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I sold my NSM yesterday a little out of sync, at 26.67 based on rule 1 on page 263 of HTMMIS.
Abe what does HTMMIS stand for? Where do I get to read this?
HTMMIS - How To Make Money In Stocks by William O'Neil. Required reading to trade the CANSLIM system.
What's rule 1? Or are you gonna make me pull the book out.
For those who do not keep the book or our bible at their trading desk…. “Largest Daily Price Run-up” I’ll leave some stuff out so you will read the book. But this is a possible sign for climax top action. And this action generally occurs very close to the stocks peak.
Now, Good job Abe on the stock. And I am in the view of taking somewhat quick profits in the fourth year of the bull market. But I could easily argue that this stock does not contain enough “tell tale traits” for this action to be considered a “climax top.” Don
I thought that the "largest daily price run-up" rule applies after a stock has made significantly long run. NSM has nearly doubled since it's IPO Base, but it's only been running for about 4 months. I always thought that a "significantly long run" meant over a year...?
After looking at the chart that's the rule I thought he might have been implying but I'm with you lamothe.mike. Seems to early in the run.
And I have read that book multiple times over the past few years. I love it even more every time I read it but I don't have a desk to trade from. Casual trader and all. But never hurt to take a profit especially when that extended.
Just started reading Nicolas Darvas's book "How I Made 2 Million In The Stock Market" (great book so far). Unfortunately nathann, he would disagree with you about "never getting hurt taking a profit." The logic stems from taking profits too early, jumping into and out of a stock, racking up commission fees unnecessarily, and not seeing the true gains that could've been had.
That said, if you bought NSM out of the IPO base, I doubt this reasoning would apply here as you would be selling a stock you have nearly a double in. I just thought I'd share Darvas's reasoning to demonstrate that you can get hurt taking a profit...at the wrong time.
All that said, congrats Abe! Not sure where you got in, but it seems like you probably had a really nice gain!
Can anyone show me a "Largest Daily Price Run-up" more than four weeks from a valid CAN SLIM base that wasn't a good sell opportunity?
how about LULU- 11/5/10or 12/9/10?
Great reference. My position is that:
1. LULU 11/5/10 was not extended up past 20% from the base and was still in the 8 week holding period described on page 272 of HTMMIS.
2. LULU 12/10/2010 was a legitimate sell opportunity. Ideal re-entry could have been made on 1/25/2011 with the low volume sell off five weeks into a less than 15% correction(flat base), above the accelerating 50 dma. Or re-entry could have been made with the very heavy pocket pivot volume on 2/1, launching from within the flat base of a powerful stock. That way you stay out of the five weeks of basing action. Who knows if it will hold.
Really the reason I sell into Greatest Daily run up after 3 weeks AND after the 20% run from a CAN SLIM base is because more often than not a base is soon to follow and I never know if it's a base or a collapse. See LULU 10/27/09 and GROW 1/26/06. Grow 1/26/06 reminds me most of today's NSM action. INVN 3/12/12 is similar.
I thought 11/5 in LULU was an iffy example, and see your point as well on the 12/10.
One last one to look at- ULTA 3/11/11?
Obviously this is a probability thing- and I agree with your rationale- just wanted to see if i could find an example.
Also a great example. Since ULTA's February 2011 run to 44.06 was less than 20% from the prior pullback, I think we can say that ULTA 3/11/11 was coming out of an ascending base, so still within the three week window. I'll take that position since the market said emphatically that day was a buy/hold/day for ULTA.
It seems like today we'll have another HTMMIS sell rule triggered "new high on low volume."
In my rules, I call today's action in NSM: Extended stock up 2% without accumulation - Sell.
A new high was hit on 8/10/12 on low volume as well. That day was also up 2%+ on low volume. Should it not have been sold on that day following these rules?
Yes that is true about darvas. I enjoyed that book. I would like to read again. I have been hurt taking a profit. SWI being one of them. Bought SWI AT 34 base and sold out way before now. Only psychologically hurt from less profit. Lol. I get your meaning lamothe.mike.
Devanbb. It depends on your conviction. In some stocks the answer is definitely yes, the sort of low volume seen on 8/10 would be a sell signal. You have to weigh many factors into your analysis. The enormous relative strength and leadership from NSM was enough to keep me in NSM a bit longer. At some point up here NSM is going to consolidate for a few weeks. I will carefully measure how that consolidation occurs and I will respond if many numerous factors indicate that I should respond to NSM.
Abe ... just following the conversation here about CONSOLIDATION, SELL SIGNALS within the context of "LARGEST DAILY PRICE RUN-UP" - - came across another stock, 'PRX" (Par Pharmaceuticals), that had a gap-up in large volume on July 16th & (I guess has triggered the 20% rule) has been in an ULTRA-TIGHT CONSOLIDATION since then: how do you read these ultra-tights? good? bad? sell? how would you explain the stocks tight range? Quants? HFTs? ... when I read HTMMIS and look at stock charts from over a hundred years ago I can't help but try to overlay my learning/interpretation with knowledge about Stock Market dynamics of today (Quants , HFTs) ... yes, human behavior stays the same but how do we read a CONSOLIDATION CHART OF PRX? Thanks for any response.
PRX agreed to be acquired near the ultra tight price. news.investors.com/.../private-equity-firm-to-buy-par-pharmaceutical.htm Most of the time that is what causes this sort of ultra tight action. Sometimes there might be a 2nd bid. at a higher price, but I consider this sort of action to be untradeable.
Now since NSM corrected less than 20%, it could be that it is breaking out of a Hight Tight Flag and I have completely blown my position in a great winning stock.
Would you also consider pcyc to be a high tight flag?
Doesn't a High Tight Flag offer up another buy point?
Nothing wrong about taking profits - good work.
As others have pointed out this is probably not a climax top. Climax tops usually happen after several bases have formed and everyone thinks it is going to the moon. It is only 24% above the 50dma. Climaxes often go 50% above th 50 dma and 100% above the 200 dma.
My chart nterpretation: This is not a HTF. It is not a double from $15.
The one day price action is in response to great earnings news beating estimates by a wide margin with 2.2 days of short interest now under water. Though you need at least 17 weeks before a climax top, NSM looks like it could be a big winner.
One reason to take some profits: It hit the top of a longer trend channel. Another, if you bought at the 50 dma support and now have 20%+ profit.
Maybe in the future consider taking some profits, ? 33% or 50% of your position, and buy back at addtional buy points. You want to learn to handle big winners properly.
There will be many more stocks and opportunities.
Abe...what's the longest you've held onto a position? Can you give us an historical example of where you got in and out of a stock that you've held for an extended run...possibly 52 weeks or more?
P.S. I have followed your blogs since joining the MarketSmith community, and your investment style seems a bit...hyperactive...relative to the CAN SLIM methodology.
I do not hold for the extended run. I prefer the 20-25% burst that occurs in the eight weeks after the breakout. This is what Bill describes on page 258 of HTMMIS. I try to perfect the capture of a 25% gain and squeeze my losses to less than 2.5%
Thanks, abe. That helps me put a bigger perspective on your blogs. Keep up the great work!
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