From: owner-canslim-digest@lists.xmission.com (canslim-digest) To: canslim-digest@lists.xmission.com Subject: canslim-digest V2 #3375 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 Tuesday, June 17 2003 Volume 02 : Number 3375 In this issue: RE: [CANSLIM] stop losses and profits Re: [CANSLIM] fwht pivot RE: [CANSLIM] stop losses and profits ---------------------------------------------------------------------- Date: Tue, 17 Jun 2003 11:08:06 -0500 From: "Katherine Malm" Subject: RE: [CANSLIM] stop losses and profits Hi Mike, First, you're assuming that today's action would be 7-8% below one's purchase price at its opening gap. That would be impossible, because you would assume that the buyer had made an entry when the stock was extended rather than when it was rising from a basing pattern on volume. (The last valid entry point was the breakout of an ascending base on 4/30 when it rose on volume above the A-base channel.) In other words, the best defense is a good offense. Second, you're assuming that other sell rules wouldn't have already kicked in on GRMN, even before today's action. Depending on the rules one uses, the action since 4/30 might have had one trimming their holdings or selling outright). Third, if one had been in GRMN since the last BO on 4/30 (or before), they are still above breakeven. That "wiggle room" gives them the option to see how the stock acts in response to this 2 day drop if they wish. In other words, does GRMN find support at the 50dMA? A willingness to sit through these kinds of corrections will depend on the market strength, one's profit taking plan, and one's sleep-through-the-night risk tolerance. I look at my open positions each evening to see if they've triggered any yellow flags or outright sell rules. I check in during the day only in spot checks, as I think constantly monitoring the stocks intraday is hypersensitive and contra-indicated to the intermediate time frame within which the CANLSIM methodology falls. The only time I look more closely at the action intraday is if the stock is in the danger zone (ie. too many yellow flags but no outright sell rule violated just yet). Katherine - -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com]On Behalf Of michael_niemotka@baxter.com Sent: Tuesday, June 17, 2003 8:51 AM To: canslim@lists.xmission.com Subject: RE: [CANSLIM] stop losses and profits Katherine, Thanks again, and keep up the excellent work! When you mentioned not using hard stops, I assume that you are watching the market closely during the day, but am wondering how you handle a case where a stock takes a tumble at open, that goes beyond your 7-8% loss, case in point, GRMN today. I was stopped out with 11% loss because of the quick drop, and am now watching to see what happens. For you, you would be watching , and my wait until the end of the day to see if you violate your internal stop losses, but how do you protect yourself from a huge drop that does not come back up, ie what signs do you look for to exit manually? Thanks as always Mike Mike Niemotka , PE Sr. Principal Engineer Baxter Healthcare Corporation Route 120 & Wilson Road Round Lake, IL 60073 Tel (847) 270-4075 Fax (847) 270-4525 michael_niemotka@baxter.com "Katherine Malm" To: canslim@lists.xmission.com Sent by: cc: owner-canslim@lists.xm Subject: RE: [CANSLIM] stop losses and profits ission.com 06/17/2003 09:36 AM Please respond to canslim Hi Mike, re: "As a point of clarification, no matter what the market conditions at breakout, and the strength of the breakout, after 3 weeks you move the stops to break even, is that correct?" Yes. Once 3 weeks has passed and the stock is moving past the pivot, you don't want to take a loss of any kind. If it wanders up during the 3 weeks, but isn't moving strongly, then you want to give it room to move. For example, in a weak market, successful BO's aren't necessarily going to shoot straight up. However, at the same time you give it breathing room, it doesn't make sense to allow an 8% loss after having held it for so long. re: "Also, WON has a "rule" that if a stock rises 20% in the first 3 weeks of breakout, you "must" hold it for at least 8 weeks. If this is the case, what would happen if the stock drops back down 25% to the point where it would trigger a 4-5% loss rule? Does the "hold for 8 weeks" rule supersede the "don't let a gain of 15-20% turn into a loss rule"?" What you're referring to is the idea that if a stock rises 20% in the first 3 weeks, then this is a sign of strength in the BO. The rules that I've outlined refer to the initial stop loss on a position. Once the stock has risen 20% or more, there's no reason to take a loss. Move stop loss to breakeven, period. That helps in the case where something rises sharply, but then moves back down. By moving stop to breakeven, you protect yourself from losing money on something that crashes back to earth. A 20% rise in any market is significant. If a stock rises that much and then reverses in the first 3 weeks, that's generally a sign of weakness somewhere along the line. At the same time, if a stock has risen 20%, then not only do you move the stop to breakeven, but you also give it room to prove itself over the first 8 weeks. In other words, you're slightly more tolerant of the price/volume action *after* the 20% rise if it hits 20% in the first 3 weeks, but never more tolerant than breakeven. re: "And finally, is there an easy way to monitor how the number of breakouts is changing, and how successful they are? " Absolutely. I have been working on this during the last couple of years. You can see a glimpse of that in a post that I made a couple of weeks ago in response to jans' question on the leveling off of RSLines in the leaders (I've included a copy at the end of this post). I showed several charts that indicated not only the number of breakouts, but also the cumulative breakouts and the number of breakouts making rises of 20% or more in their first 3 weeks. This kind of work is still behind the scenes, but eventually will be presented at our site for our subscribers. There are 3 issues related to this kind of info (1) how strong is the market?, (2) how strong are the breakouts, in general?, (3) if I own a stock, how will the strength of the BO and the market influence my sell rules? and (4) if I'm interested in a stock but missed the original BO, is there a benign pullback that will afford a second chance entry? Katherine - -----Original Message----- From: Katherine Malm [mailto:kmalm@earthlink.net] Sent: Tuesday, May 27, 2003 7:22 PM To: Canslim@Lists.Xmission.Com Subject: RE: Lagging RSLines (was: [CANSLIM] SHFL Breaking Out) Hi jans, To illustrate this in action, I took all the cup with handle (cwh) breakouts for the month prior to and after the follow thru day on 3/17/03. While this doesn't represent *all* breakouts during the period, it's a very good barometer, because the cwh pattern is by far the most common intermediate term pattern. I chose the 2 months around the FTD so that I could have a steady state group of "leaders" and then measure their technical condition against the market as a whole between the beginning of that period and 5/23/03 (which is when I prepared the stats). For the period between 2/17/03 and 4/17/03, there were 71 distinct stocks that broke out. I used