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Author: BruceBrown Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 23034  
Subject: FORE! Date: 3/1/2001 11:45 AM
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Recommendations: 120
I feel like a beginning golfer who has just watched some videos of the golf swing, read a few books, thought about a few things, hit a bucket or two of slices and hooks and now am standing on the first tee in front of a crowd who knows the game as well as golf swing all too well. It's pretty difficult to swing the club and hit the ball in those circumstances - so bear with me. Perhaps I should simply yell 'FORE' before we go on with this post. In other words - duck low and protect your respective body parts...

I certainly don't - at this time - pretend to have any confidence and skill built up about CANSLIM and the rest of the reading materials from the Burrow. That's not why I am making this post. However, I have most of the books and have been reading them for the past two months. I am still in the early stages of study process which is allowing me to look back and see where I went wrong. As painful as that is, I feel it is an important step for me to move forward. I sure could have used an earlier injection of Weinstein and O'Neil about 12 months ago when my friggin' ego and confidence was a dangerous element. However, what remains in the past is finished. Believe me, I don't mean for that previous sentence to be taken as being flippant. It's not. I just don't know how to find the proper words at the moment to describe it. The point is to move forward and improve for the future. Failing to do that would be admitting no lessons were learned and no wrongs committed. Allow me to be the first to admit that although I've been able to uncover emerging things in the early going in technology over the past few years - outside of that I knew very little about what to do with that information in terms of making and or protecting the money. Of that, I am deeply humbled. Not only for my personal capital, but for anyone who has had the misfortune of observing my thoughts.

I had a very disturbing exchange with dbphoenix on the gorilla game board in early 2000 due to my ego and 'lemming' belief based on some type of group think about gorillas. Those of you that read this board will recall my venture over to this board to equally shove my foot in my mouth. I made an immature comment about the Burrow's graphics in my frustration and was way off base. Way off base. For all of that, I deeply apologize. I can't even bring myself to offer any type of an excuse.

When I found the Fool a few years ago - no doubt the LTB&H philosophy fit right into my longer term goals as many of my investments were in the middle of a nice run. At this point, I refuse to simply 'accept' the overall Fool mantra and have the desire to broaden my horizons. Boy, was I tainted by the Gardners (as well as Malkiel's) comments in regards to TA. That belief hurt me as well as others. I was delighted to be presented with the information in the list of reading material that db has assembled. It's all very eye opening information. I haven't even cracked the Bulkowski or Schabacker books yet because they look like I need flourescent lighting and a number two lead pencil with a notebook and professor in front of the class to get me through them. Yet, they will be cracked in due time. I've only encountered the rest of the (minus the out of print Mamis book) material on an initial basis (first readings) and have much more study to complete. I'm still learning about the 7 iron before I spread that knowledge throughout the bag to hit the driver, wedge and 3 iron.

I've had plenty of dandies get away from me using the shorter term time reference even though they were all purchased for the longer term. I believe I will be attempting to implement additional strategies to help in building that longer term process from now on to avoid certain elements of greed and fear contained within the overall process of investing and the stock market. I realize it will take time, discipline and effort on my part. If it leads to better longer term success and realization, then it will all have been worth it. Not that I would wish a market environment such as 1973-74 or 2000 to ? in all of our futures again, but what a learning experience to recover from for all investors and the markets.

The above being said, my first request is for a little guidance concerning a current holding I have had since earlier last year and my parents have had for many years. Cardinal Health. It's not designed as a presentation of “here is a CANSLIM' candidate” by any means, but more designed as an exercise process or learning experience to see how I should apply the criteria to a current holding to help make decisions about why I still hold it, what the market is telling me about it and what process I should go through to avoid holding yet another stage 4 disaster while being unable to move, set stops and evaluate overall strategy. I can't really narrow down why I bought this particular company outside of my knowledge of the company and the desire to broaden my portfolio into more 'non technology' areas at the end of 1999 and early 2000. At the time, I didn't even set a time frame for holding the investment. I had no idea that the stock was going to perform as well up until now, so I thought it would benefit me to try and take a look at it to make some determinations. As has been mentioned on this board, I don't think we are in classic 'CANSLIM' times by means of a new bull market at present by any means. Certainly not with the broader markets. So perhaps it would be best to apply some Weinstein criteria as to what stage the stock is currently located rather than view anything by means of CANSLIM.

