RE: [CANSLIM] TASR and PDII

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: [CANSLIM] TASR and PDII
Date: Wed, 13 Aug 2003 23:02:44 -0500
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Hi Yien,

Just a follow-up on TASR. This, from today's "Big Picture":

"Although this correction has been tame, you still need to keep a close eye
on your stocks. They may be flashing key sell signals.

Take Taser International. (TASR) The stun gun maker has been on a tear since
April. The stock rallied steadily to about 13 and then accelerated wildly.
It more than doubled in just over three weeks.

On Tuesday, Taser shot up to 25.97 before reversing to close with a modest
gain of 0.49 to 24.49. Volume of 976,000 shares was the heaviest of the
run-up. At its peak, Taser towered 93% above its 50-day average. That's on
the very high side even for market-leading stocks.

The gains, volume and price acceleration all suggest a climax run. At the
very least, Taser holders should expect a significant correction. The stock
didn't disappoint Wednesday. It dropped 1.83 to 22.66 in heavy volume."

Katherine

- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Katherine Malm
Sent: Tuesday, August 12, 2003 5:05 PM
To: canslim@lists.xmission.com
Subject: RE: [CANSLIM] TASR and PDII


Hi Yien,

Both PDII and TASR put in high volume reversal days today, or a "tail down."
That, in combination with the other clues of a top would make me believe
that both are due for some sort of correction. That correction could be mild
or could take them back to a recent area of logical support. One of the
great downsides to CANSLIM investing is that it has a huge following. I call
it "having too many eyes" on a stock. Others describe it as "the momentum
crowd taking over." Either way, these stocks are in nosebleed territory and
need to be watched closely.

Here is a checklist which will help you determine whether a stock "may" be
putting in a top. Of course, one never knows until after the top has been
put in. The choices are (1) sell into a potential top given that the signs
are there or (2) ride it out, assuming that the correction will be mild
enough that a consolidation will create a launching pad for the next move
up.

Summary:
Signs of potential climax runs:
If a stock's price is overextended from its base and:
(1) its price closes for a larger increase than on any prior up days
(ultimate top often occurs on heaviest volume day since the beginning of the
advance)
(2) if it has been advancing rapidly and opens on a gap up in price (advance
is probably near its peak)
(3) the stock's price breaks badly for several days and does not rally
(4) suddenly makes its greatest one-day price drop since the beginning of
the move (consider in context of additional sell signals,industry group
weakness, market weakness, fundamental weakness in stock)
(5) a stock split is announced and the stock runs up sharply for 1-2 weeks.

Other signals of topping:
(1) Stock has advanced a number of months and price rises 25-50% on heavy
volume in a couple of weeks
(2) Churning: Stock trades on heavy volume but can't manage meaningful price
gains
(3) Wedging: New price highs on low volume
(4) Price repeatedly falls on high volume
(5) Leader in industry group puts in climax top
(6) Tail Down--Stock stages a high volume reversal after a healthy run-up

Overextension from the base is a nebulous term, but generally you're into
"extended" territory when:
(1) the stock gets into "rubberband sell rule territory"--i.e. >=25% above
the 50dMA AND >=70% above the 200dMA
(2) the current forward PE has expanded to 120%  of the trailing PE (i.e.
2.2 times) at the time of the breakout.


Katherine

- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Yien T Lung
Sent: Tuesday, August 12, 2003 12:08 PM
To: canslim@lists.xmission.com
Subject: [CANSLIM] TASR and PDII



Hi guys,

I am trying to improve my selling skills. Would TASR and PDII be possible
examples of climax tops?

Thanks

Yien




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