the same methodology we use for measuring the industry scores for use in assigining industry rank and then measured that group score from 2/17 through 5/23. The score is derived by assigning points to each stock based on the RSRank, % off 52 week high, price relative to the 50dMA, price relative to the 200dMA, an 50 realtive to 200dMA. (For a more in depth description, see http://www.breakoutwatch.com/industry_methodology.htm ) Here is a graph of the score for this group of leaders against the market as a whole: http://www.cwhcharts.com/katherine/cwhBreakoutsGroupA.jpg Notice that while the group as a whole has pulled back in score ever so slightly, it is still at a very high value of 90 out of a possible 100. Notice also that the market as whole has been very strong during this period, rising very steadily. What that translates into is a pause in the action of the leaders that is very mild against a strengthening market. That would mean that the RSLines would then fall back a bit. Here's another view point to demonstrate the strength of the market during that same period: First is the total number of cwh breakouts by week: http://www.cwhcharts.com/katherine/cwhBreakoutsByWk.jpg Notice the dearth of breakouts in mid-2002 and the more recent increase. You can also see the increase in the total number of cwh breakouts by looking at the cumulative number since the 10/10/2 market low: http://www.cwhcharts.com/katherine/cwhBreakoutsCumul.jpg We're now up to more than 300 cumulative breakouts and the rate of breakouts per week has accelerated since mid March when we posted the FTD. Here's another viewpoint to show the cwh breakouts action. This is a rolling total. At any point in time, the number you see shows the total number of breakouts over the prior 13 week period: http://www.cwhcharts.com/katherine/cwhBreakoutsRolling13wks.jpg Notice how the cumulative total rose into late 2002, then churned a bit until about 2/21/3. That's about 1 month prior to the FTD 3/17/3 and corresponds to the beginning of the period I selected for highlighting the "leaders" in the rally. Now, one last view to show the strength of the breakouts and the market as a whole during the latest 13 week period. I've taken three 13 week periods and measured the action of the cwh breakouts during each of those periods. The chart shows the price action of the breakouts 3 weeks after they originally broke out. I used 3 weeks, because WON often suggests that we look to see not only *how many* stocks are setting up and breaking out, but also *how strong* those breakouts are in the first few weeks of their breakout: http://www.cwhcharts.com/katherine/PctIncAfterBO.JPG Notice that for the period 11/25/02 through 2/21/03 that only 1.3% of breakouts were up >=20% and only about 16% were up 5% or more in the first 3 weeks. The number of failures (down more than 8% in the first 3 weeks) was also very high, 25% of all the breakouts. However, in the latest 13 week period (2/24/03 through 5/23/03), 12.7% of the breakouts during the period are up >=20%, and 47% are up >=5%. At the same time, failures are down considerably at 7.8% of the total breakouts during the period. Looking at the performance to date of all breakouts during the latest 13 week period, 57.2% are now up >=5% since their breakout and only 6% have failed. Bottom line.... the leaders are still strong (average technical score for the group 90 out of 100) + market continues to serve up more breakouts + market continues to serve up successful breakouts and shows a small % of failed breakouts = RSLines of the leaders will fall back a bit. That said, this is a record of the market as it is today. If the number of breakouts begins to wane, if the price action of breakouts falls back, if breakouts begin to fail, and/or if the price/volume action in the indexes begins to show churning and/or distribution, then those would be signs the rally is over. By itself, a slight pullback in the RSLines of the leaders does not, by itself indicate problems. Katherine - -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com]On Behalf Of michael_niemotka@baxter.com Sent: Tuesday, June 17, 2003 7:42 AM To: canslim@lists.xmission.com Subject: RE: [CANSLIM] stop losses and profits Katherine, As usual, an excellent response. I appreciate how you have outlined everything to include the general market into the equation. As a point of clarification, no matter what the market conditions at breakout, and the strength of the breakout, after 3 weeks you move the stops to break even, is that correct? And finally, is there an easy way to monitor how the number of breakouts is changing, and how successful they are? I am thinking that one way would be to plot the number of confirmed breakouts from your site vs each day to see if there is a trend, and then to also use the breakout page to see the results after 3 weeks. Thanks again Mike Mike Niemotka , PE Sr. Principal Engineer Baxter Healthcare Corporation Route 120 & Wilson Road Round Lake, IL 60073 Tel (847) 270-4075 Fax (847) 270-4525 michael_niemotka@baxter.com "Katherine Malm" To: canslim@lists.xmission.com Sent by: cc: owner-canslim@lists.xm Subject: RE: [CANSLIM] stop losses and profits ission.com 06/17/2003 08:02 AM Please respond to canslim Hi Mike, I had to stretch my brain cells to remember back to this discussion from last year! Refining and redefining my sell rules has been a number one priority for me since early 2000, so you'll probably understand why I've modified these since last year. Part of what makes sell rules more complex is that the market will influence how breakouts behave, and therefore how much "tolerance" one would give a stock after the breakout. Last August, when this note was written, we were deep into the Bear. Very few stocks were breaking out and for those that were, the action was always very tentative. This "low tolerance" point of view was part of the responsiveness to market conditions. Now, I've developed a more sophisticated means of monitoring breakouts in addition to the general market health warnings that we can see from simply looking at the price/volume chart of the index averages, so the sell rules can be specific, but still adaptable to strong vs weak markets. From a market perspective, the initial tolerance is affecting by asking if this is a "strong" or "weak" market: (1) Is the market in a confirmed rally? (2) Are the number of breakouts increasing? (3) What percentage of the breakouts are up >=20% within the first 3 weeks after their breakout? For the stock itself, the intial tolerance is affected by asking if this was a "strong" or "weak" breakout: (1) Was the breakout on strong volume? (2) If the breakout was on strong volume, did it close above or slightly below the pivot? (3) Did the breakout follow through (i.e., show the ability to continue to move up, however small, after the breakout)? (4) Was the volume on the breakout week higher than the previous week? In simple terms you can then have 4 combinations: (1) Strong Market, Strong BO (highest tolerance) (2) Strong Market, Weak BO (midrange tolerance) (3) Weak Market, Strong BO (midrange tolerance) (4) Weak Market, Weak BO (lowest tolerance) The initial sell stop is set either at 8-10% below purchase (high tolerance), 4-5% below purchase (midrange tolerance) or