From: owner-canslim-digest@lists.xmission.com (canslim-digest) To: canslim-digest@lists.xmission.com Subject: canslim-digest V2 #1921 Reply-To: canslim Sender: owner-canslim-digest@lists.xmission.com Errors-To: owner-canslim-digest@lists.xmission.com Precedence: bulk Content-Transfer-Encoding: quoted-printable X-No-Archive: yes canslim-digest Monday, December 10 2001 Volume 02 : Number 1921 In this issue: Re: [CANSLIM] breakouts - return to base RE: [CANSLIM] Acc/Dis Numbers [CANSLIM] next threshold for over rich market based on Acc/Dis numbers Re: [CANSLIM] AZO Re: [CANSLIM] breakouts - return to base Re: [CANSLIM] breakouts - return to base ---------------------------------------------------------------------- Date: Mon, 10 Dec 2001 11:46:37 -0800 (PST) From: Kent Norman Subject: Re: [CANSLIM] breakouts - return to base Thanks Katherine You are putting some flesh on the bones. Makes it more meaningful. Kent Norman - --- Katherine Malm wrote: > Chris, > > Just a clarification. The 75% return rate is a > pullback within the first 12 days (this is the > average for the study). Bulkowski states that none > take longer than 30 days. After that, it goes beyond > throwback and falls into "normal price action" > territory. > > With regard to the WON 20% rule and profit taking. > Bulkowski gives some statistics that I think throw > some light. He says that 47% of stocks reach a high > after breakout in less than 3 months. 35% take > longer than 6 months. Most likely rise? 10-20%. > Average rise? 38%. His frequency distribution shows > that the longer it takes to reach the peak, the > larger the average gain. > > So think about what that means in terms of WON sell > guidelines. > > (1) If the stock rises 20% in less than 8 weeks, > suggests you hold on through the first correction > (2) Once it reaches 25% (and I'm assuming he then > means, if it takes longer than 8 weeks to do that), > THEN suggests taking some profits. > > But I also look for accumulation/distribution during > these rises to assess whether the uptrend is > persistent enough to carry the stock further than > the 25%. > > In that context, makes a lot more sense! > > Katherine > > > ----- Original Message ----- > From: Chris Dempsey > To: canslim@lists.xmission.com > Sent: Monday, December 10, 2001 12:22 PM > Subject: RE: [CANSLIM] breakouts - return to base > > > Katherine, David, and All others interested > > I remember reading that WON says 40% of breakouts > return to the base. I believe it is more than that. > I'm not sure that it is 75%, but it might be. For > that reason WON states in his book you must take > some profits when they hit 20%. On one of the IBD > tapes they state to profits in 1/2 of positions > reaching 25%. These are because of the high rate of > pull backs. If you don't do this then you are forced > to use the rule, don't let a winner turn into a > loser. > > SCUR appears to be an example of a stock > returning/nearly returning to the base. > -----Original Message----- > From: owner-canslim@lists.xmission.com > [mailto:owner-canslim@lists.xmission.com]On Behalf > Of camelot.homes@charter.net > Sent: Monday, December 10, 2001 9:49 AM > To: canslim@lists.xmission.com > Subject: Re: [CANSLIM] low volume breakouts > > > hi katherine , thank you so much for this very > good information! when bulkowski states that stocks > retrace back to the b/o piont 75% of the time is he > talking about high or low volume breakouts? and > where is the best place to get a copy of his book? > david > ----- Original Message ----- > From: Katherine Malm > To: canslim@lists.xmission.com > Sent: Monday, December 10, 2001 5:10 AM > Subject: Re: [CANSLIM] low volume breakouts > > > Hi David, > > The question you ask is a good one. Demanding > controlled study proof of a guideline like this is > important, as it makes an underlying assumption > about technical patterns which may or may not > trigger a buy. I pulled out my "Encyclopedia of > Chart Patterns" by Thomas Bulkowski to answer this > question. In this book, the author does statistical > studies on chart formation and there is an entire > chapter devoted to the C&H. (pp.135-152). > > Before I state the author's conclusions, a > general overview of WON's theory as to why volume > should be high on the breakout. That is, you are > looking for the point at which demand so outweighs > supply that the price moves up and onward. In my own > personal experience, low volume breakouts seem to > fall back more often than not. But these are "odds" > not specifics. SONC is a good example from recent > discussions on the list. Take a