Re: [CANSLIM] RE: Shorting (was: WEBX)

From: "Rolf Hertenstein" <rolfh@mindspring.com>
Subject: Re: [CANSLIM] RE: Shorting (was: WEBX)
Date: Sat, 9 Aug 2003 11:09:28 -0600
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Thanks for reposting this.  I made a hard copy when Tom first posted it, but
lost the electronic file.

WON (in HTMMIS) says he wrote a booklet on shorting in 1976 and "not much
has changed on the subject since then".  I'm assuming this is the booklet.

On another topic, thanks to whoever on this list recommended Mark Douglas'
book "The Disciplined Trader".  It's focus is on the pyschology of trading
rather than techniques, and is quite different from any other stock trading
book.  According to Douglas, trading is like nothing else one does in normal
life, hence emotions et al. can interfere with successful trading. It's all
very fun and interesting, with me frequently thinking: "Oh yeah, I've
done/thought that particular idiocy".

 Rolf

- ----- Original Message -----
From: "Katherine Malm" <kmalm@earthlink.net>
>
> Hi Rolf,
>
> Here is O'Neil's publication on shorting. A little difficult to read in
> places because the original was passed around a few times before finally
> being digitized:
>
> http://www.breakoutwatch.com/katherine/WONonShorting.pdf
>
> BTW, I originally received this copy from Tom Worley.
>
> Katherine
>
> -----Original Message-----
> From: owner-canslim@lists.xmission.com
> [mailto:owner-canslim@lists.xmission.com]On Behalf Of Rolf Hertenstein
> Sent: Saturday, August 09, 2003 11:23 AM
> To: canslim@lists.xmission.com
> Subject: Re: [CANSLIM] WEBX
>
>
> ----- Original Message -----
> From: "Fanus" <fanus13@yahoo.com>
>
> > CANLSIM is a long strategy and according to the rules,
> > you get out if you are in a bear market.
> > I think this type of discussions are
> > better suited for a different discussion group.
>
> I disagree.  Though WON spends almost all of his HTMMIS pages on long
> techniques, he does discuss short selling in correcting or beginning bear
> markets.  He even gives a couple of chart pattern examples, like the Head
> and Shoulders Top.  I would welcome any discussion here from the more
> experienced members on their short techniques.  If we are (or even if we
> aren't) at the beginning of a multi-year, mostly sideways market, with
> occassional bull runs, seems like effective shorting could really help
> overall returns.
>
> Some specific thoughts on DMC's post (see below):
> A (annual earnings): Seems like a change in earnings (for the worse) would
> be more important a specific number like 15%.
> N (new something): My two thoughts are 1. a new product that *doesn't*
live
> up to expectations, or 2. new 52-week low.
> I (institutional): If there are large institutional positions, and they
> begin to dumpp the stock, might this not drive the price more aggressively
> downward?
>
>  Rolf
>
> >
> > --- DMC197807 <dmc197807@comcast.net> wrote:
> > > P.S. [prescript]:  I can't see any reason to
> > > establish (or keep) a long
> > > position on WEBX here.  Too much risk for me.
> > >
> > > Mark,
> > >
> > > Welcome to the thread.  I don't have any problem
> > > with you posting your
> > > website location here; it looked pretty good to me.
> > >
> > > On the subject of using canslim to find breakdown
> > > rather than breakout
> > > candidates, I think that's a good idea.  I'm not
> > > sure how we properly tweak
> > > the criteria, but I think it's an excellent topic
> > > for education here.  Why?
> > > Because the M in Milscan is very, very precarious
> > > here and I think shorts
> > > and puts are going to smash longs and calls over the
> > > next several weeks.  I
> > > don't see a lot more upside to the market at this
> > > point.  Just pulling up an
> > > SPX chart shows a very very tired market, and the
> > > path of least resistance
> > > looks to be southeast-, and not northeastward bound.
> > >