at breakeven (low tolerance). You'll notice I'm more tolerant on the initial stop loss than WON, as some stocks exhibit a particular volatility pattern that would force you out unnecessarily. I also do not use hard stops unless I'm out of town and can't review my holdings. I use end of day prices to determine these points. Often, when a stock has a wide-bar range, it kicks in a sell stop unneccesarily. If the stock is weakening, hitting the stop intraday, but doesn't close below the stop, I will watch action on the next day and determine whether the stock is bouncing back on volume (showing strength) or wandering up on low volume (showing continued weakness). Regardless of market strength, after one of the following, the initial stop is moved to breakeven: (1) For high liquidity stocks (>=100K shares), did it rise >=20% after the BO? (2) For low liquidity stocks (<100K shares), did it rise >=15% after BO? (3) Has 3 weeks passed since the BO? Katherine - -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com]On Behalf Of michael_niemotka@baxter.com Sent: Monday, June 16, 2003 11:25 AM To: canslim@lists.xmission.com Subject: Re: [CANSLIM] stop losses and profits Katherine, A while back you shared the below sell rules with me, and I was wondering if you could provide a clarification on item #2. After a stock has been held 2 weeks, you stated that you move your stop loss to break even, and I was wondering if that was independent of the action of the stock. In particular, if you buy a stock that breaks out, and in the first couple of weeks moves down a little ( -1 to -3% from pivot), but then moves back up into a + terrritory, do you still move to break even, or do you keep the 7-8% stop loss in place, and if so, for how long? Thanks Mike "Katherine Malm" To: canslim@lists.xmission.com Sent by: cc: owner-canslim@lists.xm Subject: Re: [CANSLIM] stop losses and profits ission.com 08/20/2002 02:41 PM Please respond to canslim HI Mike, I know I talked a bit in circles on this topic and it may have been because I didn't read your question/response closely enough. Here's the summary of my thinking on this issue: I separate my sell rules into several distinct time periods, and the rules vary a bit depending on what the stock does within a certain amount of time. All of this also assumes a healthy "M", of course: 1. Time period: 1st 2 wks after breakout: If the stock rises, regardless of the percentage, then falls back on low volume, the 8% rule still holds. I do not add to a position unless the stock falls back near the pivot on *low volume.* I am skeptical and keep a sharp eye if it drops below the pivot, but it's not uncommon for this to happen, especially in iffy markets, and especially in the first week. That's what the 8% rule is there for, it gives you some leeway, but there are times where it goes up quickly and then falls back and you're stuck with the 8% loss. When the volume picks up to the downside, I'll move the stop to breakeven. If the volume is severe, I'll be out before it hits that point. 2. Once the stock passes the 2 wk mark and up to the 8th week: I've moved my stop to breakeven. That way, I don't have to take a loss in a stock that's risen and stayed above its pivot. 3. Once the 8 wk mark passes, new sell rules kick in. On something like NCEN, in particular, you were fighting against tide to begin with, so there was already extra risk in your purchase. The market was in a clear downtrend and had shown no signs of follow-thru. Second warning was the churning it put in on 6/27, 6/28. Lots of volume and very little price progress--yellow flag. That makes 2 because the poor market is a yellow flag to begin with. Next warning: a big tail down on 7/1, though the volume was relatively benign and didn't qualify as a "distribution" day. Last warning to head for the exits: 7/2. A big volume day and big tail down. That's 4 yellow flags in a row. Time to exit if you haven't already done so. If it wasn't clear on 7/2, it was screaming for attention on 7/5--an up day on very low volume. Assuming you'd missed all the signals, then you still would be saved by a breakeven stop if you'd entered on the breakout 6/19. All in all, the 8% stop is useful, but far less important than all the other sell rules after a stock breaks out. Katherine - ----- Original Message ----- From: To: Sent: Tuesday, August 20, 2002 2:19 PM Subject: Re: [CANSLIM] stop losses and profits | | Katherine, | | I actually followed this thinking and watched a nice profit (15%) in NCEN | turn into an 8% loss as the bottom dropped out. I think it has made me | make a modification to stop at break even if I end up at 15% gain, at least | until M has be proven to be turned. I came up with this based on assuming | a stock that breaks out would "normally" be expected to rise about 25-30% | before re-basing, so if never gets up by that amount from my buy point, | then I should exit sooner rather than later... | | | Mike Niemotka , PE | Sr. Principal Engineer | Baxter Healthcare Corporation | Route 120 & Wilson Road | Round Lake, IL 60073 | Tel (847) 270-4075 | Fax (847) 270-4525 | michael_niemotka@baxter.com | | | | "Katherine Malm" | To: canslim@lists.xmission.com | Sent by: cc: | owner-canslim@lists.xm Subject: Re: [CANSLIM] stop losses and profits | ission.com | | | 08/16/2002 05:01 PM | Please respond to | canslim | | | | | | | Oops...I realize now I misread your question. | | I would *hold on* up to 8% below buy price, but if the stock comes back and | *kisses* the pivot, then I would buy more. I'm not inclined to buy more | when the stock drops *below* the pivot, unless it shows strong volume | pushing it back up to the pivot and beyond. Now I think I've confused even | myself! | | This is the way I think of it "Kiss the pivot, second chance to buy | more---Hit the pivot, yellow flag" | | Katherine | | ----- Original Message ----- | From: "Katherine Malm" | To: | Sent: Friday, August 16, 2002 4:55 PM | Subject: Re: [CANSLIM] stop losses and profits | | | Hi Mike, | | | | 8% standard stop loss, though I don't see this happen too often when the | | market is healthy. | | | | Katherine | | | | ----- Original Message ----- | | From: | | To: | | Sent: Friday, August 16, 2002 2:54 PM | | Subject: Re: [CANSLIM] stop losses and profits | | | | | | | | | | Katherine, | | | | | | I knew I could count on you for a good answer. As a follow up to your | | | answer #4, if you made 10-15% in one week, how low would you allow the | | | stock to drop on low volume and still buy more, as opposed to selling | out? | | | | | | Put another way, if it ran up 15% in a week, would you allow it to go | | below | | | your original buy point, even if it was at low volume? | | | | | | | | | Have a great weekend everyone! | | | | | | Mike | | | | | | Mike Niemotka , PE | | | Sr. Principal Engineer | | | Baxter Healthcare Corporation | | | Route 120 & Wilson Road | | | Round Lake, IL 60073 | | | Tel (847) 270-4075 | | | Fax (847) 270-4525 | | | michael_niemotka@baxter.com | | | | | | | | | | | | "Katherine Malm" | | | To: | | canslim@lists.xmission.com | | | Sent by: cc: | | | owner-canslim@lists.xm Subject: Re: | | [CANSLIM] stop losses and profits | | | ission.com | | | | | | | | | 08/16/2002 02:31 PM | | | Please respond to | | | canslim | | | | | | | | | | | | | | | | | | | | | Hi