RE: [CANSLIM] Re:stocks at the top

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: [CANSLIM] Re:stocks at the top
Date: Wed, 13 Aug 2003 11:54:58 -0500
Next Article (by Author): [CANSLIM] market correction bottom? "Rolf Hertenstein"
Previous Article (by Author): RE: [CANSLIM] DMC not DMX "Jeff Henderson"
Articles sorted by: [Date] [Author] [Subject]
Hi Rolf,

Harold's original question was "how do I find failed tops" (for
shorting)....so the first question in search of that answer is to first be
able to identify what a stock looks like when it tops. That's an important
question for 2 reasons. First, if one is holding a long position, knowing
what a stock looks like when it *is* topping is a key factor in selling
correctly. Second, if one can spot a top (after the fact) and screen for it
based on definitive technical characteristics, one can then look for the
signs that the top is "failing" (if one wants to short). As DMC suggests
with the "smart speculator" quasi-quote, it's not necessary to know that a
stock has put in an ultimate top to know that it's time to sell, just as
it's not necessary (or preferred) to short *at* the top to benefit from the
downside move. In other words, entering a long CANSLIM position is timed so
that there is evidence that an upward move which has shown outperformance to
the market (uptrending RSLine, high RSRank), has paused, gathered strength
and is continuing, that is, shows proof that the uptrend is continuing. When
shorting, the same thing holds true in reverse. That is, a downtrend has
begun, a countermove against the downtrend falls short of the previous high,
and then the downtrend continues. That's the "proof" that one can enter and
ride the downtrend. Dave Landry says that he has a monitor that allows him
to turn every chart upside down. That lets you "see" the same things you
look for in entries to the long side in potential entries to the downside.

When it comes to closing any position, sell rules kick in when there is
evidence that the downtrend or the uptrend has been broken. That means
you'll never capture the ultimate top or bottom in the move. When a stock
tops, that means that there is often excessive enthusiasm to the upside. The
stock gaps up with exhaustion, it puts in a high volume day with a wide
range and then closes at the bottom of its range (tail down), it breaks a
long standing trend channel to the upside, it moves very little in price
despite the high volume (churning), etc. (all the things in the "topping"
checklist.)

Katherine


- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of DMC197807
Sent: Wednesday, August 13, 2003 11:28 AM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] Re:stocks at the top


Rolf,

Very smart post, imo.  Remember the way to riches is to let the winners run
and cut the losers short.  It's not to lock in profits by selling a rising
stock which is correcting normally.  Weinstein has some things to say about
this.

I advised the original questioner to draw a trendline and see whether or not
the price action violated the trendline.   The trendline looks (jes'
eyeballing it) like it's at about 20 right now.  Maybe that's too much
profit to give back.

Another way to do it (Van Tharp) is to take the ATR and use a multiplier
(1.5 X or 2 X) and set your stop at that number with some adjustments for
round number activity.  Since ATR is 1.56 in PDII then it seems wise to set
the stop at somewhere between 2.50 and 3.00 below the highest closing price.
Since the highest closing looks to be about 26, then you could set the stop
at 23.46 or 22.96 (to avoid the round number bounces at 23.50 and 23.

Some smart speculator (Baruch, Keynes) said, in true trend following
fashion, I give up the first 20% and the last 20% of any gain to others, and
keep the middle 60% for myself.

DMC



- ----- Original Message -----
From: "Rolf Hertenstein" <rolfh@mindspring.com>
To: <canslim@lists.xmission.com>
Sent: Wednesday, August 13, 2003 9:13 AM
Subject: [CANSLIM] Re:stocks at the top (was short selling (WEBX) )


> Right *at* the top is trickier.  When I first read the question, I thought
> of, e.g., a Head & Shoulders Top, but by the time that formation is
> complete, it's already topped.  Climax tops are a possibility, but where
is
> *the* top as it's still going up?  I thought TASR for instance was likely
> done at the end of July after quickly running from $12 to $20.  But now it
> climaxed the climax to $25+.  Was yesterday finally *the* top, since it
did
> close well below the high on extremely high volume? Dunno.  Same for PDII.
> Most other technicals, like a quick slice down through the 50 DMA, are
> telling me that a top may have already happened.
>
> Generally, I watch the price/volume action for decelerating price rise,
> especially on higher volume, and especially if higher volume days are also
> down days, to warn that a top may be approaching.  This is also pretty
much
> the way I try to gauge the markets as a whole.  Nothing fancy.
>
> I'll be interested to hear other ideas.
>
>  Rolf
>
> ----- Original Message -----
> From: "Katherine Malm" <kmalm@earthlink.net>
>
>
> > Hi Harold (and all),
> >
> > Let's do this for the sake of discussion on the subject. Instead of me
> > simply listing how one (or I) would go about screening for failed tops,
> let
> > me ask of the group a preliminary question:
> >
> > What does a stock look like technically when it is *at* a top?
>
>
>
> -
> -To subscribe/unsubscribe, email "majordomo@xmission.com"
> -In the email body, write "subscribe canslim" or
> -"unsubscribe canslim".  Do not use quotes in your email.


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



- -
- -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.