CANSLIM & Momentum Investing 01 (May 08 - Jul 09)

[Aspellian]

MM bro,

big thanks for your explanation and illustration. appreciate it alot.

Cheers and Huat Ah!!!

[Aspellian]

DOW UP 49pts +0.44% (Day 3 of positive gains)
NAZ DOWN 29pts - 1.28% (3 days of attempt rallies broken by Day 4 negative loss)
S&P UP 0.36 +0.03% (Day 3 of positive gains but barely)

Hi MM bro,

In relation to the "follow through" above -
1) does it matter if the DOW and S&P attempt rallies (DAY 3 for both) are such small gains?
2) now that NAZ is down again, does it mean that its 3 days attempt rallies is set back to ZERO, and we have to recount?
3) when we look at "follow through", must it be all 3 indices have follow through (ie. 4 days of gain follow by a gain of >1%)?
4) you mentioned you watched a 4th index, can u share with us what it is?

Thanks bro. <maybe in future, u can consider starting a "tuition" class on CANSLIM? i will be ur first student!!>

[millionairemind]

A bro,

I. Prospective rally is intact as long as DAY 2/3 does not undercut Day 1's low. The most explosive rally occurs when the follow thro' day occurs in Day 4-10... why??? Even if Day 1/2/3 has positive gains, it could easily be short covering... It takes ALOT of money to move the index by a large amount beyond Day 4.

II. As long as the index does not undercut Day 1 lows, the rally attempt is still intact. (mm - edited to change rally to rally attempt... error)

III. As long as one index punches thro' with a follow thro' day, it is sufficient to lead the other 3... So far, I have always seen Nasdaq lead the other 3 indices. But hor, on March 20, it was DOW that had a follow thro' day. You want to see the other 2 indices have their respective follow thro' soon cos' that tells you the whole mkt is rallying. Nasdaq, S&P had their respective follow thro' day 1 week later. Please see my posting on May 11.

viewtopic.php?f=11&t=46&st=0&sk=t&sd=a

IV. The 4th index is NYSE ... I always watch IBD 100... it comprises on the 100 leading stocks in the market right now. They ALWAYS tell you the direction of the market. If leading stocks CANNOT LEAD, the market is DEAD. Right now, the rallying stocks are all financials.. for the week IBD 100 actually lost ground.. due to it being heavy in oil related counters. I am waiting for the new batch of leaders to emerge.....

All this is covered in the book HOW TO MAKE MONEY IN STOCKS by Bill O'Neil.

No need to start class lah.... pick up the book, read it once every month, have it ingrained in your head, practise, make mistakes, lose money, practise again until it becomes second nature

For me, I am just happy to be able to share with you and the forummers here cos' I wished someone could tell me 8 years ago that market could be timed and showed me the way.. then perhaps I would not have lost so much money

But then again, better late than never...

[Aspellian]

Thanks MM,

I have been digesting your posts on CANSLIM.
am i right to say that there is a follow-thru last night as it moved > 1% across the 3 major indexes?

[millionairemind]

A bro,

You need a major move... >1.7% on higher volume to consider it a follow thro'.

Hope this helps.

Cheers,
mm

[Aspellian]

A bro,

You need a major move... >1.7% on higher volume to consider it a follow thro'.

Hope this helps.

Cheers,
mm

Hi MM bro,

Thank you.

is >1.7% an IBD's researched benchmark or is it from your CANSLIM experience?

[-dol-]

I think the benchmark is not cast in stone. It used to be 1% but was adjusted to 1.7% because there were manipulators who tried to create their "follow-through" to spark the market. Depending on market conditions (eg. if 1.7% swings become too common), they could change the benchmark if it is appropriate to do so.

On a side note, if one have read about the many experts analysing the market using their pet theories and indicators, one would realised that no one really knows. In the end, it's all about putting as much odds as reasonably possible on your side before you make your move.

[millionairemind]

A Bro,

DOL is correct. He is another CANSLIM practitioner. Having him on board keeps me honest cos' he can counter balance my views

15-20 years ago, a gain of 1% in higher volume was sufficient to make it a follow thro'. However, O'Neil wrote that in recent years, many hedge fund mgrs with billions at their disposal tried to create a "fake follow thro" to dispose of their unwanted stocks (think DOW JONES with only 30stocks)... hence it was revised to 1.7%.

I will not be surprised if this is again reversed to 2% in the future.... more and more difficult to make money liao..

Anyway, like what DOL said, the CANSLIM method is to put as much odds as you can in your favor before you whack the market...

All trading/investment is a playing of probabilities.... that is Y value investors insist on margin of safety (in case they are wrong) and CANSLIM practitioner insist that the market be in an uptrend before they go whack the strongest stocks in the strongest section...

Cheers,
mm

[kennynah]

mm/dol : i am realizing that canslim method is about determining entry and exit points, using FA and TA to achieve a great deal of certainty...as pointed out, lowering of odds of being wrong.

hence can i conclude that this method can only spawn a few entry opportunities within a trading year and sometimes, none at all. this is so, because it takes some lengthy periods to form those shapes(cup and handle, bases, etc)?

therefore, even if there were sharp spikes in p/v, signalling the necessary follow-thru, it may not be correct entry points, because those shapes have yet sufficiently formed?

and finally, even if the entry points were correct, it can take up to weeks and months for those positions to make substantial gains?

is it therefore, not inaccurate, to say that canslim is NOT a short term trading tool ?

so many questions....paiseh....free lessons here from the canslim practitioners...i better seize this advantage thanks a million...

[iam802]

For a newbie like myself, CANSlim allows me to easily scan through the stocks to find a list of good companies first.

Being new to investment, I would often ask these questions:
- is this a good company? (company can buy or not)
- is the price too high? (this price can buy or not?)
- is the price too low? (drop already, can buy or not?)
- market like that...(can buy or not... or sell or not)
- price run up... still can earn or not (can buy or not?)
- ppel selling (sell or not, hold better...fundamentally nothing wrong...see how? don't know?)

And with the distribution and follow-through days, it give me good enough signals to act on it.