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To Abe and All: Abe, following your strong argument for a sell rule after >4 days of no accumulation, I would assume, had you bought into FRAN, you would have considered selling/sold yesterday after 4 days of no accumulation and breaking 10 DMA? I am just above the -7-8% loss rule based on a purchase the day it actiually closed above it's $29.85 buy point. I noted, but ignored, it's bearish reversal on the first day of the attempted break out and was mesmerized by the solid volume on the "breakout". I have felt I was a bit aggressive in buying this but was swayed, in true Peter Lynch fashion, by our local branch's phenomenal traffic and very satisfied customers. I would appreciate any feedback on this one and/or IPO bases in general. Thanks in advance Abe and all. Brad
Brad, my opinion on Fran is,
1. First attempt to breakout on very high volume may of been flawed due to the fact it closed in the lower end of trading. Which you infact pointed out.
2. First drop below 10DMA was just at 3% below 10DMA ( atleast that is what my MS chart shows). Which other than it dropping below 10DMA no real reason not to hold( but note with that strong volume on breakout day and than closing in the low range that day and High flying stocks tend to continue to breakout) It may of thrown up a red flag "Maybe"
3. After it touch/ drop the second time below 10DMA and at that time I belive the distrubution count was getting up there, it certainly needed to be unloaded.
4. Now Abe can correct me if I am wrong but I think his 4 day rule is more posed towards pocket pivots than a Breakout from a proper base? That 3/4 day rule has been working for me when it comes to pocket pivots.
It is just a little strange that my chart is different than your chart thou. Well good luck.
Brad, One more comment Sorry.
1. During its left side time in base it had been obeying 10DMA, so add that with my second comment, it might of really been a sell with all three items considered.
Brad Sorry again, I meant right side of base.
The lesson I would take away is to lighten my position into light volume rally's like 3/23 that occur following 4 days without accumulation. By the 2nd break of the 10 day you can see that sell off volume is really starting to overwhelm the buing volume. By 4/5 the distribution is pretty clear and the market is heading lower. That's major weakness.
Livermore and O'Neil are correct that the big money is made by sitting. What is often overlooked is that sitting best works when you start your position in RS and volume leaders coming out of the depths of a long bear market. No one wants to sit through Intel's 65% correction in 1982. Even if you knew it was the one to "sit" with.
So with that being said about big money made sitting, the easy money is made launching off the 50 day early as the market turns upward. See INVN on 3/7. I chickened out with INVN and sold at 18 and a 20% gain in 3 days. I didn't get all of its gain up to 22, but I didn't lose any of my profit either.
I guess my point is that sometimes you can buy BIDU, PCLN, NFLX, CMG AAPL in March of 2009 and make big money sitting, other times you have to be able to capture smaller gains of a 2-3 week burst off the 50 day.
Remember not to quit your day job, in that sometimes bear markets can last 18-20 months.
jkaa & Abe, Thanks for the great observations. The development of the distribution, which you both pointed out, was much appreciated. I saw some of these signals but allowed my judgement to become clouded by two things: 1) my remaining cushion above the -7-8% loss sell rule--which I should have tightened up to -3-4% given the overall market's direction (i.e., correction), & 2) my personal experience at the local branch and the positive info I was hearing ala Peter L.--the "parking lot" was full darn it! The latter is an emotional & anecdotal "data point" which I allowed to subvert my judgement in the face of obvious selling pressure. Oh well, as WON stresses, and we all know experientially, we learn our greatest lessons from our mistakes! Thnx again. Brad
The first weekend workshop I ever did with Bill O'Neil was back in 2003. The greatest take away I had from that workshop was Bill's comment "All strength and power all the time."
I mean you might be in lap 300 of the Daytona 500, if your engine starts sputtering you had better get off the track. If you look at AAPLs run... how many accumulation days do you count? Or maybe it's easier to count how many days it didn't show accumulation.
I think it's possibe to overthink this... the market has been undergoing distribution, and several leaders have been selling off, PCLN the most recent, as well as ALXN. Although FRAN has great fundamentals, it isn't a thoroughbred like PCLN. The less seasoned the stock, the more likely to break down when the market weakens. Were there flaws in the base ? There is no perfect base. If you apply logic and imagine if you were a large holder, saw the market was weakening, and had bought the stock before the gap up, you'd be wise to sell the stock. Better to step aside at the firs tunusual price drop and see what happens. You can always get back in or find other merchandise.
Recall the saying please: IF the leaders can't lead, it not appropriate to think lesser stocks will do so.
Again, thanks to everyone for a great discussion. Brad
When I look at a weekly chart all I see are Skyscrapers. I also view the base as a sort of Flat Base with a prior uptrend and alternate pivot of 24.01 and the regular pivot as 24.73 which was triggered on 03/08/2012. The daily stuff is just to scare the weak holders like myself :)
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