look at the daily > chart from 10/3 to now. You can see that SONC tried > very hard on several days to break out of its > consolidation, but fell back and eventually gapped > down. The low volume B/O's don't always mean the > stock will fail, just that it's not yet ready to > move on. I like to have the odds in my favor, so I'm > always willing to wait until there's proof of the > pudding. > > Back to Bulkowski. In the C&H formation, the > failure rate is 26%. If you wait for an upside > breakout, the failure rate falls to 10%. Stocks > retrace back to the B/O point 75% of the time > (average time 12 days). Waiting for the throwback > increases the success rate another 1%. Typical B/O > volume is 180% above the prior day and stays high > for the following week. Interestingly, he says > removing the high volume B/O criteria does hurt > performance, but only minimally. This is an > excellent chapter on C&H and, based on the > statistical evidence, the author makes other > conclusions that lead to particular trading tactics. > There are several additional criteria that WON would > require of a stock forming a C&H and then breaking > out, such as rising RS, high group RS, underlying > fundamental characteristics, etc. that are not > included in the author's study. My own conclusions, > anecdotally, are that if these other criteria are > met AND you get a high volume B/O, the odds are in > your favor. (No statistical studies to back that up, > however!) > > Katherine > > > ----- Original Message ----- > From: camelot.homes@charter.net > To: canslim@xmission.com > Sent: Sunday, December 09, 2001 5:44 PM > Subject: [CANSLIM] low volume breakouts > > > how often does a low volume breakout succeed > past the pivot point versus a high volume breakout > past the pivot point? david > ===== Opportunities always look bigger going than coming. __________________________________________________ Do You Yahoo!? Send your FREE holiday greetings online! http://greetings.yahoo.com - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Mon, 10 Dec 2001 18:02:10 -0500 From: Robert Subject: RE: [CANSLIM] Acc/Dis Numbers Hi Tom The following would indicate an "over rich" market. When %e gets as low as 1.5 to 2%, you should be on the look out that the market is overextended (over-rich), and is due for a correction. Also once the a+b/a:e gets close to 75%, one should be alerted that the market is very extended and is likely to go through a correction. As far as when the above might happen it would seem we have along way to go right now. The indication from the Ian woodward answer is that this happens rarely (like when Mr. Greenspan talks about Irrational exuberance). A normal market should vary between 62 and 75%. Hopefully we will be in a time of more normal markets for a while. Robert - -----Original Message----- From: Tom Worley [SMTP:stkguru@netside.net] Sent: Monday, December 10, 2001 3:58 AM To: canslim@lists.xmission.com Subject: Re: [CANSLIM] Acc/Dis Numbers Thanks, Robert, I had been wondering how much longer it would take to see "Market in correction" go away! What is the next threshold, and what will it take for the numbers to achieve that? Tom Worley stkguru@netside.net AIM: TexWorley ----- Original Message ----- From: Robert To: canslim@lists.xmission.com Sent: Sunday, December 09, 2001 10:41 PM Subject: [CANSLIM] Acc/Dis Numbers Hello everyone. Here are the latest Acc/Dis numbers. PLEASE take note that the market has returned to a "stable condition" on 12/7!! The last time the market this occoured was 5 months ago on 7/6/01. So things are looking up. Let the Bull return.... Robert Spread sheet version Date,A,B,C,D,E,% of AB/A:E,%E,Market Posture 11/30/01,651,2299,1232,930,305,54%,6%,Market in correction 12/3/01,715,2371,1201,860,281,57%,5%,Market in correction 12/4/01,695,2392,1181,878,282,57%,5%,Market in correction 12/5/01,678,2360,1204,885,288,56%,5%,Market in correction 12/6/01,736,2440,1173,814,263,59%,5%,Market in correction 12/7/01,924,2470,1064,754,239,62%,4%,Market stable 12/10/01,984,2450,1058,728,248,63%,5%,Market stable << File: ATT00003.htm >> - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Mon, 10 Dec 2001 18:03:51 -0500 From: Robert Subject: [CANSLIM] next threshold for over rich market based on Acc/Dis numbers Hi Tom The following would indicate an "over rich" market. When %e gets as low as 1.5 to 2%, you should be on the look out that the market is overextended (over-rich), and is due for a correction. Also once the a+b/a:e gets close to 75%, one should be alerted that the market is very extended and is likely to go through