Regardless, I will just run a brief initial CANSLIM look at the stock itself which comes from the Health Care Distributors/Health Services and Products Provider industry segment. As I said, I'm not trying to make the conclusion that it fits the criteria - especially in this environment. But as an exercise for future use, I thought I would at least begin to take a look at running things through the initial criteria to get a handle on future application once times roll around to moving in the uptrend direction. I remain open to what such a discovery would reveal. This is only a rough draft of what would be best served by guidance to lead me to a direction of nailing down a second, third and final draft for proper study/presentation. No need to mention, it's a work in progress. I only chose it as a learning exercise. I welcome all suggestions and comments as how I can dive deeper into each element to make determinations and weed out non important information. Obvious steps to take would be to determine the entire health care segment and judge how the aggregate is performing in addition to the leaders and the laggards in the current market environment. That study has not been completed on my part and remains the obvious 'next'. Without even looking at that sector, I don't know how we would view some of the defensive issues in terms of this point in the cycle. If the aggregate health care service and product group has not been too shabby over the past few months to year, I imagine it is due to the cyclical rotation. Yet, that is unfounded speculation on my part without looking. I would imagine that's not proper use of CANSLIM by any stretch of the imagination, but simply a process of where the money has been flowing. I can't run an IBD stock check up on CAH since it appears foreign subscription and sign up is not available. If any of you subscribers could run a check up on CAH and post it, I would appreciate it. I assume it lists the industry segment ratings to see how the aggregate is doing.

C = Current quarterly earnings per share. They must be up at least 18% or 20%

Recent quarter was 21.4% better than the y/y period. Operating revenues improved 24% from the year ago period. Management's guidance was for 20% EPS growth going forward. Previously announced $750 Million share buy back program was withdrawn due to the $1.67 Billion acquisition of Bindley Western Industries.

A = Annual earnings per share. They should show meaningful growth for the last five years.

Five year actual EPS growth has been an annualized 20.7%. Consensus analyst 5 year forward EPS growth is an estimated 21.5%. Five year actual annualized revenue growth has been 29.1%.

Estimates and analyst ratings:

http://quicken.com/investments/estimates/?symbol=CAH

N = New. Buy companies with new products, new management, or significant new changes in their industry conditions. And most important, buy stocks as they initially make new highs in price.

http://www.thestreet.com/stocks/biotech/1197316.html

Here's where I need some determination and guidance. I'm not sure if this qualifies, but Cardinal Health just completed a recent acquisition of Bindley Western Industries. I'm not trying to stretch the implications of the word 'new', but does an acquisition figure into the parameters of 'new changes' in their industry condidtion? The stock was about $3 away from it's recently set all time high of $104.94 in the past few months as of last night's close. I would need help in determining what the chart shows. The visual I get shows that interesting spike as almost being in the middle of some sort of either a basing period or a topping period. As I said, I'm just beginning to study all of this so I'm in the dark here. Then I realized that the spike in volume after the recent high was set was partially due to the announcement of the acquisition which caused a profit taking or sell off which one often sees when such an announcement is made. I'm not sure if that is a valid observance on my part, but I just mention it.

For lack of a better chart without an html that is six miles wide, here's a long term chart:

http://tscquote.thestreet.com/Charts.jhtml?symb=CAH&time=20&freq=1&type=64

S = Supply and Demand. There should be a small or reasonable number of shares outstanding, not large capitalization, older companies. And look for volume increases when a stock begins to move up.

Well, this company has been around for a long time. Shares outstanding equal 280 Million. Market cap is around $29 Billion. A recent 3 for 2 stock split was announced. As I mentioned, the $750 Million share buy back (or roughly 7.5 Million shares using current price) was scrapped due to the acquisition of $1.67 B for Bindley. Most of these elements certainly don't seem to be qualifications for a CANSLIM candidate. Yet, I would appreciate guidance on how best to apply the age issue, number of shares and market cap to see if I should just skip trying to view this stock as a candidate or move to other elements to determine that it once was and now needs to be viewed in terms of a selling strategy.

http://quicken.com/investments/snapshot/?symbol=CAH

L = Leaders. Buy market leaders, avoid laggards.

Analysts have pegged Cardinal Health to be considered as the 'gold standard' in this particular industry. Whatever that means? In terms of EPS growth and strength within its niche, Cardinal Health has built itself up over the past decade to be quite a leader in the segment. I start to get fearful these days when sell side analysts suggest stocks. I'm afraid to say that I've heard Cardinal Health mentioned in the past two months...

