From: owner-canslim-digest@lists.xmission.com (canslim-digest) To: canslim-digest@lists.xmission.com Subject: canslim-digest V2 #528 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 Thursday, February 11 1999 Volume 02 : Number 528 In this issue: [CANSLIM] On "M" [CANSLIM] Technology - Yadda, Yadda [CANSLIM] Alks - thanks Re: [CANSLIM] Fw: A Motley Fool Perspective (on RS and IBD's RS [CANSLIM] Marder [CANSLIM] Watching big money massage a stock [Connie Mack] [CANSLIM] Bid/Ask meaining Re: [CANSLIM] Bid/Ask meaining [CANSLIM] Impact of the Internet [CANSLIM] NOVL: Chance for a relatively safe entry. [Connie Mack] ---------------------------------------------------------------------- Date: Wed, 10 Feb 1999 00:04:34 -0500 From: "Tom Worley" Subject: [CANSLIM] On "M" While I haven't had the time to watch the market as closely as usual, a couple quick observations (actually turns out I had more meandering thoughts putzing around in my aging grey matter than I realized). The lack of volume today can easily be interpreted two ways: the worst of the selling is over and the high valuations are largely corrected; OR the panic is just beginning. If we begin a rally, or at least base out for a few days to a week, then the former becomes more likely. If we continue down tomorrow, I would expect the latter as more "wait and see'ers" head for the exit. Naz is still holding onto small 1999 gains, while NYSE and R2000 both are now below recent support and down for the year. R2000, no surprise, has the larger loss. Support for Naz (and it's limited) looks to me to be around 2200 to 2235, so another drop on Wednesday could test that area. The lack of any attempt at a rally so far tonight in either the Asian mkt or the futures suggests a stale to down opening tomorrow. But a lot can happen in the next ten hours. US inflation remains a non-event, and gold prices are confirming this, along with commodoties values, esp oil. I figure there's a better than even chance of interest rates being cut in the short term (3 to maybe 6 months) in the European Community, as well as Switzerland, and a 50-50 chance of a rate hike in the US in the mid term (6 to 12 months). However, a rate hike won't occur here without substantial and sustained economic proof of the need, so there should be time to prepare. Japan and LATAM still are in major economic trouble, but Russia is increasing its militaristic (and survivalist) recent trends towards reestablishing a Soviet sphere of economic and political domain, and its mkt seems to like the idea. Expect further defaults on its foreign debt, esp debt to corps. The internet bubble may not have yet burst, but it certainly has had a lot of the pressure removed. No bet on whether it will worsen, consolidate or recover from here. Retail sales are dropping while e-commerce sales are growing. Possible trend, possible collapse coming in the retail sector if confidence in the future fails and consumer spending erodes. The "engine" to the US economy remains consumer spending. A protracted, continued slowdown in spending may finally bring this economic expansion to an end, but Mr. G will work all his magic to prevent that happening. I suspect he's not too far from retiring, and will want to go out on top, tho may want to wait and let a new Prez (Mr. "Environmental Gore" ??) pick his successor. USA Networks announcement of a buyout of Lycos is the first acquisition I can recall in a very long time where a major purchased company tanked so hugely. At the least, it speaks to the "speculative fever" in tech stocks. Even after today's $33 point drop, it's still difficult to rationalize a stock with a $3.7 BILLION dollar mkt cap that is doing less than $80 MILLION in annual sales (and still losing money). Come on, a mkt cap to sales ratio of over 40?? It's no wonder that both cos in this deal fell. It's difficult to take either seriously, much less the deal itself. Japan was to unveil further banking reforms on their Friday, judging by their mkt reaction, looks like another non-event. Did Slick Willy get spanked yet, or is he still Prez?? I have been so bored by this entire process I haven't bothered to keep up. If you're in cash by now, remember Cash is King (no, not you Dan, we didn't crown you yet!). If you're not in cash, you should be identifying your weakest holdings, and finding the exit for them at a minimum. Times like this, you should be protecting your capital. I agree with Jeffrey's sentiments posted earlier (tho looks like he should have held