a correction. As far as when the above might happen it would seem we have along way to go right now. The indication from the Ian woodward answer is that this happens rarely (like when Mr. Greenspan talks about Irrational exuberance). A normal market should vary between 62 and 75%. Hopefully we will be in a time of more normal markets for a while. Robert - -----Original Message----- From: Tom Worley [SMTP:stkguru@netside.net] Sent: Monday, December 10, 2001 3:58 AM To: canslim@lists.xmission.com Subject: Re: [CANSLIM] Acc/Dis Numbers Thanks, Robert, I had been wondering how much longer it would take to see "Market in correction" go away! What is the next threshold, and what will it take for the numbers to achieve that? Tom Worley stkguru@netside.net AIM: TexWorley ----- Original Message ----- From: Robert To: canslim@lists.xmission.com Sent: Sunday, December 09, 2001 10:41 PM Subject: [CANSLIM] Acc/Dis Numbers Hello everyone. Here are the latest Acc/Dis numbers. PLEASE take note that the market has returned to a "stable condition" on 12/7!! The last time the market this occoured was 5 months ago on 7/6/01. So things are looking up. Let the Bull return.... Robert Spread sheet version Date,A,B,C,D,E,% of AB/A:E,%E,Market Posture 11/30/01,651,2299,1232,930,305,54%,6%,Market in correction 12/3/01,715,2371,1201,860,281,57%,5%,Market in correction 12/4/01,695,2392,1181,878,282,57%,5%,Market in correction 12/5/01,678,2360,1204,885,288,56%,5%,Market in correction 12/6/01,736,2440,1173,814,263,59%,5%,Market in correction 12/7/01,924,2470,1064,754,239,62%,4%,Market stable 12/10/01,984,2450,1058,728,248,63%,5%,Market stable << File: ATT00003.htm >> - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: 10 Dec 2001 16:21:14 -0800 From: "Tim Fisher" Subject: Re: [CANSLIM] AZO Scratch that one too, Earl. Out at my buy price, so only commissions lost. P.S. Dunno why but I STILL don't like PENN. Guess that last fakeout burned me too hard. At 07:30 PM 12/9/2001 -0800, you wrote: >Here is a new Leader's List for your reading pleasure. I put this list >together with my own version of the IBD composite rating, and the following >stocks ranked as the highest 150 or so stocks as of Friday's close. The >list is just based on the rankings of the stocks, so do you own DD, and >especially look at the charts. I also include Industry Group RS in my >rank, so some stocks will be penalized for their group RS when the group >may be moving up strongly (and this is something I want to look at changing >in the future). Standard disclosure - Of the list, I own UTSI, ECTL, and >ASIA. Tim Fisher Ore-ROCK-On Rockhounding Web Site Pacific Fishery Biologists Information mailto:tim@OreRockOn.com WWW http://OreRockOn.com - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Mon, 10 Dec 2001 18:24:42 -0600 From: Subject: Re: [CANSLIM] breakouts - return to base This is a multi-part message in MIME format. - ------=_NextPart_000_00F7_01C181A7.EFD12FF0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable katherine and chris, sorry i have been away. i always wonder if the most = likely breakout will rise 5 to 20%-is it better to take those small = profits on alot of stocks, then wait longer for possible bigger profits? = david ----- Original Message -----=20 From: Katherine Malm=20 To: canslim@lists.xmission.com=20 Sent: Monday, December 10, 2001 12:40 PM Subject: Re: [CANSLIM] breakouts - return to base Chris, Just a clarification. The 75% return rate is a pullback within the = first 12 days (this is the average for the study). Bulkowski states = that none take longer than 30 days. After that, it goes beyond throwback = and falls into "normal price action" territory. With regard to the WON 20% rule and profit taking. Bulkowski gives = some statistics that I think throw some light. He says that 47% of = stocks reach a high after breakout in less than 3 months. 35% take = longer than 6 months. Most likely rise? 10-20%. Average rise? 38%. His = frequency distribution shows that the longer it takes to reach the peak, = the larger the average gain. So think about what that means in terms of WON sell guidelines.