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

[millionairemind]

K bro,

Depends on what you mean by short term.. if you are taking about 1-2 weeks, CANSLIM is NOT A SHORT TERM trading tool... CANSLIM practitioners are looking for trends that last for months on end... The recent one lasted 2 months exactly.. enough to make good on several stocks

Once mkt is in confirmed uptrend, the practitioner looks for strong stocks in leading sectors that have shaped up nicely with the cup and handle, tight bases and ready to break out... history have shown that MOST leading stocks break out within first 13weeks of a confirmed uptrend.

Here is a SUPER nice chart on the break out of Nasdaq back in March 2003.... Day 4 of of rally attempt.. super duper cheong .



I hope this helps, K...

[-dol-]

K,

I cannot claim to be a canslim practitioner as I am open to other styles that sometimes run contrary to canslim principles.

From what I understand, canslim first determine if a market is conducive for going long in stocks - i.e.identify a market uptrend. Once that's in place, the leading stocks with the best fundamentals and technicals are targetted. Sometimes, a market uptrend may not present good opportunities where leading stocks are poised to run - it might say something about the market - may be such an uptrend may not be sustainable. In such cases, one might not be invested or may not be fully invested as opportunities are scarce. This in some ways help one avoid those "iffy" situations. It also seems that canslim is more conducive for investments that may last into weeks or months, rather than short-term trading that are in terms of days. Short-term traders will probably need more sensitive indicators (and also look more at intra-day charts) than follow-through and all those chart patterns that need more time to form in canslim. Indeed, it is very much what you have inferred - it is timing intermediate trends lasting months rather than days.

I also find that canslim works much better in the US simply because the canslim stocks need to be of great quality and have genuine institutional participation. Too many stocks in Singapore are of questionable quality and the institutional participation is lacking when all the funds start getting out of Asia. In this vacuum, what we have here are short-term traders and syndicates. Singapore blue-chips may be fundamentally sound but many lack the growth characteristics of true canslim stocks - whose biggest winners are young, innovative companies showing explosive earnings growth that morph into multi-baggers. You do not really day-trade such winners - you identify these quality stocks and hold them as long as the general market uptrend and stock's technicals permit to net the really big gains. It is quite a different ball game.

Perhaps, MM can enlighten or correct me on this.

[kennynah]

mm and dol :

many thanks for clarifying my outstandingly long queries on canslim methodology. i have a much better understanding now.

my questions are never ending it seems....appreciate again your indulgence.

canslim technique appears to be capable of pin-pointing (basing on several examples shown within this thread as well) the early stages of sustainable bull runs.

i have asked before, but appropriate that I ask again here.

how can canslim technique be utilised to pin-point the early stages of any extended bear market, besides the usual high volume/deep price declines scenarios, as it appears to be able to do so for the bull...

that is to say, much has been said about high p/v actions, follow thru', pattern formations (this dont undercut that, else recount starts all over), but little has been stated about canslim's ability to give more astute signals to spot early stages of a prolonged downturn, or is there?

many kam sias

respectfully yours,
K

[millionairemind]

K Da Ge,

CANSLIM can tell you when a correction started but it DOES NOT TELL YOU how DEEP and how LONG the correction is going to last.

Some corrections turn out to be SUPERBEAR markets like back in 2000... Nasdaq topped on March 14. By the 1st week of the correction, CANSLIM followers have been asked to raise cash as mkt is in a correction.. nobody knew that the correction was going to be SO SEVERE...

Here is the article I wrote recently on tracking distribution days and when mkt goes into a correction.

viewtopic.php?f=16&t=949&st=0&sk=t&sd=a&start=10

I hope this helps.

Cheers,
mm

[kennynah]

CANSLIM can tell you when a correction started

Here is the article I wrote recently on tracking distribution days and when mkt goes into a correction.

viewtopic.php?f=16&t=949&st=0&sk=t&sd=a&start=10

mm brudder :

not to mince on your choice of words above...but do you mean instead, that canslim is able to indicate that an impending correction is about to start, rather than indicating that a correction has started?

the reason for being nitty gritty here is that any TA tool is useful so long as it has sufficiently been tested to make a credible forecast. If the TA tool points out an obvious situation, it is not so useful.

i referred to your lengthy article and within, i see only 1 signal, offered by canslim, to suggest that a correction maybe underway. That signal is P/V Distribution.

am i right that canslim offers no other signals, other than this P/V Distribution signal, to suggest a possible downtrend? this is markedly different from the canslim forecasting uptrend, becos it offers many signals such as P/V Accumulation, Pattern Formation, Earnings Growth, etc...

this is very lengthy...paiseh...if i only had one line to phrase my question, it would be this :

HOW (not can it) can canslim method detect a downtrend, other than the P/V Distribution days?

please teach me...again...hahaha...

thanks.

K

[HengHeng]

wah i see liaoz blur liaoz too many words.

[millionairemind]

K - let me try to split your question into 2 parts

1. Correction - CANSLIM tracks distribution days (P/V of market indices) to know when the correction JUST started... Take Jan for instance. I PM you when we were back in WS that I was in full cash on Jan 3. The actual correction started on Jan 4 when Nasdaq broke down hard with a 3.8% gap. Back then STI was around 3437. At the depth of correction it was around 2800. On the March 24 morning (the next trading day after follow thro' in the US on March 20), it was trading around 2880.

CANSLIM is a methodology for GROWTH STOCKS only... 3 out of 4 growth stocks follow the market trend. That is Y it is more important to track the mkt trend to know when to close your long positions.

2. Uptrends are also by tracked by P/V changes of the indices... Once the market is in a confirmed uptrend.. then you start looking at individual growth stocks with all the pattern liao liao.. new highs lah, cup with handle lah, 3-week tight flag lah...

The M in CANSLIM is the market direction and what the market is actually doing... not what it is going to do. CANSLIM practitioners do not pre-empt the market, do not second guess the market.

We do NOT BOTTOM FISH.. cos' we don't know where the bottom is... think back to year 2000 again and you will understand what I mean... The market MUST PROVE itself. CANSLIM does not catch market bottoms nor market tops.

I hope this helps. I do welcome questions so that I can really test myself on how much I really understand the methodology. I am sure there are better CANSLIM practitioners out there reading this forum. They are welcome to correct my mis-understanding (if any) so that I can also learn from my mistakes.

Cheers,
mm

[kennynah]

mm : thanks again....

all that i have read from above is this...

P/V Distribution is the ONLY canslim signal to detect a possible downtrend? correct?

The M in CANSLIM is the market direction and what the market is actually doing... not what it is going to do. CANSLIM practitioners do not pre-empt the market, do not second guess the market.

if this is to be so, then why use it? and what is this method for?

thanks.

[millionairemind]

P/V tells you the trend changes.. for both uptrends and downtrends.

Mkt follow thro' = Uptrend just started and in progress = GET IN AND RIDE IT TILL IT ENDS

Mkt just broke down in correction = Uptrend just broke and the mkt is going to hell.. get out

I think the 2 sentences above sums it up pretty well. Is it clear enough? If not, then I think I might not be explaining myself well enough. If this is still unclear, when we drink kopi next time, lets have a good discussion

I think if you use the SGX example I listed ytd.. that might help?

[kennynah]

mm : thanks...it is clear now. appreciate your time teaching me...kopi guni on me next time we meet....kam sia.