
>failure prone because the upwardly drifting price doesn't shake out the
>weak holders, leaving the stock vulnerable to a correction. Wedging
>handles also make pivots harder to spot. WON considers this the most
>important aspect of a handle formation.
>
>6. The handle should drift lower on light volume. This shows existing
>holders are content to remain invested.
>
>7. Within the handle, volatility should contract. The distance between
>price highs and lows (intraday and day to day) should narrow. Avoid
>zigzagging or wide and loose handles. Choppy handles carry more
uncertainty.
>
>8. In normal markets, proper handles correct 10-20%. In Bear markets, they
>can correct as much as 30%. A handle that drifts <10% is fine as long as
>it is drifting downward and meets other requirements.
>
>9. The handle must be at least one week in length but can stretch as much
>as 7-10 weeks. It should be smaller in proportion to the size of the cup.
>
>
>
>Special Considerations:
>
>1. "High handles" can begin to form at prices higher than the left side of
>the base. This is neither ideal nor common, but can still be successful as
>long as the other handle requirements are met.
>
>2. Be sure to look at both daily and weekly charts, as stocks with lengthy
>bases will have long handles. The lengthy handle may appear as a base if
>looking at a daily chart. Long bases signal strong support and are very
>strong patterns. (The longer the base, the stronger the subsequent move.)
>Based on a study done by the IBD in 96-97, small and mid cap stocks had 33
>week bases on average. Large caps had 66 week bases on average.
>
>3. A stock can form a handle, near its pivot point and then begin forming
>another handle. In this case, consider this to be one long handle.
>
>4. "No-handle" bases are more error prone, but tend to work at the start
>of a fresh rally, especially if the rally is strong. Look for volume to
>dry up as the stock comes within 5-10% of its old peak. Stocks breaking
>out of bases without a handle are most likely industry leaders; lead the
>market in relative price performance, sales and earnings growth; and have
>high institutional sponsorship.
>
>5. Double bottom bases can form a handle, though normally they do not do
so.
>
>
>
>[Note: These notes are compiled from many years worth of Investors'
>Corners, HTMMIS, the IBD web site and other misc. sources.]
>
>
>
>--Katherine
>
>
>-----Original Message-----
>From: owner-canslim@lists.xmission.com
>[mailto:owner-canslim@lists.xmission.com]On Behalf Of Roger Tawa
>Sent: Tuesday, May 06, 2003 8:13 PM
>To: canslim@lists.xmission.com
>Subject: RE: [CANSLIM] How much support is the 50 DMA? (JOSB)
>
>Hi Katherine,
>
>I have a question with regard to your "poor" handle comment.  According to
>24 lessons, page 47, a handle should drift down on lows *OR* have a shake
>out.  In this case, the shake out did happen on the two days after the
pivot.
>
>Furthermore, at the top of page 48, it says a proper handle will dry up
>near its lows, which this one seems to do, *OR* will have several tight
>areas, which this one also has.
>
>Finally, the JOSB handle actually looks very much like the handle of
>Microsoft shown in the example on page 46.
>
>Now, being a novice at this, I would have looked at this handle and said
>"looks good" by the time april 1st came around.
>
>Do you feel that the handle should drift down along its lows for the
>entire duration of handle before it breaks out?  Would you consider this a
>better indication of a good handle than the other things?  Thanks.
>
>=================================================
>Roger Tawa
>http://tawacentral.net/
>[One thing about paradigms: shift happens.]
>[When you stop, you're done.]
>
>-----Original Message-----
>From: owner-canslim@lists.xmission.com
>[mailto:owner-canslim@lists.xmission.com]On Behalf Of Katherine Malm
>Sent: Tuesday, May 06, 2003 10:57 AM
>To: canslim@lists.xmission.com
>Subject: RE: [CANSLIM] How much support is the 50 DMA? (JOSB)
>
>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>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>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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