I = Instituttional sponsorship. Buy stocks with at least a few institutional sponsors with better than average recent performance records.

Cardinal Health is certainly well owned with a high percentage of institutional sponsorship. Most likely a negative using the 'heart of the watermelon already being eaten' comment that O'Neil talks about in the book. Once again, I would look to guidance as to what one can determine 'overwned' means in determining a CANSLIM candidate.

Institutions: http://biz.yahoo.com/hd/c/cah.html

Mutual Funds: http://biz.yahoo.com/hd/mf/c/cah.html

1,253 Institutional holders for a total of 81.5% of the shares.

http://quicken.com/investments/snapshot/?symbol=CAH


M = The general market. It will determine whether you win or lose, so learn to interpret the daily general market indexes (price and volume changes) and action of the individual market leaders to determine the overall market's current direction.

Boom! I think we could determine that the market direction has not signaled we are in any kind of a bull market at least in the overal Dow index (which is down around 13% from it's all time high). Pretty much some sort of a trading range has been lasting for quite some time within the Dow. Who knows where we are going from here? This determination is out of my league in my current learning process. I do know that CAH is in the S&P 500 and that index has just hit the 21% decline area from it's high which I guess tradition qualifies as a 'bear market'. The Nasdaq hit an intraday low of being down 59% from its high this morning. In combination, those particular benchmark measures are certainly not pointing to any sort of a bull market at the moment with readings of -13%, -21% and -59%. When compared to the 1929 - 1933 and the 1973-74 eras, I can see why the bears are enjoying 'being right' this time around since the opportunity provides plenty of fodder. O'Neil mentions that the 1929 - 1933 period saw the average stock lose 90% of its value and the average stock lost 70% of its value in the 1973-1974 era. The 1973-74 period saw the Dow lose 50% with the underlying issues giving back 70%. We have certainly seen plenty of technology stocks lose 65% - 95% of their value from the highs to date which illustrates that the index average might end up not having as large a loss as the average issue once it's all said and done. However, we will have to wait and see what that information is once we arrive at a point to look back and provide that data. Not that I feel any prouder as being part of 'history', but I fear that I am in this unfortunate circumstance. I would venture to guess that there are more people who have particpated in this historical moment than would have desired. So, it appears the "M" portion certainly fails the desired trend at the moment.

As indicated, I'm more interested in determining the current situation for Cardinal Health since it is already a holding. So, it's a real money decision. How I look at all of the elements I need to look at to use as viewing 'what the market is saying' will be instructive for me - regardless if I make a determination to take any action. The defensive issues, taken as a separate 'index' so to speak might qualify more as an area that has been experiencing a 'bullish' direction over the past 10 to 14 months or at least the recipient of rotational money as we work through the economic cycle 'wheel'. I'm not sure that qualifies as the appropriate type of rotation at this time to be conducting this exercise, but perhaps an ideal time to make a determination to avoid stage 4 action.

If I think of the Weinstein stages and simply look at the chart, I can see a few things. Whether they are right or wrong is up for grabs. So once again, I welcome any comments. I don't even know what the hell kind of a chart I shold be looking at. Bar chart? Linear chart? Candlestick chart? OHLC chart? I'm going with the bar chart as presented by Weinstein on page 22 of his book. I've looked at both the daily and the weekly. The stock has been trading in a range since late September to current more or less between $90 and $100. During that time it has never dipped below the 200 DMA, but has flirted with the 50 DMA, including dipping below it a few times. On a weekly basis, the stock has only dipped below the 20 DMA at one brief point since my purchase. On a daily basis, there have been more dips below the 20 DMA as opposed to the weekly. The RSI has not exactly made the type of directional move that I would like since the middle of 2000 to the current date as the price has increased when I look at the weekly. Therein lies the question. If I look at the monthly chart in terms of the 'longer view', the RSI shows the highest reading with upward momentum. If I change that to weekly the RSI is headed in the wrong direction. If I look at a daily, the RSI doesn't look bad. What the heck am I supposed to determine with those three views. I know they apply to different time frames, but any guidance would be appreciated.