=20 (1) If the stock rises 20% in less than 8 weeks, suggests you hold on = through the first correction (2) Once it reaches 25% (and I'm assuming he then means, if it takes = longer than 8 weeks to do that), THEN suggests taking some profits. But I also look for accumulation/distribution during these rises to = assess whether the uptrend is persistent enough to carry the stock = further than the 25%. In that context, makes a lot more sense! Katherine ----- Original Message -----=20 From: Chris Dempsey=20 To: canslim@lists.xmission.com=20 Sent: Monday, December 10, 2001 12:22 PM Subject: RE: [CANSLIM] breakouts - return to base Katherine, David, and All others interested I remember reading that WON says 40% of breakouts return to the = base. I believe it is more than that. I'm not sure that it is 75%, but = it might be. For that reason WON states in his book you must take some = profits when they hit 20%. On one of the IBD tapes they state to profits = in 1/2 of positions reaching 25%. These are because of the high rate of = pull backs. If you don't do this then you are forced to use the rule, = don't let a winner turn into a loser.=20 SCUR appears to be an example of a stock returning/nearly returning = to the base. -----Original Message----- From: owner-canslim@lists.xmission.com = [mailto:owner-canslim@lists.xmission.com]On Behalf Of = camelot.homes@charter.net Sent: Monday, December 10, 2001 9:49 AM To: canslim@lists.xmission.com Subject: Re: [CANSLIM] low volume breakouts hi katherine , thank you so much for this very good information! = when bulkowski states that stocks retrace back to the b/o piont 75% of = the time is he talking about high or low volume breakouts? and where is = the best place to get a copy of his book? david ----- Original Message -----=20 From: Katherine Malm=20 To: canslim@lists.xmission.com=20 Sent: Monday, December 10, 2001 5:10 AM Subject: Re: [CANSLIM] low volume breakouts Hi David, The question you ask is a good one. Demanding controlled study = proof of a guideline like this is important, as it makes an underlying = assumption about technical patterns which may or may not trigger a buy. = I pulled out my "Encyclopedia of Chart Patterns" by Thomas Bulkowski to = answer this question. In this book, the author does statistical studies = on chart formation and there is an entire chapter devoted to the C&H. = (pp.135-152). Before I state the author's conclusions, a general overview of = WON's theory as to why volume should be high on the breakout. That is, = you are looking for the point at which demand so outweighs supply that = the price moves up and onward. In my own personal experience, low volume = breakouts seem to fall back more often than not. But these are "odds" = not specifics. SONC is a good example from recent discussions on the = list. Take a look at the daily chart from 10/3 to now. You can see that = SONC tried very hard on several days to break out of its consolidation, = but fell back and eventually gapped down. The low volume B/O's don't = always mean the stock will fail, just that it's not yet ready to move = on. I like to have the odds in my favor, so I'm always willing to wait = until there's proof of the pudding. Back to Bulkowski. In the C&H formation, the failure rate is = 26%. If you wait for an upside breakout, the failure rate falls to 10%. = Stocks retrace back to the B/O point 75% of the time (average time 12 = days). Waiting for the throwback increases the success rate another 1%. = Typical B/O volume is 180% above the prior day and stays high for the = following week. Interestingly, he says removing the high volume B/O = criteria does hurt performance, but only minimally. This is an excellent = chapter on C&H and, based on the statistical evidence, the author makes = other conclusions that lead to particular trading tactics. There are = several additional criteria that WON would require of a stock forming a = C&H and then breaking out, such as rising RS, high group RS, underlying = fundamental characteristics, etc. that are not included in the author's = study. My own conclusions, anecdotally, are that if these other criteria = are met AND you get a high volume B/O, the odds are in your favor. (No = statistical studies to back that up, however!) Katherine ----- Original Message -----=20 From: camelot.homes@charter.net=20 To: canslim@xmission.com=20 Sent: Sunday, December 09, 2001 5:44 PM Subject: [CANSLIM] low volume breakouts how often does a low volume breakout succeed past the pivot = point versus a high volume breakout past the pivot point? david - ------=_NextPart_000_00F7_01C181A7.EFD12FF0 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable
katherine and chris, sorry i have been = away. i=20 always wonder if the most likely breakout will rise 5 to 20%-is = it better=20 to take those small profits on alot of stocks, then wait longer for = possible=20 bigger profits? david
----- Original Message -----
From:=20 Katherine=20 Malm
Sent: Monday, December 10, 2001 = 12:40=20 PM
Subject: Re: [CANSLIM] = breakouts - return=20 to base

