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Maybe there are some out there that find CAN SLIM much easier to work than I do. I find it necessary to break down the price and volume action on at least a daily basis.
I'd be very grateful to see the components of an easier assessment.
Based on your blogs I think you are probably a shorter term trader than I am. I use more intermediate term time frames. If you put a 21 day moving average on the chart it touches the line a couple times and goes below the 21 dma intraday a couple of times, but has not yet closed below the 21dma since the break out. It is getting close to that again now. Using the 21 day moving average as an alternative sell line for more intermediate term. I have that one in addition to the normal 10 and 50dma on my charts. Just one idea to throw out there.
I have used the 20 day moving average quite a bit. Though it does clutter up the chart some. I think that two of the biggest differences between the "pocket pivot followed by 4 days w/o accumulation" in ALXN vs RATE are that:
1. ALXN 4 days w/o accumulation occur above highest volume hour of the launch from the 50 day vs RATEs 4 days w/o accum occur below the highest volume hour of the launch.
2. RATE's launch is much later in the market rally
I use a 20 day as well and find it very useful on stronger stocks like ALXN, once they get moving. I use shorter term and intermediate trades depending on my view of the market and how much margin or cash I'm carrying at any given time. Love the blog!
Thanks bruce. We all need encouragement in the tough job of price and volume anaysis. Regarding shorter term vs longer term, I am always trying to buy a stock that I can hold for at least 8 weeks, however I am not willing to ride a stock that looks great like SLXP as it breaks off the advance with the little gap down on 3/27 after a low volume push to a sputtering(or stutter stepping) new high.
You've got to at least have some eye for the build up of distribution days by 4/3 and 4/4 on SLXP.
I look at this chart and see previous resistance around 90.00 in the 2nd week of March that has now turned into a line of support. Reference the large drop on March 28th that rebounded to close just above that support, at 90.22. Since then you've got declining volume as the market has an intermediate correction, and ALXN holds just under its 10 day moving average. We all have our own style that we put on investing, but I do try my best to, as William O'Neill has said many times, try to learn the system as is before tweaking it too much with your own ideas. Re-reading the chapter of "When to Sell and Take Your Worthwhile Profits" in his book, he doesn't prescribe anywhere in there that you concentrate so much on the 1-, 2-, 3- or 4-day volume/price action, in fact he continuously references how the chart looks at the end of weeks. I think its good to frequently step back from the daily and intra-day action to gain a longer term perspective. To quote WON: "Achieving giant profits in a stock takes time and patience and following rules." I invest to achieve these giant profits.
Actually I consider the 4 day weighting of accumulation and distribution to be pure CAN SLIM analysis. On page 220 of HTMMIS. "Occasionally but rarely a follow through occurs as early as the third day of the rally. In such a case the first, second and third days must all be very powerfull." Breaking down the price, volume and day count components of a turn in the market is a very natural furtherence of the CAN SLIM study.
Your quote comes from the 'M - Market Direction' chapter, in which he talks about the general indexes, not individual stocks. Interesting interpretation/application.
The gentleman that wrote the forward to the Morales/Kacher book, Fred Richards has a very simple sell rule. Once he has a decent profit, he sells when a stock closes more than 6% below the highest prior close. It's a simple rule, and works very well except in the strongest of stocks.
You might try 6% for modest movers, and 10% for very fast moving stocks. There is not a singe rule that works across the board, but following this rule does enable you to stick with stocks for a good portion of their move.
I think this is my favorite thread of the past few weeks. The discussion really grinds through the difficult interpretations we have to make in applying CAN SLIM rules. The question we really are after here is - What rule woud not let a slow and small gain like SLXP in March "develop into a loss" as described on page 271 of HTMMIS and still hang onto a slow grinding winner like ALXN in January? If you can articulate a rule that can capture a gain on both, you would be a true CAN SLIM master.
I don't have that rule yet.
In my experience, the most frustrating experience is buying a stock with great fundamentals, only to sell it too soon, and then see it turn around and head higher. In reviewing my sells over the past few months, I think it may be appropriate to let stocks experience a 10% drop, and see if they can recover after a few days. If they can't, then sell, but if they can, you stick with them. Obviously you'll have some that will keep dropping, but you'll also have others that continue higher and higher, and you need those big winners to make up for the small losses. I agree with Ryan who advises taking a step back from intra day and daily action. On the AAII website, CAN SLIM is ranked as one of their best investing strategies, and the way they employ the stategy, they sell a stock that isn't within 10% of it's high, but they run the screen once a week, so some stocks that drop 10% will have recovered within the week.
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