> > > With that in mind, how would be alter CANSLIM to
> > > look for breakdowns?  [I'll
> > > put commentary in brackets for breakdown]
> > >
> > > C = Current quarterly earnings per share (should
> > > show a major percentage
> > > increase compared to the prior year's same quarter)
> > > [Here I think you take
> > > all earnings up to, say 10% positive.  Why?  What we
> > > are looking for are
> > > stocks which have risen with the tide in spite of
> > > lukewarm or poor earnings,
> > > but earnings up to 30% seem too robust to produce a
> > > good short.]
> > >
> > > A = Annual earnings (the company should be
> > > experiencing meaningful growth
> > > over the past five years) [Perhaps the cap on annual
> > > earnings growth should
> > > be 15%??]
> > >
> > > N = New products, new management, new high prices [I
> > > don't see how to apply
> > > this one; I don't want to exclude new high prices,
> > > because we're looking for
> > > overvalued stocks.  Other ideas?]
> > >
> > > S = Supply and demand (small capitalization stocks
> > > with high trading volume)
> > > [Here, having large cap elephants could be a great
> > > idea
> > >
> > > L = Leader in the industry, not a laggard [here, use
> > > a relative strength
> > > rating of 60 or below?]
> > >
> > > I = Institutional sponsorship (a little goes a long
> > > way) [Hmmmm.  Do we want
> > > high institutional ownership, or is this factor one
> > > to be left out
> > >
> > > M = Market direction (should be headed up).  [This
> > > one goes first.  For me,
> > > the market is facing a lot more easy downside right
> > > here than upside.
> > > Chances of a SPX in the 600, 700, 800 range in the
> > > next 3-4 months is much
> > > greater, to me, than a SPX move to 1100, 1200,
> > > 1300.]
> > >
> > > Now comes the difficulty of establishing a pivot,
> > > and selling at the
> > > breakdown of that point.
> > >
> > >
> > >
> > > DMC
> > >
> > >
> > >
> > >
> > >
> > > ----- Original Message -----
> > > From: "Mark Crisp"
> > > <stressfreetrader@btopenworld.com>
> > > To: <canslim@lists.xmission.com>
> > > Sent: Wednesday, August 06, 2003 8:17 AM
> > > Subject: Re: [CANSLIM] WEBX
> > >
> > >
> > > > What about using CANSLIM in reverse to find
> > > shorting candidates?
> > > >
> > > >  I ran this scan on my filter and came up with
> > > some nice looking shorting
> > > > candidates:
> > > >
> > > > 1 year low
> > > > RS <30
> > > > E.P.S. <30
> > > > Price >$30
> > > > Volume >250,000
> > > > Cap. >2.0bn
> > > >
> > > >   Looking for poor fundamental stocks that are
> > > falling in price. Reverese
> > > > CANSLIM if you like. Trade the breakouts.
> > > >
> > > >   What do you say?
> > > >
> > > >   Mark Crisp
> > > >  http://www.stressfreetrading.com
> > > >
> > > > ----- Original Message -----
> > > > From: "Jiehui" <ddloyilbshrb@iartdesign.com>
> > > > To: <canslim@lists.xmission.com>
> > > > Sent: Wednesday, August 06, 2003 5:42 AM
> > > > Subject: [CANSLIM] WEBX
> > > >
> > > >
> > > > > Hi all,
> > > > >
> > > > > I'm a beginner in this and is still a little
> > > unsure of how to read
> > > charts.
> > > > I hope some of the more experienced chart readers
> > > on this group can help
> > > me.
> > > > >
> > > > > WEBX has formed the teacup w/ handle pattern and
> > > I mistakenly bought at
> > > > the volume surge thinking it's a break-out, only
> > > to find it went down
> > > 5.68%
> > > > >
> > > > > Is it forming another handle now and should I
> > > continue holding on to the
> > > > stock and wait for the handle to form or until the
> > > 8% stop-loss is
> > > reached.
> > > > Or should I exit my position now? Is this
> > > considered a failed break-out?
> > > > >
> > > > > The rating for this WEBX is currently: 97 81 73
> > > A+ A A-
> > > > >
> > > > > Regards,
> > > > > Jiehui
> > > >
> > > >
> > > > -
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> >
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