Chris,
 
Just a clarification. The 75% return = rate is a=20 pullback within the first 12 days (this is the average for the study). = Bulkowski states  that none take longer than 30 days. After that, = it goes=20 beyond throwback and falls into "normal price action" = territory.
 
With regard to the WON 20% rule and = profit=20 taking. Bulkowski gives some statistics that I think throw some light. = He says=20 that 47% of stocks reach a high after breakout in less than 3 months. = 35% take=20 longer than 6 months. Most likely rise? 10-20%. Average rise? 38%. His = frequency distribution shows that the longer it takes to reach the = peak, the=20 larger the average gain.
 
So think about what that means in = terms of WON=20 sell guidelines.
 
(1) If the stock rises 20% in less = than 8 weeks,=20 suggests you hold on through the first correction
(2) Once it reaches 25% (and I'm = assuming he then=20 means, if it takes longer than 8 weeks to do that), THEN = suggests taking=20 some profits.
 
But I also look for = accumulation/distribution=20 during these rises to assess whether the uptrend is persistent enough = to carry=20 the stock further than the 25%.
 
In that context, makes a lot more=20 sense!
 
Katherine
 
 
----- Original Message -----
From:=20 Chris Dempsey =
Sent: Monday, December 10, = 2001 12:22=20 PM
Subject: RE: [CANSLIM] = breakouts -=20 return to base

Katherine, David, and All others=20 interested
 
I=20 remember reading that WON says 40% of breakouts return to the base. = I=20 believe it is more than that. I'm not sure that it is 75%, but it = might be.=20 For that reason WON states in his book you must take some profits = when they=20 hit 20%. On one of the IBD tapes they state to profits in 1/2 of = positions=20 reaching 25%. These are because of the high rate of pull backs. If = you don't=20 do this then you are forced to use the rule, don't let a winner turn = into a=20 loser.
 
SCUR appears to be an example of a stock=20 returning/nearly returning to the base.
-----Original Message-----
From:=20 owner-canslim@lists.xmission.com=20 [mailto:owner-canslim@lists.xmission.com]On Behalf Of=20 camelot.homes@charter.net
Sent: Monday, December 10, = 2001=20 9:49 AM
To: = canslim@lists.xmission.com
Subject: Re:=20 [CANSLIM] low volume breakouts

hi katherine , thank you so much = for this=20 very good information! when bulkowski states that stocks retrace = back to=20 the b/o piont 75% of the time is he talking about high or low = volume=20 breakouts? and where is the best place to get a copy of his book?=20 david
----- Original Message ----- =
From:=20 Katherine=20 Malm
To: canslim@lists.xmission.com= =20
Sent: Monday, December = 10, 2001=20 5:10 AM
Subject: Re: [CANSLIM] = low volume=20 breakouts

Hi David,
 
The question you ask is a good = one.=20 Demanding controlled study proof of a guideline like this is = important,=20 as it makes an underlying assumption about technical patterns = which may=20 or may not trigger a buy. I pulled out my "Encyclopedia of Chart = Patterns" by Thomas Bulkowski to answer this question. In this = book, the=20 author does statistical studies on chart formation and there is = an=20 entire chapter devoted to the C&H. = (pp.135-152).
 
Before I state the author's = conclusions, a=20 general overview of WON's theory as to why volume should be high = on the=20 breakout. That is, you are looking for the point at which demand = so=20 outweighs supply that the price moves up and onward. In my own = personal=20 experience, low volume breakouts seem to fall back more often = than not.=20 But these are "odds" not specifics. SONC is a good example = from=20 recent discussions on the list. Take a look at the daily chart = from 10/3=20 to now. You can see that SONC tried very hard on several days to = break=20 out of its consolidation, but fell back and eventually gapped = down. The=20 low volume B/O's don't always mean the stock will fail, just = that it's=20 not yet ready to move on. I like to have the odds in my favor, = so I'm=20 always willing to wait until there's proof of the = pudding.
 
Back to Bulkowski. In the = C&H=20 formation, the failure rate is 26%. If you wait for an upside = breakout,=20 the failure rate falls to 10%. Stocks retrace back to the B/O = point 75%=20 of the time (average time 12 days). Waiting for the throwback = increases=20 the success rate another 1%. Typical B/O volume is 180% above = the prior=20 day and stays high for the following week. Interestingly, he = says=20 removing the high volume B/O criteria does hurt performance, but = only=20 minimally. This is an excellent chapter on C&H and, based on = the=20 statistical evidence,  the author makes other conclusions = that lead=20 to particular trading tactics. There are several additional = criteria=20 that WON would require of a stock forming a C&H and then = breaking=20 out, such as rising RS, high group RS, underlying fundamental=20 characteristics, etc. that are not included in the author's = study. My=20 own conclusions, anecdotally, are that if these other criteria = are met=20 AND you get a high volume B/O, the odds are in your favor. (No=20 statistical studies to back that up, however!)
 