April of 2000 to September was an obvious uptrend that seems to qualify as a stage 2 move. It's certainly not the first stage 2 move that the stock has had in the past. From a larger picture, the stock has had quite an advance over the past decade.

http://finance.yahoo.com/q?s=CAH&d=mym

1994 to 1998 was a pretty major move. The April 2000 to September 2000 move was a shorter stage 2 move before the stock entered whatever the 9/00 to 3/01 period is. Here's a quick look at the past 2 years:

http://finance.yahoo.com/q?s=CAH&d=2ym

I'm curious if the past few months would qualify as having been in a stage 3 or a possible considation/basing period. That's why I'm watching it to see what happens with volume and direction - regardless of whether or not it is a CANSLIM candidate or not. Anyway, I'm still in the discovery process as is evident and simply used CAH as an example to take a look. I would appreciate any comments and direction on some of the above to see how I can progress to the next step or two to make some determinations.

BB
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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13155 of 23034
Subject: Re: FORE! Date: 3/1/2001 1:09 PM
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First, I can't think of any post made in the last three years that deserves a recommendation more than this one. I hope members will respond.

Second, there are a lot of details in your post that members can chew on and possibly respond to, as practice if nothing else. In order to be clear, however, I'd rather make this as simple and as brief as possible.

You are the last person who requires advice on developing a fundamental premise. Therefore, I won't go there at all. As to the float, however, as well as the institutional involvement, don't worry about it. A lot has changed in the last 14 years. Smallcaps may indeed stage their long-promised comeback or they may not. What the marketeer has to do is focus on what's happening, not on what he wishes would happen. One could argue that too many people have been burned by largecaps and that the orchestra is warming up for their swansong. But I wouldn't bet on it. The mutual fund industry has grown to the point where it has no choice but to emphasize mid- and largecaps.

But I promised to be brief.

The bar chart you think you're looking at isn't really a bar chart. Once upon a time, newspapers didn't report the open, hence the "bars" as shown in Weinstein. But any chart you look at online or in print will most likely be an OHLC. I suggest, however, that you get used to candle charts as they more graphically present the relationship between the open and close (this becomes more important as one's eyesight deteriorates). Line charts are excellent for filtering out noise and letting you see just where your stock is going: up, down, or sideways. If your frustration mounts, switch to a line chart of the close (and, separately, the high and the low, if you want a more accurate sense of where demand and supply are kicking in). This may provide the required aha.

As to this particular chart, I again suggest that you keep it simple. Forget about RSI, MACD, stochastics. I wouldn't even worry about MAs too much. If the base is long enough, the stock is going to be sitting on its 50d anyway, and perhaps even its 200d, and since MAs are trend-following instruments, and since a stock in a long base is no longer trending, the MAs are less important than the dynamic of the base.

I'll assume that you were able to get past the cartoons and read at least some of my site, so I won't repeat any of that here. In this instance, note that there is a line that can be drawn under this base -- a line called a "demand line" -- at around 87. This line was tested in October, November, December and January. A support or resistance line that has been able to withstand three tests is a strong line and should not be underestimated. In other words, if the stock were to fall below this line on heavy volume, or if it were to descend below this more gradually on lighter volume but show no inclination toward rebounding, something would be wrong.

Whether you were to act on that or not depends on your timeframe, your premise (fundamental and technical), your risk tolerance. You might want to see if it were to hold at 75, or 68, or 60. But a common error made amongst LTBHers is that they give the stock more and more room until it drops all the way back to the original purchase price, and even below that. Without a plan, you have no way of determining for yourself whether you want out at a breach of 87 or not. Think about all of this and reach a decision before the stock makes it for you.

Similarly, don't worry about how far the stock has come. Strong stocks will base, perhaps for the purpose of allowing their E to catch up with their P, in preparation for a further advance. You'll know whether this is a continuation base or a "Stage 3" base by how it reacts to the next test of the demand line, if any. If it drops below that line and doesn't rebound quickly above it, you just left a top, though circumstances can change, just as with earnings projections, and a sudden new wave of interest can manifest itself in the chart at just the moment you took your profits. In that case, you have to decide whether the story is worth buying again, or whether you should content yourself with a nice profit (perhaps the bulk of the ultimate profit) and move on to other opportunities. In other words, better safe than sorry.

(Note that Stage 4 doesn't necessarily imply a return to Stage 1 levels. Stage 4 may be relatively brief and the stock may undergo a new base-building period at a level not all that far from the Stage 3 dropoff point. This tendency of strong stocks to build new bases at levels higher than one might be led to expect can tie an LTBHer into knots. He often decides that all this sellstop, profit-taking business is hooey and that he'd be better off just holding on. Which is exactly the time that the particular stock he's studying decides to plummet to an all-time low.)