Nancy, | | | | | | Let me try and clear up some of your confusion: | | | | | | 1. A stock's "rise" does not occur *in* a base, but *between* bases. | While | | | the price will fluctuate up and down within the base itself, the amount | of | | | fluctuation will vary depending on the severity of correction and the | time | | | it takes to form the area of consolidation. The stock is essentially | | | *absorbing* the gains of its previous advance. | | | | | | 2. When you purchase a stock, you will always purchase it as it *breaks | | | out* | | | of that base. This preferred buy point is referred to as the "pivot" | and | | is | | | again defined by the pattern that the base forms. | | | | | | 4. When a stock begins a healthy rising pattern after it breaks out, it | | can | | | rise *any* amount before it consolidates (bases) again. There is no | hard | | | and | | | fast rule as to how much it will rise before basing, though WON | suggests | | | that if it is >=25%, the next base would then be considered a "new | stage | | | base." This is only important in that his studies show that most stocks | | | can't muster the oomph to keep going after they've reached the 3rd or | 4th | | | stage base. | | | | | | 3. Mike's question about a sell rule is not dependent on *which* base | in | | | the | | | base count we are evaluating. A base is a base. If the stock breaks out | as | | | it should and begins to rise, how are you going to handle selling it | | | when/if | | | the time comes? | | | | | | 4. WON suggests that, if you buy correctly at the pivot (or no more | than | | 5% | | | above it), that you should never have to suffer a loss of more than 8%. | | | This | | | is because, in his studies, he has found that a healthy stock never | falls | | | more than 8% below the pivot before continuing a healthy advance. | | | | | | 5. Mike's question, specifically, was "if a stock breaks out of a base, | | | then | | | rises 10-15%, then falls back, where do you place your sell stop? 8% | below | | | your buy price or something other than that?" In other words, should | you | | be | | | willing to accept *any* loss if a stock has managed to rise 10-15% in 6 | | | wks, | | | then falls back to where you bought it. My vote is, if it takes 6 wks | to | | | rise and then erases the entire advance, I don't want to take an 8% | loss. | | | If | | | it rose 10-15% in *one* week and then fell back on low volume, I'd look | at | | | that as "normal" and might consider it a second chance to *buy* more. | | | | | | Katherine | | | | | | | | | ----- Original Message ----- | | | From: "NANCY POLCARO" | | | To: | | | Sent: Friday, August 16, 2002 1:47 PM | | | Subject: Re: [CANSLIM] stop losses and profits | | | | | | | | | | Katherine-let me see if I am following correctly please. My question | is | | | | that previously I understood that after the third rise in a base | | | formation | | | a | | | | stock may correct by dropping below the previous base and then | starting | | | up | | | | again if all is well with the stock. Then the bases start to be | | | recounted | | | | again. In this case, if you just bought in during the third rise in | the | | | | base, which from my understanding would probably go up between | 15%(Mikes | | | | figure) and 25%( the amount of each rise in a base of a healthy | stock) | | | you | | | | would sell(not you personally but someone with my amount of | experience | | or | | | | the like) before the 8% drop, to protect your gain. Then follow the | | | stock | | | | and watch for a buy in again at some point depending on how the stock | | | acts | | | | from this point on? Is that close to correct ??? Thanks for your | | | thoughts | | | | Nancy | | | | | | | | | | | | >From: "Katherine Malm" | | | | >Reply-To: canslim@lists.xmission.com | | | | >To: | | | | >Subject: Re: [CANSLIM] stop losses and profits | | | | >Date: Fri, 16 Aug 2002 13:09:30 -0500 | | | | > | | | | >HI Mike, | | | | > | | | | >I think you'll get a hundred different answers on this one, so I'll | | just | | | | >answer from my personal point of view. | | | | > | | | | >If a stock breaks out of a well-formed base on volume, then takes 6 | | | weeks | | | | >to | | | | >rise 10 or 15 percent, then I sure wouldn't want to risk 8% loss at | | that | | | | >point, even if it were falling back "normally" as you suggest. To me | | | that | | | | >means that no sell signals were triggered on the way up, and that | the | | | | >general pattern included up days on higher volume than down days, | | | support | | | | >at | | | | >the 50 day moving average, etc. My personal preference, however, | would | | | be | | | | >to | | | | >move my stop to breakeven or slightly below (3-4% max, depending on | | | market | | | | >conditions) if the stock had risen like this. | | | | > | | | | >Katherine | | | | > | | | | > | | | | >----- Original Message ----- | | | | >From: | | | | >To: | | | | >Sent: Friday, August 16, 2002 9:17 AM | | | | >Subject: [CANSLIM] stop losses and profits | | | | > | | | | > | | | | >| Group, | | | | >| | | | | >| In reading WON, he makes a statement that you should never let a | | stock | | | in | | | | >| which you are up 10-15% turn into a loss, but I was wondering you | | have | | | | >| interpreted that along with the sell at no more than an 8% loss | rule. | | | | >| | | | | >| Say you buy a stock, at a breakout, and it rises 10-15% over a few | | (6+ | | | | >| weeks), and then is started to correct....Do you sell at you break | | | even | | | | >| point, or do you allow it to go to your 8% loss point before | selling? | | | | >This | | | | >| is assuming that the stock is NOT giving any strong sell signals, | but | | | | >| appears to be pulling back "normally". | | | | >| | | | | >| Thanks | | | | >| | | | | >| Mike Niemotka , PE | | | | >| Sr. Principal Engineer | | | | >| Baxter Healthcare Corporation | | | | >| Route 120 & Wilson Road | | | | >| Round Lake, IL 60073 | | | | >| Tel (847) 270-4075 | | | | >| Fax (847) 270-4525 | | | | >| michael_niemotka@baxter.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. | | | | > | | | | > | | | | >- | | | | >-To subscribe/unsubscribe, email "majordomo@xmission.com" | | | | >-In the email body, write "subscribe canslim" or | | | | >-"unsubscribe canslim". Do not use quotes in your email. | | | | | | | | | | | | | | | | | | | | _________________________________________________________________ | | | | Send and receive Hotmail on your mobile device: http://mobile.msn.