the DELL puts another day, but probably still a wise action on this still powerful stock) that a huge gap down tomorrow would be healthy. But so far looks like we will get neither a sig gap up or down. Tom W stkguru@netside.net ICQ # 5568838 - - ------------------------------ Date: Wed, 10 Feb 1999 07:39:02 -0500 From: "Frank V. Wolynski" Subject: [CANSLIM] Technology - Yadda, Yadda Amazing, 'Tech Wreck', 'Crash of Technology', just two descriptions I've heard. CNBC dragging out all the fear mongers. Just amazing, makes me ashamed to work in Television. The big headlines do capture you though, it's our own fault. Well on to fun stuff. Every once in a while, IBD actually has a 'Companies In the News' on a group that is meaningful. They goofed and did that today. "Computer Software - Enterprise". Just scanning the list of the top 21, over half of the stocks in the list have EPS's of > 95, and the rest are above 75. The group has stellar performers on a fundamental basis. ROE's in the teens make up the bottom half and above 25 for the rest. The margins are great, and the last Qtr EPS and last Qtr sales figures for many are impossibly good. Here are the Top 21 in the order of EPS+RS. TSFW, VRTS, SEBL, ORCL, SAPE, CLFY, CTXS, LGTO, SNPS, GEOC, CPWR, NLCS, AVTC, CCRD, BOOL, EFII, PVSW, NEON, UNFY, ITWO, SYMX. This is not a recommendation to buy any of these, just a heads up on a group that has been ranked in performance in the teens for over a year, week after week. (Since its inception.) It dipped to 57 on Oct19, 1998 as the Internuts went ballistic. Other than that it has consistently been in column 1 of the 4 columns of group performance. I'm not sure I can gather up the bearishness the analysts parading on CNBC and other media seem so full of. With 50% of american households now having PC's and PC's being so cheap, 'free PC's for watching advertising', how can a group of software stocks turning in Qtrly Earnings of 170%, 71%, 100%, 47%, 50%, 400%, 58% ( again top down from the list, and there are 5 more with above 100% Qtrly earnings in the list ) be considered 'Wrecked'. My IS budget at work is doubling every year. Your in a business and you want to survive, you are more than likely looking at Ecommerce and Technology. What, anything that has a retracement to a technical support level is 'trashed'? 'Wrecked'? 'Done'? 'Stick a fork in it'? The Wizards wouldn't be trying to shake us out of the best growth stocks on the exchanges would they? With REAL EARNINGS! Nah, they are Guru's, the Sultans of financial kingdom. They wouldn't mislead us! Turn your heads while they run them down, but peek back every now and then. I've built a surrogate index of those listed above and finally have an index that compares with the Internet index. I'll be watching this group very closely. Regards, Frank Wolynski wolynski@mindspring.com http://wolynski.home.mindspring.com/ - - ------------------------------ Date: Wed, 10 Feb 1999 08:37:32 -0500 From: "Dave Wood" Subject: [CANSLIM] Alks - thanks Everyone, Thanks for the information about flags and ALKS. It is definately not a cs stock. I first noticed it last week on the New America page of IBD. It is trading on future hopes not present results. Almost sounds like an internet stock, doesn't it ? I realize one thing; I definately need to learn more about the flag formation before trading it again. Dave - - ------------------------------ Date: Wed, 10 Feb 1999 08:43:34 -600 From: "Charles Bentley" Subject: Re: [CANSLIM] Fw: A Motley Fool Perspective (on RS and IBD's RS A response to Dale Wettlaufer's article. http://www.fool.com/workshop/1999/workshop990205.htm On 8 Feb 99 at 21:02, Tom Worley wrote: > My thanks to Mary Keener for bringing this amusing article > to me attention. > An Investment Opinion > by Dale Wettlaufer > > The Weakness of Relative Strength ========================================================== Charles Bentley Solution Group Voice (713) 827-8133 PO Box 31400 FAX (713) 827-8232 Houston, Texas 77231-1400 - - ------------------------------ Date: Wed, 10 Feb 1999 07:20:54 -0800 From: Tim Fisher Subject: [CANSLIM] Marder Another excellent Marder article. I like this guy! I'm letting my stops take me out & am resisting the temptation to buy right back in. Resisted with INTC last week and voila it's right back down to my stop. The only encouraging thing I see is the ability of the really rock-solid mattress stuffers like MSFT, PFE, COST, and yes, even Dell (I gauge support at the 75 area, so it was at least 