As for confirmation, since Cardinal is a holding company, keep an eye on the HCX (healthcare), and possibly the DRG (pharmaceuticals, which is probably dragging the HCX down). For added confirmation, find a couple of other stocks which are similar to CAH in business model and, preferably, chart pattern. Their activity may give you early warning or courage, whichever is required.

As a footnote, the Bulkowski book is more to be referred to rather than read, unless one is extraordinarily fascinated by all of this. The Schabacker book is an easy read. Easier than Edwards. And the charts are far easier to read. But the core of these and all the books recommended is what drives the markets: demand and supply. Everything is just detail. Relate everything you read to how it applies to the demand/supply equation and the whole thing will be much simpler than it may now seem.

--Db

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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13157 of 23034
Subject: Re: FORE! Date: 3/1/2001 1:20 PM
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<<As a footnote, the Bulkowski book is more to be referred to rather than read, unless one is extraordinarily fascinated by all of this. The Schabacker book is an easy read. Easier than Edwards. And the charts are far easier to read. But the core of these and all the books recommended is what drives the markets: demand and supply. Everything is just detail. Relate everything you read to how it applies to the demand/supply equation and the whole thing will be much simpler than it may now seem.>>

Make that "Everthing else is just detail".

*sigh*


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Author: BruceBrown Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13163 of 23034
Subject: Re: FORE! Date: 3/1/2001 4:47 PM
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Db,

Thanks for your response. The way I go on in my posts, brevity is never an issue with me. So I appreciate you taking the time to point out some initial things and taking the time to write the amount that you did share. Although it was generous of you to offer up the suggestion of recommending my post, I don't want to be responsible for attracting any unwanted 'noise' over on this board to disrupt any flow.

Second, there are a lot of details in your post that members can chew on and possibly respond to, as practice if nothing else.

Believe me, I welcome any member chewing that can be directed to all of those details. I don't want to glut the board, but I do want to carry out the exercise to develop a template I can use to 'attack' future areas of study in CANSLIM.

I can understand the visual of candlestick charts being easier on the eyes as I have now moved into the bifocal stage of life. Too bad my monitor is on a small laptop. I have a lot to learn about candlesticks in order to be able to interpret them, but that's all part of the study. I also appreciate the comments on the CAH support line that has been tested in the $87 area. That helps set some parameters to work with on decision making and what to be watching.

As for confirmation, since Cardinal is a holding company, keep an eye on the HCX (healthcare), and possibly the DRG (pharmaceuticals, which is probably dragging the HCX down). For added confirmation, find a couple of other stocks which are similar to CAH in business model and, preferably, chart pattern. Their activity may give you early warning or courage, whichever is required.

Will do. The few that I have studied do have certain charactertistics over the longer haul that resemble a trend. With the love of western medicine in the states and the longer term chart patterns of some of the components - I've even read commentary on viewing the group not only as defensive in nature, but as one of the ways to play the aging baby boom population. How does that jive with the 'theory' that these groups are traditional 'defensive' plays which would indicate some form of rotation in as well as out during the appropriate portion of the economic cyclical wheel? Obviously, the way to find the correct answer is to study what the market is saying about the overall group now and as we move into that future. Sorry, I'm just asking and answering my own questions. However, in theory, the premise of an aging portion of the population that is large does make sense. I simply haven't studied the entire gamut of healthcare, drugs and medical supplies enough to make any conclusions for investment or trading purposes. I did study some of the softare companies in healthcare automation solutions a few years back, but I'm pretty 'out of the loop' and see the distance I have to travel in studying a new group.

Trends found in some of the leaders in big cap drugs, biotechs and healthcare stocks do confirm a general April, 2000 starting point as an uptrend which all led into what appears to be a lengthy basing pattern. Obviously, if I was applying the proper study I would want to know representative leaders as well as laggards in healthcare, major drugs, biotech & drugs, medical equipment, health services and health automation/information services. Companies that come to immediate mind are McKesson/HBOC, Cardinal Health, Amgen, Johnson & Johnson, Pfizer, Merck, American Home Products as a small core group to be used and coupled with a much larger representative group to get a feel for the structure. At least I know the exercise that I should now continue to study and learn to apply in every industry and segment for the future. It takes work, but seems like the obvious type of worthwhile study and work that justifies what it is all about. This portion of the work is the most attractive to me because it fits my comfort zone. Reading the charts, volume and technical indicators remains in my 'non comfort' zone until experience builds.

