Re: [CANSLIM] HITK

From: "DMC197807" <dmc197807@comcast.net>
Subject: Re: [CANSLIM] HITK
Date: Mon, 28 Jul 2003 11:05:53 -0700
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Fanus,

Thanks for your note.  Each of us has his own system.  Back in May I traded
HITK off the center of the Bollinger bands for a bounce which I got and I
was monitoring it off shorter time frame charts.  The mistake I made was not
holding on for the ride further up, but I was leaving for 10 days on the
East Coast and couldn't afford to keep the position open, so I left with
9.3% gain in 7 days.  If I can annualize that gain it's better than 300% per
year, so I like it.  I kept a tight stop on the position so maybe your
calculation of the risk wasn't mine.

Everyone looks at risk and reward differently.  You may see a stock which
can rise up to 35 or 40 fairly easily (the reward) but I see a broken chart
and the likelihood of that happening as very, very slim.  More likely, given
the pattern, is for the stock to pause and hiccup and continue to break
down.  Or it could stabilize and idle here at the $22-28 range for a while.
However, there have been a lot of buyers on the way up to $49 and not all of
them have sold.  It often takes several days for the totality of a drop from
49 to 25 to sink in.  A lot of people hope it will recover, a lot try to
trade out, but in the end the weight of the chart often produces the
inevitable.

Another way to look at your calculation is to try to figure out the
probabilities within a given time frame (let's take 2 weeks, or 10 trading
days) of your two speculation scenarios to play out:  1) drops to 23?  this
is highly likely, imho, given the ATR where it is, call it 2-1; or 2) rises
to 35 or 40?  this is a 40-1 shot, to me, in this time period, or worse.  So
you calculate the value of the two and, with the stock where it is now,
26.50, you have a 50% chance of losing $3.50, or -1.75, and a 2.5% chance of
it rising to 35, or $0.87, so I wouldn't take your approach, not even with
your money.

What is the better approach?  Patience, let the plunge work through its
natural progression.

This is what makes a market, though.  Regards,

DMC



- ----- Original Message -----
From: "Fanus" <fanus13@yahoo.com>
To: <canslim@lists.xmission.com>
Sent: Monday, July 28, 2003 10:19 AM
Subject: Re: [CANSLIM] HITK