Katherine
 
 
----- Original Message -----
From:=20 camelot.homes@charter.net=20
Sent: Sunday, December = 09, 2001=20 5:44 PM
Subject: [CANSLIM] low = volume=20 breakouts

how often does a low volume = breakout=20 succeed  past the pivot point versus  a high volume = breakout=20 past the pivot point?=20 = david
- ------=_NextPart_000_00F7_01C181A7.EFD12FF0-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Mon, 10 Dec 2001 19:00:14 -0600 From: "Katherine Malm" Subject: Re: [CANSLIM] breakouts - return to base This is a multi-part message in MIME format. - ------=_NextPart_000_00C8_01C181AC.E693F9E0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable David, I think it depends on your investment strategy. If you are intentionally = playing a short term trend, small profits 5-20% might be ok. On the = other hand, the goal of moving into the intermediate time frame is to = find the right combination of fundamentals and technicals so the ride = can be far greater. A good ride in a good market could easily get you = far more than 5-20%. It's not uncommon to get nice 50-60% returns in a = few months. That's why you want to really understand price/volume action = so that you can determine if the stock remains healthy in its upward = intermediate term advance. Small pullbacks here and there mean little = over this time frame. It's repeated high volume pull backs = (distribution) that are problematic. One of the things that always stuck = with me from Nicholas Darvas' book "How I made $2 million in the Stock = Market" was the simple phrase "I have no reason to sell a stock that's = rising." In other words, skipping town too early could very well lower = your overall investment return. If your strategy is a swing strategy of 1-10 days or so, a consistent = 5-10% return on each position would certainly garner a high return = overall. But the entries are based on pricing patterns and the = candidates mined from stocks with enough volatility to move swiftly in a = few days. Very different strategy than CANSLIM. Katherine ----- Original Message -----=20 From: camelot.homes@charter.net=20 To: canslim@lists.xmission.com=20 Sent: Monday, December 10, 2001 6:24 PM Subject: Re: [CANSLIM] breakouts - return to base katherine and chris, sorry i have been away. i always wonder if the = most likely breakout will rise 5 to 20%-is it better to take those small = profits on alot of stocks, then wait longer for possible bigger profits? = david ----- Original Message -----=20 From: Katherine Malm=20 To: canslim@lists.xmission.com=20 Sent: Monday, December 10, 2001 12:40 PM Subject: Re: [CANSLIM] breakouts - return to base Chris, Just a clarification. The 75% return rate is a pullback within the = first 12 days (this is the average for the study). Bulkowski states = that none take longer than 30 days. After that, it goes beyond throwback = and falls into "normal price action" territory. With regard to the WON 20% rule and profit taking. Bulkowski gives = some statistics that I think throw some light. He says that 47% of = stocks reach a high after breakout in less than 3 months. 35% take = longer than 6 months. Most likely rise? 10-20%. Average rise? 38%. His = frequency distribution shows that the longer it takes to reach the peak, = the larger the average gain. So think about what that means in terms of WON sell guidelines.=20 (1) If the stock rises 20% in less than 8 weeks, suggests you hold = on through the first correction (2) Once it reaches 25% (and I'm assuming he then means, if it takes = longer than 8 weeks to do that), THEN suggests taking some profits. But I also look for accumulation/distribution during these rises to = assess whether the uptrend is persistent enough to carry the stock = further than the 25%. In that context, makes a lot more sense! Katherine ----- Original Message -----=20 From: Chris Dempsey=20 To: canslim@lists.xmission.com=20 Sent: Monday, December 10, 2001 12:22 PM Subject: RE: [CANSLIM] breakouts - return to base Katherine, David, and All others interested I remember reading that WON says 40% of breakouts return to the = base. I believe it is more than that. I'm not sure that it is 75%, but = it might be. For that reason WON states in his book you must take some = profits when they hit 20%. On one of the IBD tapes they state to profits = in 1/2 of positions reaching 25%. These are because of the high rate of = pull backs. If you don't do this then you are forced to use the rule, = don't let a winner turn into a loser.=20 SCUR appears to be an example of a stock returning/nearly = returning to the base. -----Original Message----- From: owner-canslim@lists.xmission.com = [mailto:owner-canslim@lists.xmission.com]On Behalf Of = camelot.homes@charter.net Sent: Monday, December 10, 2001 9:49 AM To: canslim@lists.xmission.com Subject: Re: [CANSLIM] low volume breakouts hi katherine , thank you so much for this very good information! = when bulkowski states that stocks retrace back to the b/o piont 75% of = the time is he talking about high or low volume breakouts? and where is = the best place to get a copy of his book? david ----- Original Message -----=20 From: Katherine Malm=20 To: canslim@lists.xmission.com=20 Sent: Monday, December 10, 2001 5:10 AM Subject: Re: [CANSLIM] low volume breakouts Hi David, The question you ask is a good one. Demanding controlled study = proof of a guideline like this is important, as it makes an underlying = assumption about technical patterns which may or may not trigger a buy. = I pulled out my "Encyclopedia of Chart Patterns" by Thomas Bulkowski to = answer this question. In this book, the author does statistical studies = on chart formation and there is an entire chapter devoted to the C&H. = (pp.135-152). Before I state the author's conclusions, a general overview of = WON's theory as to why volume should be high on the breakout. That is, = you are looking for the point at which demand so outweighs supply that = the price moves up and onward. In my own personal experience, low volume = breakouts seem to fall back more often than not. But these are "odds" = not specifics. SONC is a good example from recent discussions on the = list. Take a look at the daily chart from 10/3 to now. You can see that = SONC tried very hard on several days to break out of its consolidation, = but fell back and eventually gapped down. The low volume B/O's don't = always mean the stock will fail, just that it's not yet ready to move = on. I like to have the odds in my favor, so I'm always willing to wait = until there's proof of the pudding. Back to Bulkowski. In the C&H formation, the failure rate is = 26%. If you wait for an upside breakout, the failure rate falls to 10%. = Stocks retrace back to the B/O point 75% of the time (average time 12 = days). Waiting for the throwback increases the success rate another 1%. = Typical B/O volume is 180% above the prior day and stays high for the = following week. Interestingly, he says removing the high volume B/O = criteria does hurt performance, but only minimally. This is an excellent = chapter on C&H and, based on the statistical evidence, the author makes = other conclusions that lead to particular trading tactics. There are = several additional criteria that WON would require of a stock forming a = C&H and then breaking out, such as rising RS, high group RS, underlying = fundamental characteristics, etc. that are not included in the author's = study. My own conclusions, anecdotally, are that if these other criteria = are met AND you get a high volume B/O, the odds are in your favor. (No = statistical studies to back that up, however!) Katherine ----- Original Message -----=20 From: camelot.homes@charter.net=20 To: canslim@xmission.com=20 Sent: Sunday, December 09, 2001 5:44 PM Subject: [CANSLIM] low volume breakouts how often does a low volume breakout succeed past the pivot = point versus a high volume breakout past the pivot point? david - ------=_NextPart_000_00C8_01C181AC.E693F9E0 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable
David,
 