30% extended when this rout started) to hold up well above recent support (so far, cross your fingers) . http://cbs.marketwatch.com/archive/19990210/news/current/marder.htx?source=b lq/yhoo&dist=yhoo Tim Fisher, 1995 President, Pacific Fishery Biologists Ore-ROCK-On Rockhounding Web Site PFB Information mailto:tim@OreRockOn.com WWW http://OreRockOn.com - - ------------------------------ Date: Wed, 10 Feb 1999 10:59:11 -0500 From: Connie Mack Rea Subject: [CANSLIM] Watching big money massage a stock [Connie Mack] This has nothing to do with CS; however, it is interesting for those who do a bit of swing trading or day trading. Already MU has traded over 2.5 million shares. If you have Time & Sales numbers, you can see how institutions and big traders are massaging a stock. If you don't have T/S, put up a 1-day 5-min screen on BigCharts. Ordinarily, MU has a 1/16 spread, but this morning I have seen spread go from 1/16 to 5/8 is a single trade. Big players are active. Notice how well the MACD on a 1-min or 5-minute chart gave a good buy signal. I have made three trades: buy/sell/buy and am presently holding while MU has just gone through 68. MU will be a good stock to analyze after today's close. Put the 3/7/10 EMA, the SloSto, and, especially, MACD on the intraday chart. Connie Mack - - ------------------------------ Date: Wed, 10 Feb 1999 12:52:34 -0800 From: John Allen Subject: [CANSLIM] Bid/Ask meaining Hi group, Could someone advise me on bid\ask significance. When I see a big imbalance, for example, significantly larger "bid size" than "ask size" , what does that imply? Also, when there is a large spread between bid and ask, how is that interpreted? Thanks in Advance John R. Allen - - ------------------------------ Date: Wed, 10 Feb 1999 22:41:02 -0500 From: "Tom Worley" Subject: Re: [CANSLIM] Bid/Ask meaining John, frankly I'm a little surprised no one answered you by now, guess they were all waiting for me to get home from work! Anyway, to understand the bid/ask (or bid/offer) dynamics, it's best to turn your perspective around from being an investor and look at it from the market's side. Let's forget the different exchanges for the moment, and just look purely at the bid/ask (I'll use that since it's fewer characters to type). When you have a large size imbalance, with the higher number on the bid, it means that there is/are bidders willing to buy stock at that price. This constitutes support at that price. It also less objectively means that some of them may get anxious, and raise (chase the stock) their bid, thus setting off a bidding war if the price doesn't quickly retreat back to the former bid. Likewise, a larger size on the bid may persuade potential sellers to either hold off entering their order in hopes of a higher bid, then using a market order, or else entering a sell order using a higher limit, maybe to undercut the offer/ask and tempt some of those "bidders" into raising their limit and taking out their offer. In other words, a large size on the bid compared to the ask makes a stock look strong for that moment in time. The same holds true in reverse when the size on the ask/offer is the greater number. It means more shares are available if you are willing to pay that price. When the ask size is small, a single trade at "market" might be sufficient to take out the existing ask and cause the mkt quote to move to the next best (higher) price. Then, a market order to buy would cost more than must a few moments ago. Let's talk difference in the exchanges. On the NYSE and AMEX, you have a "true" auction system compared to NASDAQ. I put quotes around true, because even there you have all the third market operations, plus all the independent traders like Connie, plus all the other funds and investors that have not yet entered an order but are waiting for a specific event, like a price threshold to be crossed, before they enter their order. Nonetheless, the size being quoted is generally accurate in terms of the floor specialist. But only the floor specialist, unless you have a quote system that also shows the source of the high bid or low offer, whereby you can see if it's coming from the floor specialist or some other place. On NASDAQ, however, the size figures can often be inaccurate and misleading. You could have ten different market makers on the bid (willing to buy) at 35.50. Collectively their "size" might be only 10 (1000 shares). But in reality, they collectively might be prepared to buy as much as 50,000 or more shares. Why such