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. | | | | | | | | | - | | | -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. | | | | | | - | -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. - - - -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. - - - -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. ------------------------------ Date: Tue, 17 Jun 2003 12:08:19 EDT From: Chazmoore@aol.com Subject: Re: [CANSLIM] fwht pivot - --part1_bb.328a1f8d.2c2096f3_boundary Content-Type: text/plain; charset="US-ASCII" Content-Transfer-Encoding: 7bit Thanks Katherine. That makes perfect sense. Charley - --part1_bb.328a1f8d.2c2096f3_boundary Content-Type: text/html; charset="US-ASCII" Content-Transfer-Encoding: quoted-printable Thanks Katherine. That ma= kes perfect sense. Charley - --part1_bb.328a1f8d.2c2096f3_boundary-- - - - -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: Tue, 17 Jun 2003 11:26:23 -0500 From: michael_niemotka@baxter.com Subject: RE: [CANSLIM] stop losses and profits Katherine, Thanks for the clarifications. As for GRMN, I had been in originally at the breakout , and after it had risen a 20% gain, I had installed a 15% trailing stop, and then got stopped out with a 5% gain on 5/21. I got back in on 5/27 after I thought it had gotten thru the resistance at $48. (Understandably NOT CANSLIM thinking), but after the rebound from my stop point, I looked at it as a possible reentry point. In hindsight, I should not have had a 15% trailing stop, because the stock had risen 20% in the first 3 weeks, so I should have only be at a break even stop loss, which would have kept me in the mix. Overall, I am trying to learn from this action, and balance the profit taking rules, with those allowing the stocks to have some room to move and continue upward. Thanks again for having the patience to answer all my questions. Mike Mike Niemotka , PE Sr. Principal Engineer Baxter Healthcare Corporation Route 120 & Wilson Road Round Lake, IL 60073 Tel (847) 270-4075 Fax (847) 270-4525 michael_niemotka@baxter.com "Katherine Malm" To: canslim@lists.xmission.com Sent by: cc: owner-canslim@lists.xm Subject: RE: [CANSLIM] stop losses and profits ission.com 06/17/2003 11:08 AM Please respond to canslim Hi Mike, First, you're assuming that today's action would be 7-8% below one's purchase price at its opening gap. That would be impossible, because you would assume that the buyer had made an entry when the stock was extended rather than when it was rising from a basing pattern on volume. (The last valid entry point was the breakout of an ascending base on 4/30 when it rose on volume above the A-base channel.) In other words, the best defense is a good offense. Second, you're assuming that other sell rules wouldn't have already kicked in on GRMN, even before today's action. Depending on the rules one uses, the action since 4/30 might have had one trimming their holdings or selling outright). Third, if one had been in GRMN since the last BO on 4/30 (or before), they are still above breakeven. That "wiggle room" gives them the option to see how the stock acts in response to this 2 day drop if they wish. In other words, does GRMN find support at the 50dMA? A willingness to sit through these kinds of corrections will depend on the market strength, one's profit taking plan, and one's sleep-through-the-night risk tolerance. I look at my open positions each evening to see if they've triggered any yellow flags or outright sell rules. I check in during the day only in spot checks, as I think constantly monitoring the stocks intraday is hypersensitive and contra-indicated to the intermediate time frame within which the CANLSIM methodology falls. The only time I look more closely at the action intraday is if the stock is in the danger zone (ie. too many yellow flags but no outright sell rule violated just yet). Katherine - -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com]On Behalf Of michael_niemotka@baxter.com Sent: Tuesday, June 17, 2003 8:51 AM To: canslim@lists.xmission.com Subject: RE: [CANSLIM] stop losses and profits Katherine, Thanks again, and keep up the excellent work! When you mentioned not using hard stops, I assume that you are watching the market closely during the day, but am wondering how you handle a case where a stock takes a tumble at open, that goes beyond your 7-8% loss, case in point, GRMN today. I was stopped out with 11% loss because of the quick drop, and am now watching to see what happens. For you, you would be watching , and my wait until the end of the day to see if you violate your internal stop losses, but how do you protect yourself from a huge drop that does not come back up, ie what signs do you look for to exit manually? Thanks as always Mike Mike Niemotka , PE Sr. Principal Engineer Baxter Healthcare Corporation Route 120 & Wilson Road Round Lake, IL 60073 Tel (847) 270-4075 Fax (847) 270-4525 michael_niemotka@baxter.com "Katherine Malm" To: canslim@lists.xmission.com Sent by: cc: owner-canslim@lists.xm Subject: RE: [CANSLIM] stop losses and profits ission.com 06/17/2003 09:36 AM Please respond to canslim Hi Mike, re: "As a point of clarification, no matter what the market conditions at breakout, and the strength of the breakout, after 3 weeks you move the stops to break even, is that correct?" Yes. Once 3 weeks has passed and the stock is moving past the pivot, you don't want to take a loss of any kind. If it wanders up during the 3 weeks, but isn't moving strongly, then you want to give it room to move. For example, in a weak market, successful BO's aren't necessarily going to shoot straight up. However, at the same time you give it breathing room, it doesn't make sense to allow an 8% loss after having held it for so long. re: "Also, WON has a "rule" that if a stock rises 20% in the first 3 weeks of breakout, you "must" hold it for at least 8 weeks. If this is the case, what would happen if the stock drops back down 25% to the point where it would trigger a 4-5% loss rule? Does the "hold for 8 weeks" rule supersede the "don't let a gain of 15-20% turn into a loss rule"?" What you're referring to is the idea that if a stock rises 20% in the first 3 weeks, then this is a sign of strength in the BO. The rules that I've outlined refer to the initial stop loss on a position. Once the stock has risen 20% or more, there's no reason to take a loss. Move stop loss to breakeven, period. That helps in the case where something rises sharply, but then moves back down. By moving stop to breakeven, you protect yourself from losing money on something that crashes back to earth. A 20% rise in any market is significant. If a stock rises that much and then reverses in the first 3 weeks, that's generally a sign of weakness somewhere along the line. At the same time, if a stock has risen 20%, then not only do you move the stop to breakeven, but you also give it room to prove itself over the first 8 weeks. In other words, you're slightly more tolerant of the price/volume action *after* the 20% rise if it hits 20% in the first 3 weeks, but never more tolerant than breakeven. re: "And finally, is there an easy way to monitor how the number of breakouts is changing, and how successful they are? " Absolutely. I have been working on this during the last couple of years. You can see a glimpse of that in a post that I made a couple of weeks ago in response to jans' question on the leveling off of RSLines in the leaders (I've included a copy at the end of this post). I showed several charts that indicated not only the number of breakouts, but also the cumulative breakouts and the number of breakouts making rises of 20% or more in their first 3 weeks. This kind of work is still behind the scenes, but eventually will be presented at our site for our subscribers. There are 3 issues related to this kind of info (1) how strong is the market?, (2) how strong are the breakouts, in general?, (3) if I own a stock, how will the strength of the BO and the market influence my sell rules? and (4) if I'm interested in a stock but missed the original BO, is there a benign