I think it depends on your investment = strategy. If=20 you are intentionally playing a short term trend, small profits 5-20% = might be=20 ok. On the other hand, the goal of moving into the intermediate time = frame is to=20 find the right combination of fundamentals and technicals so the ride = can be far=20 greater. A good ride in a good market could easily get you far more than = 5-20%.=20 It's not uncommon to get nice 50-60% returns in a few months. That's why = you=20 want to really understand price/volume action so that you can determine = if the=20 stock remains healthy in its upward intermediate term advance. Small = pullbacks=20 here and there mean little over this time frame. It's repeated high = volume pull=20 backs (distribution) that are problematic. One of the things that always = stuck=20 with me from Nicholas Darvas' book "How I made $2 million in the Stock = Market"=20 was the simple phrase "I have no reason to sell a stock that's rising." = In other=20 words, skipping town too early could very well lower your overall = investment=20 return.
 
If your strategy is a swing strategy of = 1-10 days=20 or so, a consistent 5-10% return on each position would certainly garner = a high=20 return overall. But the entries are based on pricing patterns and the = candidates=20 mined from stocks with enough volatility to move swiftly in a few days. = Very=20 different strategy than CANSLIM.
 
Katherine
----- Original Message -----
From:=20 camelot.homes@charter.net =
Sent: Monday, December 10, 2001 = 6:24=20 PM
Subject: Re: [CANSLIM] = breakouts - return=20 to base

katherine and chris, sorry i have = been away. i=20 always wonder if the most likely breakout will rise 5 to 20%-is = it better=20 to take those small profits on alot of stocks, then wait longer for = possible=20 bigger profits? david
----- Original Message -----
From:=20 Katherine=20 Malm
Sent: Monday, December 10, = 2001 12:40=20 PM
Subject: Re: [CANSLIM] = breakouts -=20 return to base

Chris,
 
Just a clarification. The 75% = return rate is a=20 pullback within the first 12 days (this is the average for the = study).=20 Bulkowski states  that none take longer than 30 days. After = that, it=20 goes beyond throwback and falls into "normal price action"=20 territory.
 
With regard to the WON 20% rule and = profit=20 taking. Bulkowski gives some statistics that I think throw some = light. He=20 says that 47% of stocks reach a high after breakout in less than 3 = months.=20 35% take longer than 6 months. Most likely rise? 10-20%. Average = rise? 38%.=20 His frequency distribution shows that the longer it takes to reach = the peak,=20 the larger the average gain.
 
So think about what that means in = terms of WON=20 sell guidelines.
 
