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This is a classic example of why I use a 4 days with no accumulation sell rule. Main points:
1. Sales and EPS growth and SMR rating are very healthy
2. 1st test of the 50 day line after the first stage cup.
3. The Launch looked good. And 3/28 might have been follow on accumulation, only it quickly got lower in price than it's heaviest hourly volume bar and couldn't skip back up above it for several days. Tightening should occur higher in price than your heaviest hourly volume bar. That tells you that the market accepts the higher price that the big buyer has put up.
4. April 3 is the 4th day without accumulaiton, lower in price than the heaviest volume day of trading. It's stil above the 10 day and there was no distribution day in the stock so maybe you can hold it for a 5th day, but additional weakness on top of 4-5 days w/o accumulation will definitely close the position in my book.
5. April 4 is day five without accumulation and infact is a distribution day. The market can exact a heavy price from stocks that aren't showing accumulation, higher in price every 3 or 4 days. Today RATE paid the 4.4% price.
6. I am still pretty positive on RATE however I won't risk sitting through a 30% deep base that may or may not climb again.
Excellent explanation, I have learned a lot from this post, thanks for sharing!
I need to study this. Thanks so much for posting.
It would be interesting to study some of the model book stocks to see how long one would go without either a support day or accumulation day. Or how often they would have a support or accumulation day.
Exactly right. A support day can often stand in for an accumulation day. After 4-5 days without accumulation, they don't usually start up again without a pocket pivot.
What is your definition of an accumulation day, and how do you handle stocks like SXCI, for an example, that consolidate their gains for a while before moving higher. Surely if there is big potential in a stock, you don't want to sell it and miss being on board for the bulk of the move. It seems to me that getting out early is just as costly (in opportunity cost) as getting out a bit too late. Thanks for your insight.
While you are at it, since I am a little confused about the methodology you employ, perhaps you could walk through a couple of stocks... ALXN and KORS and demonstrate where you would have sold them during their recent run up.
dtempest - A breakout in the 1st 5-6 weeks after a bear market with strong volume high relative strength might be given a little more wiggle room. Still I would want the 4-5 days w/o accumulation to be above the ten day and higher in price than the heavy bars.
Once you are out 8-9 weeks from the upward turn in the market, I think you'd want to get much more defensive. I'll post ALXN w/ market ups.
Abe: As always, thanks for the great post, excellent observations and clear discussion. Your attention to detail continues to amaze and inspire me! Thanks for sharing! Brad
O'Neil has a sentence on page 271 that says "Don't take profits during the first eight weeks of a move unless the stock gets into serious trouble or is having a two- or three-week "climax" run-up"
If RATE is any guide, 5 days without accumulation and a distribution day consitutes "serious trouble".
Of course most of the WON screened stocks showed heavy selling on 4/4. So perhaps that helps tip you off to "serious trouble".
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