pullback that will afford a second chance entry? Katherine - -----Original Message----- From: Katherine Malm [mailto:kmalm@earthlink.net] Sent: Tuesday, May 27, 2003 7:22 PM To: Canslim@Lists.Xmission.Com Subject: RE: Lagging RSLines (was: [CANSLIM] SHFL Breaking Out) Hi jans, To illustrate this in action, I took all the cup with handle (cwh) breakouts for the month prior to and after the follow thru day on 3/17/03. While this doesn't represent *all* breakouts during the period, it's a very good barometer, because the cwh pattern is by far the most common intermediate term pattern. I chose the 2 months around the FTD so that I could have a steady state group of "leaders" and then measure their technical condition against the market as a whole between the beginning of that period and 5/23/03 (which is when I prepared the stats). For the period between 2/17/03 and 4/17/03, there were 71 distinct stocks that broke out. I used the same methodology we use for measuring the industry scores for use in assigining industry rank and then measured that group score from 2/17 through 5/23. The score is derived by assigning points to each stock based on the RSRank, % off 52 week high, price relative to the 50dMA, price relative to the 200dMA, an 50 realtive to 200dMA. (For a more in depth description, see http://www.breakoutwatch.com/industry_methodology.htm ) Here is a graph of the score for this group of leaders against the market as a whole: http://www.cwhcharts.com/katherine/cwhBreakoutsGroupA.jpg Notice that while the group as a whole has pulled back in score ever so slightly, it is still at a very high value of 90 out of a possible 100. Notice also that the market as whole has been very strong during this period, rising very steadily. What that translates into is a pause in the action of the leaders that is very mild against a strengthening market. That would mean that the RSLines would then fall back a bit. Here's another view point to demonstrate the strength of the market during that same period: First is the total number of cwh breakouts by week: http://www.cwhcharts.com/katherine/cwhBreakoutsByWk.jpg Notice the dearth of breakouts in mid-2002 and the more recent increase. You can also see the increase in the total number of cwh breakouts by looking at the cumulative number since the 10/10/2 market low: http://www.cwhcharts.com/katherine/cwhBreakoutsCumul.jpg We're now up to more than 300 cumulative breakouts and the rate of breakouts per week has accelerated since mid March when we posted the FTD. Here's another viewpoint to show the cwh breakouts action. This is a rolling total. At any point in time, the number you see shows the total number of breakouts over the prior 13 week period: http://www.cwhcharts.com/katherine/cwhBreakoutsRolling13wks.jpg Notice how the cumulative total rose into late 2002, then churned a bit until about 2/21/3. That's about 1 month prior to the FTD 3/17/3 and corresponds to the beginning of the period I selected for highlighting the "leaders" in the rally. Now, one last view to show the strength of the breakouts and the market as a whole during the latest 13 week period. I've taken three 13 week periods and measured the action of the cwh breakouts during each of those periods. The chart shows the price action of the breakouts 3 weeks after they originally broke out. I used 3 weeks, because WON often suggests that we look to see not only *how many* stocks are setting up and breaking out, but also *how strong* those breakouts are in the first few weeks of their breakout: http://www.cwhcharts.com/katherine/PctIncAfterBO.JPG Notice that for the period 11/25/02 through 2/21/03 that only 1.3% of breakouts were up >=20% and only about 16% were up 5% or more in the first 3 weeks. The number of failures (down more than 8% in the first 3 weeks) was also very high, 25% of all the breakouts. However, in the latest 13 week period (2/24/03 through 5/23/03), 12.7% of the breakouts during the period are up >=20%, and 47% are up >=5%. At the same time, failures are down considerably at 7.8% of the total breakouts during the period. Looking at the performance to date of all breakouts during the latest 13 week period, 57.2% are now up >=5% since their breakout and only 6% have failed. Bottom line.... the leaders are still strong (average technical score for the group 90 out of 100) + market continues to serve up more breakouts + market continues to serve up successful breakouts and shows a small % of failed breakouts = RSLines of the leaders will fall back a bit. That said, this is a record of the market as it is today. If the number of breakouts begins to wane, if the price action of breakouts falls back, if breakouts begin to fail, and/or if the price/volume action in the indexes begins to show churning and/or distribution, then those would be signs the rally is over. By itself, a slight pullback in the RSLines of the leaders does not, by itself indicate problems. Katherine - -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com]On Behalf Of michael_niemotka@baxter.com Sent: Tuesday, June 17, 2003 7:42 AM To: canslim@lists.xmission.com Subject: RE: [CANSLIM] stop losses and profits Katherine, As usual, an excellent response. I appreciate how you have outlined everything to include the general market into the equation. As a point of clarification, no matter what the market conditions at breakout, and the strength of the breakout, after 3 weeks you move the stops to break even, is that correct? And finally, is there an easy way to monitor how the number of breakouts is changing, and how successful they are? I am thinking that one way would be to plot the number of confirmed breakouts from your site vs each day to see if there is a trend, and then to also use the breakout page to see the results after 3 weeks. Thanks again Mike Mike Niemotka , PE Sr. Principal Engineer Baxter Healthcare Corporation Route 120 & Wilson Road Round Lake, IL 60073 Tel (847) 270-4075 Fax (847) 270-4525 michael_niemotka@baxter.com "Katherine Malm" To: canslim@lists.xmission.com Sent by: cc: owner-canslim@lists.xm Subject: RE: [CANSLIM] stop losses and profits ission.com 06/17/2003 08:02 AM Please respond to canslim Hi Mike, I had to stretch my brain cells to remember back to this discussion from last year! Refining and redefining my sell rules has been a number one priority for me since early 2000, so you'll probably understand why I've modified these since last year. Part of what makes sell rules more complex is that the market will influence how breakouts behave, and therefore how much "tolerance" one would give a stock after the breakout. Last August, when this note was written, we were deep into the Bear. Very few stocks were breaking out and for those that were, the action was always very tentative. This "low tolerance" point of view was part of the responsiveness to market conditions. Now, I've developed a more sophisticated means of monitoring breakouts in addition to the general market health warnings that we can see from simply looking at the price/volume chart of the index averages, so the sell rules can be specific, but still adaptable to strong vs weak markets. From a market perspective, the initial tolerance is affecting by asking if this is a "strong" or "weak" market: (1) Is the market in a confirmed