a difference, you ask? Cuz many/most stocks on Nasdaq have minimum size requirements of only 100 shares, thus a MM can plug in his bid (or ask for that matter) for a single round lot, even tho he knows he is good for much more. In truth, the real MM will plug in for a number closer to what they can really do, since if you are looking to direct your trade of 1000 shares to a particular MM, you are unlikely to send it to one only guaranteeing execution at that price for 100 shares. In addition, from my experience, NASDAQ (the computer) doesn't effectively add up all those MMers and their individual size and give a collective size number. More often, it only reports the largest size at that price. With Level Two access (too costly for most of us), you can see each individual MM and their respective bid/ask and size for each. Now onto your question about spread, one of my favorite topics since I like the more thinly traded small caps with "larger than the average bear" spreads. The actual spread is a function of several dynamics, including the number of viable MMers, the price, the ADV, the size of the issue and more significantly the float, etc. Momentum in the stock price will have the most immediate short term effect on spread. If a stock is in demand, some buyers will just throw in market orders, thus eroding or taking out the best ask. Others will be more conservative, putting in limit bids, often higher than the then current bid quoted. Their effect on NASDAQ, under the new Order Display rules, is to move the quoted bid up, making the stock appear stronger. This goes back to my earlier point, when an ultimate "chase" of the stock can occur. In an auction forum such as NYSE or AMEX, entering a limit buy (bid) order which is higher than the existing bid will have the same effect. Obviously, if you use a limit order either to buy or sell, and the limit is within the existing spread, while your order must be either executed or shown to the market, there is no guarantee of execution. Whereas a market order entered is guaranteed to be executed, but with no guarantee of price. Hope this quick primer helps, if not ask more questions of the group or myself. Tom W stkguru@netside.net ICQ # 5568838 - -----Original Message----- From: John Allen To: canslim@xmission.com Date: Wednesday, February 10, 1999 3:43 PM Subject: [CANSLIM] Bid/Ask meaining Hi group, Could someone advise me on bid\ask significance. When I see a big imbalance, for example, significantly larger "bid size" than "ask size" , what does that imply? Also, when there is a large spread between bid and ask, how is that interpreted? Thanks in Advance John R. Allen - - - - ------------------------------ Date: Wed, 10 Feb 1999 23:02:12 -0500 From: "Tom Worley" Subject: [CANSLIM] Impact of the Internet Here's a couple paragraphs snipped from Infobeat's daily report on Internet companies. Worth reading, if only to understand the full potential of this still rapidly growing medium. At the end of 1998, there were an estimated 147 million users of the Internet around the world, and 52 percent of them, or 76 million, were logging on in the United States. This reflects a compound growth rate in Internet users of 55 percent since the end of 1996. The numbers were released today by the Computer Industry Almanac Inc., an Arlington Heights, Ill.-based reference information publisher. The estimate includes adult Internet users with weekly usage in businesses and homes. Japanese Internet usage included 9.75 million users, ranking second, followed by the United Kingdom's 8.1 million users, Germany's 7.1 million, and Canada's 6.5 million. (NOTE: my editorial - had this been measured in terms of percentage of adult population, and/or national economic conditions, I suspect each of these countries would have outranked the USA) Network Solutions announced it registered a record 621,000 new Internet domain names in the fourth quarter of 1998, up 137 percent from the fourth quarter 1997. That's almost 10,000 each working day. The cumulative total of Net registrations grew 118 percent from 1.5 million at December 31, 1997, to nearly 3.4 million at December 31, 1998. The value of Internet advertising in the first nine months of 1998 was $1.3 billion, according to the New York City-based Internet Advertising Bureau. The estimate, developed by a division of PricewaterhouseCoopers, said third-quarter ad revenues were $491 million, more than double those of the previous year's third quarter. The categories which lead online