> I haven't look at the CANSLIM characteristics, but
> risk/reward look pretty good to me.
>
> If one trade it as a bounce off the 200DMA, then your
> stop can be just below it.  Say around 23.00.  You
> could have entered around 25.30 this morning, risking
> 2.30.  If I was trading it, I would expect it to
> possibly stall at resistance around 35 to 40 which
> would be my profit target.  A profit target of about
> 9.7 to 14.7.  Risking 2.3 to get 9.7 is a risk/reward
> ratio of 1/4.2.   Risking 1 dollar to make 4.2. Good
> enough for me.
>
> You mentioned that you bought HITK at 5/30/03 at
> 34.20. From my side,  I do not see significant support
> close by, or a logical place to put a stop loss other
> than the 50DMA which were at 30.74 on that date.  A
> risk of 3.46.  You sold on 6/5 at 37.47; a profit of
> 3.27. So you risk 3.46 to make 3.27, a risk/reward
> ratio of 1/0.95.  Risking 1 dollar to make 0.95.
>
> In my books, an entry now is much less risky than your
> entry on 5/30.
>
> Regards
> - Fanus
>
>
> --- DMC197807 <dmc197807@comcast.net> wrote:
> > MessageGene,
> >
> > I understood that.  However, I think it's
> > hard/dangerous to trade consistently (and safely)
> > from signals generated by newsletters and stock
> > pickers, or black boxes or discussion threads.  I
> > assume you are out of HITK at this point?
> >
> > My comments were and are limited to trying to grasp
> > the total risk-reward on the name as indicated by
> > the chart.  Still too risky for me, maybe not for
> > others.  When the charts come into alignment, then
> > money is made more easily, although not without
> > risk.
> >
> > I took $3+ out of HITK at the end of May by
> > following my discipline (bot 5/30 at 34.20, sold 6/5
> > at 37.47), and it was this experience which caught
> > my attention with your post.
> >
> > HITK may close this week higher or lower, and at
> > that point it may still not be a good speculation,
> > for my money.
> >
> > Good luck,
> >
> > DMC
> >
> >
> >   ----- Original Message -----
> >   From: Gene Ricci
> >   To: canslim@lists.xmission.com
> >   Sent: Monday, July 28, 2003 9:32 AM
> >   Subject: Re: [CANSLIM] HITK
> >
> >
> >   DMC, if you'll go back to my original email you'll
> > see that I was making an observation ... and passing
> > it on to potential holders of HITK .... based on a
> > buy signal from ChangeWave.
> >
> >   'If you still own HITK there may be a light in the
> > tunnel.'
> >
> >   In the meantime I made 75 cents/share trading it
> > this morning (going long)... after the opening
> > pullback...
> >
> >   Gene
> >
> >
> >
> >
> >
> >
> >   ----- Original Message -----
> >     From: DMC197807
> >     To: canslim@lists.xmission.com
> >     Sent: Monday, July 28, 2003 11:01 AM
> >     Subject: Re: [CANSLIM] HITK
> >
> >
> >     Gene,
> >
> >     Two thoughts come to mind.  First is a ski area
> > I frequent.  Just below the highest lift are some
> > cliffs which are out of bounds by regulation and
> > also by dint of pure reason:  they look like
> > suicide.  However, on any thick powder day there are
> > a number of youth with their snowboards and skis
> > doing the "extreme thing."  For some reason only 2
> > people have gotten killed there in my memory, and a
> > few bad accidents, but mostly these yahoos make it
> > through.  It doesn't mean it isn't an absurd risk to
> > take, but there you are.
> >
> >     Is HITK still a falling knife, or is it safe to
> > buy?
> >
> >     Second is: what is volume during normal trading
> > and what is volume during a selloff?  Clearly HITK
> > is in a selloff, so I like to look at something like
> > 10 day volume (or volume since the plunge) rather
> > than 60-day volume.   Here the 60-day volume is
> > 583,000, but the most recent 8 days have coughed up
> > about 10 million shares, or 1.25 million per day.  I
> > was looking at HITK early today and was surprised
> > that the first hour, amateur hour, didn't produce
> > more volume.  It's now 2.5 hours into the trading
> > day and it's still at 330,000 shares.
> >
> >     I think today is simply a pause on the way down.
> >  I have no money in this name now and only look at
> > it to determine when, on a trading basis, the reward
> > might outweigh the risk.  That event might not
> > happen for several weeks and might take place at a
> > higher price than today's (in fact, could easily do
> > so).
> >
> >     Mostly I think of this endeavor as the opposite
> > of even recreational skiing.  We want to find the
> > easiest, most risk free way of having fun (making
> > $$), not the adrenaline rushed version.  If this
> > were a ski slope, my scans would be scouting for not
> > black diamond slopes or blue slopes.  Unlike skiing,
> > here I'm on the hunt for easy green slopes and even
> > yellow bunny hop slopes.
> >
> >     Good luck,
> >
> >     DMC
> >       ----- Original Message -----
> >       From: Gene Ricci
> >       To: canslim@lists.xmission.com
> >       Sent: Monday, July 28, 2003 7:35 AM
> >       Subject: Re: [CANSLIM] HITK
> >
> >
> >       The power of the newsletter assumes control...
> > up 6% and 1/3 of the daily volume already.
> >
> >       Gene
> >         ----- Original Message -----
> >         From: DMC197807
> >         To: canslim@lists.xmission.com
> >         Sent: Saturday, July 26, 2003 10:35 PM
> >         Subject: Re: [CANSLIM] HITK
> >
> >
> >         Technically your risk/reward on this name
> > would be skewed toward risk at this point.  The
> > chart shows no stopping yet, volume is still high
> > and the daily patterns are bearish.  The price
> > dropped right through the 200 day EMA (25.85), is
> > below any support on the daily (there looks like
> > some support at $20 on the weekly).  If $20 holds,
> > who's interested in buying for a quick off the bat
> > 20% loss?
> >
> >         I don't actually see why $20 should hold for
> > more than a pause, anyway.  To me there's no sense
> > in looking for "bad news," it's all in the chart
> > right now.
> >
> >         JMHO,
> >
> >         DMC
> >
> >
> >
> >           ----- Original Message -----
> >           From: Gene Ricci
> >           To: canslim@lists.xmission.com
> >           Sent: Saturday, July 26, 2003 6:30 PM
> >           Subject: [CANSLIM] HITK
> >
> >
> >           If you still own HITK there may be a light
> > in the tunnel. Change Wave (Tobin Smith) sent an
> > alert to his 300,000 (?) subscribers to buy HITK on
> > 7/25. Looking at the chart shows that the price
> > dropped down and stabilized at its 200-day moving
> > average at $23.14 before bouncing higher. It closed
> > at $24.88 on 7/25. Other than a possible shortfall
> > because of seasonal cough medicine sales I couldn't
> > find any other bad news. Anyone know of any other
> > issues?
> >
> >           Thanks,
> >           Gene
> >
> >           I was forwarded the following;
> >
> >           A price under $25 is a great entry point
> > for this dual
> >           generic/diabetes play -- forget the noise
> > from the momentum
> >           buyers-turned-sellers. They were cleaned
> > out with the huge volume
> >           sales, so now it's time to build or add to
> > your positions to get to
> >           a $25 cost basis. I still think we can
> > hold on for a $50 value at
> >           the end of 2004 on $2 per share earnings
> > in 2004.
> >
> >           Let's lower the buy under for HITK to $25.
> >
> >
> >
>
>
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