rally? (2) Are the number of breakouts increasing? (3) What percentage of the breakouts are up >=20% within the first 3 weeks after their breakout? For the stock itself, the intial tolerance is affected by asking if this was a "strong" or "weak" breakout: (1) Was the breakout on strong volume? (2) If the breakout was on strong volume, did it close above or slightly below the pivot? (3) Did the breakout follow through (i.e., show the ability to continue to move up, however small, after the breakout)? (4) Was the volume on the breakout week higher than the previous week? In simple terms you can then have 4 combinations: (1) Strong Market, Strong BO (highest tolerance) (2) Strong Market, Weak BO (midrange tolerance) (3) Weak Market, Strong BO (midrange tolerance) (4) Weak Market, Weak BO (lowest tolerance) The initial sell stop is set either at 8-10% below purchase (high tolerance), 4-5% below purchase (midrange tolerance) or at breakeven (low tolerance). You'll notice I'm more tolerant on the initial stop loss than WON, as some stocks exhibit a particular volatility pattern that would force you out unnecessarily. I also do not use hard stops unless I'm out of town and can't review my holdings. I use end of day prices to determine these points. Often, when a stock has a wide-bar range, it kicks in a sell stop unneccesarily. If the stock is weakening, hitting the stop intraday, but doesn't close below the stop, I will watch action on the next day and determine whether the stock is bouncing back on volume (showing strength) or wandering up on low volume (showing continued weakness). Regardless of market strength, after one of the following, the initial stop is moved to breakeven: (1) For high liquidity stocks (>=100K shares), did it rise >=20% after the BO? (2) For low liquidity stocks (<100K shares), did it rise >=15% after BO? (3) Has 3 weeks passed since the BO? Katherine - -----Original Message----- From: owner-canslim@lists.xmission.com [mailto:owner-canslim@lists.xmission.com]On Behalf Of michael_niemotka@baxter.com Sent: Monday, June 16, 2003 11:25 AM To: canslim@lists.xmission.com Subject: Re: [CANSLIM] stop losses and profits Katherine, A while back you shared the below sell rules with me, and I was wondering if you could provide a clarification on item #2. After a stock has been held 2 weeks, you stated that you move your stop loss to break even, and I was wondering if that was independent of the action of the stock. In particular, if you buy a stock that breaks out, and in the first couple of weeks moves down a little ( -1 to -3% from pivot), but then moves back up into a + terrritory, do you still move to break even, or do you keep the 7-8% stop loss in place, and if so, for how long? Thanks Mike "Katherine Malm" To: canslim@lists.xmission.com Sent by: cc: owner-canslim@lists.xm Subject: Re: [CANSLIM] stop losses and profits ission.com 08/20/2002 02:41 PM Please respond to canslim HI Mike, I know I talked a bit in circles on this topic and it may have been because I didn't read your question/response closely enough. Here's the summary of my thinking on this issue: I separate my sell rules into several distinct time periods, and the rules vary a bit depending on what the stock does within a certain amount of time. All of this also assumes a healthy "M", of course: 1. Time period: 1st 2 wks after breakout: If the stock rises, regardless of the percentage, then falls back on low volume, the 8% rule still holds. I do not add to a position unless the stock falls back near the pivot on *low volume.* I am skeptical and keep a sharp eye if it drops below the pivot, but it's not uncommon for this to happen, especially in iffy markets, and especially in the first week. That's what the 8% rule is there for, it gives you some leeway, but there are times where it goes up quickly and then falls back and you're stuck with the 8% loss. When the volume picks up to the downside, I'll move the stop to breakeven. If the volume is severe, I'll be out before it hits that point. 2. Once the stock passes the 2 wk mark and up to the 8th week: I've moved my stop to breakeven. That way, I don't have to take a loss in a stock that's risen and stayed above its pivot. 3. Once the 8 wk mark passes, new sell rules kick in. On something like NCEN, in particular, you were fighting against tide to begin with, so there was already extra risk in your purchase. The market was in a clear downtrend and had shown no signs of follow-thru. Second warning was the churning it put in on 6/27, 6/28. Lots of volume and very little price progress--yellow flag. That makes 2 because the poor market is a yellow flag to begin with. Next warning: a big tail down on 7/1, though the volume was relatively benign and didn't qualify as a "distribution" day. Last warning to head for the exits: 7/2. A big volume day and big tail down. That's 4 yellow flags in a row. Time to exit if you haven't already done so. If it wasn't clear on 7/2, it was screaming for attention on 7/5--an up day on very low volume. Assuming you'd missed all the signals, then you still would be saved by a breakeven stop if you'd entered on the breakout 6/19. All in all, the 8% stop is useful, but far less important than all the other sell rules after a stock breaks out. Katherine - ----- Original Message ----- From: To: Sent: Tuesday, August 20, 2002 2:19 PM Subject: Re: [CANSLIM] stop losses and profits | | Katherine, | | I actually followed this thinking and watched a nice profit (15%) in NCEN | turn into an 8% loss as the bottom dropped out. I think it has made me | make a modification to stop at break even if I end up at 15% gain, at least | until M has be proven to be turned. I came up with this based on assuming | a stock that breaks out would "normally" be expected to rise about 25-30% | before re-basing, so if never gets up by that amount from my buy point, | then I should exit sooner rather than later... | | | Mike Niemotka , PE | Sr. Principal Engineer | Baxter Healthcare Corporation | Route 120 & Wilson Road | Round Lake, IL 60073 | Tel (847) 270-4075 | Fax (847) 270-4525 | michael_niemotka@baxter.com | | | | "Katherine Malm" | To: canslim@lists.xmission.com | Sent by: cc: | owner-canslim@lists.xm Subject: Re: [CANSLIM] stop losses and profits | ission.com | | | 08/16/2002 05:01 PM | Please respond to | canslim | | | | | | | Oops...I realize now I misread your question. | | I would *hold on* up to 8% below buy price, but if the stock comes back and | *kisses* the pivot, then I would buy more. I'm not inclined to buy more | when the stock drops *below* the pivot, unless it shows strong volume | pushing it back up to the pivot and beyond. Now I think I've confused even | myself! | | This is the way I think of it "Kiss the pivot, second chance to buy | more---Hit the pivot, yellow flag" | | Katherine | | ----- Original Message ----- | From: "Katherine Malm" | To: | Sent: Friday, August 16, 2002 4:55 PM | Subject: Re: [CANSLIM] stop losses and profits | | | Hi Mike, | | | | 8% standard stop loss, though I don't see this happen too often when the | | market is healthy. | | | | Katherine | | | | ----- Original Message ----- | | From: | | To: | | Sent: Friday, August 16, 2002 2:54 PM | | Subject: Re: [CANSLIM] stop losses and profits | | | | | | | | | | Katherine, | | | | | | I