spending during the third quarter were consumer-related (27 percent), computing (24 percent), financial services (16 percent), telecom (11 percent) and new media (7 percent). The report also found that the overwhelming number of revenue transactions, (94 percent) continue to be cash-based with barter/trade and packaged deals accounting for five percent and one percent of total revenues. Banner advertisements are the predominate type of advertising, accounting for 53 percent, with sponsorships generating 30 percent of ad revenues. More than half the households in the United States have personal computers, according to research by Dataquest Inc. In 1995, only a quarter of homes had a PC, the research division of Gartner Group Inc. said. "There is evidence that the first time buyers are coming from households in the lower socio-economic levels, however the increase in penetration is across all segments," explained consumer market research director Van Baker. And here's a snip from the "MoneyDaily Report" Famed tech investor Roger McNamee reportedly said that 5% of today's Internet companies will be huge, 10% are on the fence as to their success, and 85% will fade away. It's better than burning out. As one investor who is still searching for his first personal "right CANSLIM" internet stock to buy, I remain convinced that there is a future Bill Gates/Microsoft style internet stock out there. It's just a matter of figuring which one will be in the 5% "huge" category. I wish I knew at what point MSFT first became a legitimate CANSLIM stock?? Tom W stkguru@netside.net ICQ # 5568838 - - ------------------------------ Date: Thu, 11 Feb 1999 09:24:00 -0500 From: Connie Mack Rea Subject: [CANSLIM] NOVL: Chance for a relatively safe entry. [Connie Mack] NOVL is a stock whose chart holds some promise. If you'll draw an upper and lower trend line on a 3-mos chart, you'll have an ascending triangle. However, you may wish to call it an ascending parallelogram. I am indifferent to its naming. Of importance is that the top trend line has been touched four times; the bottom touched four also. You, therefore, have established a solid channel of price give and take. Price now sits just above the bottom of the channel and, if inference is repeated, we ought to get a bounce up to the top of the channel. Such a rise would result in a quite nice profit. If inference is fulfilled, entry would be made at a safe point [between 18 and 18.5] and exit at the top of the channel [between 21 and 21.5]. Were this run to be realized, you would have passed through the old high and established a new one. There is a further way to chart NOVL that will imply that we are getting in at a safe point. Draw a straight across the 18 dollar line. The line will touch a congestion high in early December, further congestion in late December, and the present low congestion points of the last four days. This becomes a mildly complex chart with a triangle within a parallogram. Don't be too impressed with such figures, for almost every parallelogram can be so constituted. Whether NOVL is a CS stock or not, I've no interest; however, if it were CS, here would be an opportunity to make a relatively safe entry, achieve a nice run of a couple of points or so, and be in on a new high. The SloSto gave a buy yesterday. The MACD has hinted at a buy though it may not turn for a couple of days. The 3/7/10 EMA is probably a couple of days away for a First Level buy. Price is sitting on its 50-EMA. For some, the 50-EMA is a near-magical number that has been made into a trading system by a few investors and traders. Volume is high and spread ought to be at a 1/16, which would make market orders reasonable safe. I will try to buy several lots of NOVL on rising price increments. Technically, I am entering before a couple of my indicators are going buy. Remember that I have become pretty good friends with NOVL over the last year and a half and give myself some latitude in trading it. I still have a couple of lots of MU. I took out a couple of points in the middle yesterday. Unless it begins to breathe better today, I will release the remainder at first opportunity. The market opening looks to be fairly strong this morning. Connie Mack - - ------------------------------ End of canslim-digest V2 #528 ***************************** To unsubscribe to canslim-digest, send an email to "majordomo@xmission.com" with "unsubscribe canslim-digest" in the body of the message. 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