(1) If the stock rises 20% in less = than 8=20 weeks, suggests you hold on through the first = correction
(2) Once it reaches 25% (and I'm = assuming he=20 then means, if it takes longer than 8 weeks to do that), THEN=20 suggests taking some profits.
 
But I also look for = accumulation/distribution=20 during these rises to assess whether the uptrend is persistent = enough to=20 carry the stock further than the 25%.
 
In that context, makes a lot more=20 sense!
 
Katherine
 
 
----- Original Message -----
From:=20 Chris = Dempsey
To: canslim@lists.xmission.com= =20
Sent: Monday, December 10, = 2001 12:22=20 PM
Subject: RE: [CANSLIM] = breakouts -=20 return to base

Katherine, David, and All others=20 interested
 
I remember reading that WON says 40% of = breakouts=20 return to the base. I believe it is more than that. I'm not sure = that it=20 is 75%, but it might be. For that reason WON states in his book = you must=20 take some profits when they hit 20%. On one of the IBD tapes they = state to=20 profits in 1/2 of positions reaching 25%. These are because of the = high=20 rate of pull backs. If you don't do this then you are forced to = use the=20 rule, don't let a winner turn into a loser.
 
SCUR appears to be an example of a = stock=20 returning/nearly returning to the base.
-----Original Message-----
From:=20 owner-canslim@lists.xmission.com=20 [mailto:owner-canslim@lists.xmission.com]On Behalf Of=20 camelot.homes@charter.net
Sent: Monday, December = 10, 2001=20 9:49 AM
To: = canslim@lists.xmission.com
Subject: Re:=20 [CANSLIM] low volume breakouts

hi katherine , thank you so = much for this=20 very good information! when bulkowski states that stocks retrace = back to=20 the b/o piont 75% of the time is he talking about high or low = volume=20 breakouts? and where is the best place to get a copy of his = book?=20 david
----- Original Message ----- =
From:=20 Katherine Malm
To: canslim@lists.xmission.com= =20
Sent: Monday, December = 10, 2001=20 5:10 AM
Subject: Re: [CANSLIM] = low volume=20 breakouts

Hi David,
 
The question you ask is a = good one.=20 Demanding controlled study proof of a guideline like this is=20 important, as it makes an underlying assumption about = technical=20 patterns which may or may not trigger a buy. I pulled out my=20 "Encyclopedia of Chart Patterns" by Thomas Bulkowski to answer = this=20 question. In this book, the author does statistical studies on = chart=20 formation and there is an entire chapter devoted to the = C&H.=20 (pp.135-152).
 
Before I state the author's = conclusions,=20 a general overview of WON's theory as to why volume should be = high on=20 the breakout. That is, you are looking for the point at which = demand=20 so outweighs supply that the price moves up and onward. In my = own=20 personal experience, low volume breakouts seem to fall back = more often=20 than not. But these are "odds" not specifics. SONC is a = good=20 example from recent discussions on the list. Take a look at = the daily=20 chart from 10/3 to now. You can see that SONC tried very hard = on=20 several days to break out of its consolidation, but fell back = and=20 eventually gapped down. The low volume B/O's don't always mean = the=20 stock will fail, just that it's not yet ready to move on. I = like to=20 have the odds in my favor, so I'm always willing to wait until = there's=20 proof of the pudding.
 
Back to Bulkowski. In the = C&H=20 formation, the failure rate is 26%. If you wait for an upside=20 breakout, the failure rate falls to 10%. Stocks retrace back = to the=20 B/O point 75% of the time (average time 12 days). Waiting for = the=20 throwback increases the success rate another 1%. Typical B/O = volume is=20 180% above the prior day and stays high for the following = week.=20 Interestingly, he says removing the high volume B/O criteria = does hurt=20 performance, but only minimally. This is an excellent chapter = on=20 C&H and, based on the statistical evidence,  the = author makes=20 other conclusions that lead to particular trading tactics. = There are=20 several additional criteria that WON would require of a stock = forming=20 a C&H and then breaking out, such as rising RS, high group = RS,=20 underlying fundamental characteristics, etc. that are not = included in=20 the author's study. My own conclusions, anecdotally, are that = if these=20 other criteria are met AND you get a high volume B/O, the odds = are in=20 your favor. (No statistical studies to back that up,=20 however!)
 
Katherine
 
 
----- Original Message -----
From:=20 camelot.homes@charter.net=20
To: canslim@xmission.com
Sent: Sunday, = December 09, 2001=20 5:44 PM
Subject: [CANSLIM] = low volume=20 breakouts

how often does a low volume = breakout=20 succeed  past the pivot point versus  a high = volume=20 breakout past the pivot point?=20 = david
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