knew I could count on you for a good answer. As a follow up to your | | | answer #4, if you made 10-15% in one week, how low would you allow the | | | stock to drop on low volume and still buy more, as opposed to selling | out? | | | | | | Put another way, if it ran up 15% in a week, would you allow it to go | | below | | | your original buy point, even if it was at low volume? | | | | | | | | | Have a great weekend everyone! | | | | | | Mike | | | | | | Mike Niemotka , PE | | | Sr. Principal Engineer | | | Baxter Healthcare Corporation | | | Route 120 & Wilson Road | | | Round Lake, IL 60073 | | | Tel (847) 270-4075 | | | Fax (847) 270-4525 | | | michael_niemotka@baxter.com | | | | | | | | | | | | "Katherine Malm" | | | To: | | canslim@lists.xmission.com | | | Sent by: cc: | | | owner-canslim@lists.xm Subject: Re: | | [CANSLIM] stop losses and profits | | | ission.com | | | | | | | | | 08/16/2002 02:31 PM | | | Please respond to | | | canslim | | | | | | | | | | | | | | | | | | | | | Hi Nancy, | | | | | | Let me try and clear up some of your confusion: | | | | | | 1. A stock's "rise" does not occur *in* a base, but *between* bases. | While | | | the price will fluctuate up and down within the base itself, the amount | of | | | fluctuation will vary depending on the severity of correction and the | time | | | it takes to form the area of consolidation. The stock is essentially | | | *absorbing* the gains of its previous advance. | | | | | | 2. When you purchase a stock, you will always purchase it as it *breaks | | | out* | | | of that base. This preferred buy point is referred to as the "pivot" | and | | is | | | again defined by the pattern that the base forms. | | | | | | 4. When a stock begins a healthy rising pattern after it breaks out, it | | can | | | rise *any* amount before it consolidates (bases) again. There is no | hard | | | and | | | fast rule as to how much it will rise before basing, though WON | suggests | | | that if it is >=25%, the next base would then be considered a "new | stage | | | base." This is only important in that his studies show that most stocks | | | can't muster the oomph to keep going after they've reached the 3rd or | 4th | | | stage base. | | | | | | 3. Mike's question about a sell rule is not dependent on *which* base | in | | | the | | | base count we are evaluating. A base is a base. If the stock breaks out | as | | | it should and begins to rise, how are you going to handle selling it | | | when/if | | | the time comes? | | | | | | 4. WON suggests that, if you buy correctly at the pivot (or no more | than | | 5% | | | above it), that you should never have to suffer a loss of more than 8%. | | | This | | | is because, in his studies, he has found that a healthy stock never | falls | | | more than 8% below the pivot before continuing a healthy advance. | | | | | | 5. Mike's question, specifically, was "if a stock breaks out of a base, | | | then | | | rises 10-15%, then falls back, where do you place your sell stop? 8% | below | | | your buy price or something other than that?" In other words, should | you | | be | | | willing to accept *any* loss if a stock has managed to rise 10-15% in 6 | | | wks, | | | then falls back to where you bought it. My vote is, if it takes 6 wks | to | | | rise and then erases the entire advance, I don't want to take an 8% | loss. | | | If | | | it rose 10-15% in *one* week and then fell back on low volume, I'd look | at | | | that as "normal" and might consider it a second chance to *buy* more. | | | | | | Katherine | | | | | | | | | ----- Original Message ----- | | | From: "NANCY POLCARO" | | | To: | | | Sent: Friday, August 16, 2002 1:47 PM | | | Subject: Re: [CANSLIM] stop losses and profits | | | | | | | | | | Katherine-let me see if I am following correctly please. My question | is | | | | that previously I understood that after the third rise in a base | | | formation | | | a | | | | stock may correct by dropping below the previous base and then | starting | | | up | | | | again if all is well with the stock. Then the bases start to be | | | recounted | | | | again. In this case, if you just bought in during the third rise in | the | | | | base, which from my understanding would probably go up between | 15%(Mikes | | | | figure) and 25%( the amount of each rise in a base of a healthy | stock) | | | you | | | | would sell(not you personally but someone with my amount of | experience | | or | | | | the like) before the 8% drop, to protect your gain. Then follow the | | | stock | | | | and watch for a buy in again at some point depending on how the stock | | | acts | | | | from this point on? Is that close to correct ??? Thanks for your | | | thoughts | | | | Nancy | | | | | | | | | | | | >From: "Katherine Malm" | | | | >Reply-To: canslim@lists.xmission.com | | | | >To: | | | | >Subject: Re: [CANSLIM] stop losses and profits | | | | >Date: Fri, 16 Aug 2002 13:09:30 -0500 | | | | > | | | | >HI Mike, | | | | > | | | | >I think you'll get a hundred different answers on this one, so I'll | | just | | | | >answer from my personal point of view. | | | | > | | | | >If a stock breaks out of a well-formed base on volume, then takes 6 | | | weeks | | | | >to | | | | >rise 10 or 15 percent, then I sure wouldn't want to risk 8% loss at | | that | | | | >point, even if it were falling back "normally" as you suggest. To me | | | that | | | | >means that no sell signals were triggered on the way up, and that | the | | | | >general pattern included up days on higher volume than down days, | | | support | | | | >at | | | | >the 50 day moving average, etc. My personal preference, however, | would | | | be | | | | >to | | | | >move my stop to breakeven or slightly below (3-4% max, depending on | | | market | | | | >conditions) if the stock had risen like this. | | | | > | | | | >Katherine | | | | > | | | | > | | | | >----- Original Message ----- | | | | >From: | | | | >To: | | | | >Sent: Friday, August 16, 2002 9:17 AM | | | | >Subject: [CANSLIM] stop losses and profits | | | | > | | | | > | | | | >| Group, | | | | >| | | | | >| In reading WON, he makes a statement that you should never let a | | stock | | | in | | | | >| which you are up 10-15% turn into a loss, but I was wondering you | | have | | | | >| interpreted that along with the sell at no more than an 8% loss | rule. | | | | >| | | | | >| Say you buy a stock, at a breakout, and it rises 10-15% over a few | | (6+ | | | | >| weeks), and then is started to correct....Do you sell at you break | | | even | | | | >| point, or do you allow it to go to your 8% loss point before | selling? | | | | >This | | | | >| is assuming that the stock is NOT giving any strong sell signals, | but | | | | >| appears to be pulling back "normally". | | | | >| | | | | >| Thanks | | | | >| | | | | >| Mike Niemotka , PE | | | | >| Sr. Principal Engineer | | | | >| Baxter Healthcare Corporation | | | | >| Route 120 & Wilson Road | | | | >| Round Lake, IL 60073 | | | | >| Tel (847) 270-4075 | | | | >| Fax (847) 270-4525 | | | | >| michael_niemotka@baxter.com | | | | >| | | | | >| | | | | >| | | | | >| - | | | | >| -To subscribe/unsubscribe, email "majordomo@xmission.com" | | | | >| -In the email body, write "subscribe canslim" or | | | | >| -"unsubscribe canslim". 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