Re: [CANSLIM] AAII letter to the editor

From: Spencer48@aol.com
Subject: Re: [CANSLIM] AAII letter to the editor
Date: Wed, 16 Jul 2003 13:13:33 EDT

Next Article (by Date): Re: [CANSLIM] Lessons Learned - 2 BO Failures Today "Frik Lebom"
Previous Article (by Date): RE: [CANSLIM] Market Trend Charts Dave Stem
Articles sorted by: [Date] [Author] [Subject]

Hong:

     I read Katherine's answer to you right after I sent the E-mail.  I 
though you were asking this question:  Since stocks sometimes come back, why should 
I sell after a 7-8% loss-if I believe the stock I'm holding will come back?
     However, after reading Katherine's answer, I think your question 
concerned:  Should I hold the stock on a pullback, even though it loses 7-8% on its 
pullback?  I agree completely with the relevant portion of Katherine's E-mail:  
"...A
pullback entry is one in which one waits for a stock to pull back to near
term support, but there is not necessarily a lengthy consolidation at that
particular support. If the stock falls on high volume below that support,
there's trouble in River City. 8% may be *way* too loose a stop. Afterall,
one can still lose their shirt 8% at a time."  
My answer to your specific question are below (I'll use ALL CAPS to 
distingush my answer from your question):


In a message dated 7/15/2003 9:02:37 PM Eastern Daylight Time, 
honghsu@bellatlantic.net writes:

<< that stock will most probably not come back-even taking into account 
 that some stocks >do come back after losing more than 7-8%.    ( I MEANT 
THAT IF THE STOCK FALLS 7-8% FROM THE BO POINT IT PROBABLY WILL NOT BO AGAIN, IE. 
WE ARE DEALING WITH A FAILED BO.  HOWEVER, IF YOU BUY AFTER THE BO POINT, A 
GOOD STOCK MAY FALL OVER 7-8%, BECAUSE YOU BOUGHT IT AT THE INCORRECT PIVOT 
POINT)
 
 jans,
 
     I appreciate your response.   I am not sure I understand your 
 comments completely.  Take an example if I may ...
 
 Let's assume a stock has solid fundies and it breakout with huge volume 
 from sound base.  One week after the BO, it gained 20%.   Next two day 
 or three, it gains another 5%.  At this point I am facing a decision: 
  Take profit OR hold it to shoot 40% gain.   By holding it, the stock 
 may end up with 14% gain.  By same token, if the stock reached 40% gain, 
 then you have to decide either to take profit or shoot 60%.  Again by 
 shooting 60% gain, you have possibility to end up with 30% gain because 
 of volatile.
 
 Do you think once a stock lost 7-8%, it will not able to reach new 
 higher?    Usually how long you are willing to hold a stock which made 
 30% gain within 4 weeks from BO?  (MAYBE I'M MISUNDERSTANDING YOUR QUESTION, 
BUT A STOCK THAT IS BOUGHT AT THE CORRECT PIVOT POINT AND THEN BREAKS OUT AND 
THEN FALLS 7-8% IS AN EXAMPLE OF A STOCK THAT HAS JUST ENGAGED IN A FAILED 
BREAKOUT.  AS KATHERINE SUGGESTS,  IF THE STOCK THAT IS PURCHASED ON THE 
PULLBACK, FALLS BELOW ITS SUPPORT LINE [WHETHER IT BE THE 50DMA OR A TRENDLINE], AND 
ESPECIALLY IF THE FALL IS ON HIGH VOLUME, I'D SELL IT.
AS FOR GAINING A LOT [APPROX. 40% OR 20%] IN A FEW DAYS, WON SAYS TO HOLD 
SUCH A STOCK FOR AT LEAST 8 WEEKS [UNLESS YOU SEE DEFINITE SELL SIGNALS IN THE 
STOCK OR IN THE MARKET].  MOST BIG WINNERS BEGIN, ACCORDING TO WON, THIS WAY, 
IE. THEY MAKE A LARGE % INCREASE IN A SHORT TIME, AND THEN DIGEST THEIR GAINS BY 
CONSOLIDATING OR MAKING A PULLBACK.)

jans
 


- -
- -To subscribe/unsubscribe, email "majordomo@xmission.com"
- -In the email body, write "subscribe canslim" or
- -"unsubscribe canslim".  Do not use quotes in your email.

Go to Jeff Salisbury LWGate Home Page.