From some of the posts that I have read and from all the reading I did each day of IBD while I was in the states last month, I did gather that some of the original premise of primarily lower market cap companies being the only focus of CANSLIM had changed. Then again, it appears a plethora of mid-caps have been heading for small-cap status over the past few months.... I guess this might encourage some 'new' small-cap study. <g> I also realize that the paper has to fill content on a daily basis and that the O'Neil 'enterprise' has grown over the years. I don't know of any newstands over here that carry it, but I did enjoy reading it for three weeks while I was in the states.

Weinstein talks about the 30 week moving average (more or less 200 DMA) and the RSI as the basic ingredients to add to the mix one is tracking. He keeps it really simple in the presentation. At least I don't remember him mentioning MACD or Stochastics. Are RSI and 200 DMA pretty much ignored these days, or just ignored in a long, no trend base forming pattern where the focus then becomes more on the quality and as you say 'dynamic' of the base? As you mention, the support and resistance lines are much more the focus as the base develops and extends - as well as making decisions as to what one will do if and when either parameter of that base is penetrated.

The one I was studying which looked quite healhty while in the states was Emulex. Without knowing all of the technical details of the chart, January was filled with plenty of sentiment still remaining that the storage industry was immune to terrible slow downs and managements were optimistic saying things were on track. Of course, not being in a technology bull market and surrounded by a group in the data storage and data transfer industry that was generally rolling over and showing weakness, when Emulex failed to break out to a new high and about a week or so later came out with the warning that order deferrals were encountered in the month - that nice looking chart pretty much removed any chance of surviving a stage 4 decline. I forget the exact figure, but I believe the next tick was down over $40 before anyone even heard the news. Lesson learned being that studying the entire industry segment of data storage/transfer as well as technology and networking clearly would have indicated that it simply wasn't the 'time' to be playing with 'fire'. At least I can say that in retrospect, but at the time I heard it I was just about to board an airplane to fly back to Europe. It was less than a lovely trip.

(Note that Stage 4 doesn't necessarily imply a return to Stage 1 levels. Stage 4 may be relatively brief and the stock may undergo a new base-building period at a level not all that far from the Stage 3 dropoff point. This tendency of strong stocks to build new bases at levels higher than one might be led to expect can tie an LTBHer into knots. He often decides that all this sellstop, profit-taking business is hooey and that he'd be better off just holding on. Which is exactly the time that the particular stock he's studying decides to plummet to an all-time low.)

Hey, I can relate. Big time. You name the stock - I've been through it in the past year.

My question about Stage 4 stocks (which we have to admit covers a lot of ground in technology stocks these days) is how does such an overwhelming bear market or corrective phase such as we have been through alter our perceptions about them going forward? Obviously, I need to throw into the mix of just how fundamentally stretched in terms of valuations many of the stocks became which allowed them to simply become technically based trading vehicles. Being that we have no vision into the forward fundamentals, I assume the downtrend has been pretty well technically driven as well as the stocks drift. What I mean by the above question going forward is do we view the seriousness of their stage 4 declines and all of the overhead resistance any different than a stage 4 stock having declined in a 'normal year' that is not a 'non bear market/bubble correction, bottom seeking phase'?

This ties in with the eventual return of a some form of a new bull market in the future providing 'new leaders' as opposed to the stocks that were leading in the previous rise such as web architecture stocks ( networkers, communication chips, software, storage, fiber and optical ). What kind of damage control and time frame do those groups and their leaders require to work through the bottoming process, basing process and the breaking out process of those lower ranges? Do we apply different rules? Painful though it is - all of these companies as has been mentioned lack that 'visibility' and it is impossible at the moment for any kind of valuation to be narrowed down on the fundamental side as they all drift. Or at least that has become the predominant sentiment driving things of late. I imagine we will see an entire sequence of telecom companies improving their fundamentals slowly, followed by inventory issues and eventual new orders being placed which will work its way through the component suppliers, semiconductors, third party manufacturing companies and the equipment makers. In other words, a long process to be carried out that involves a lot of unclear issues at the moment.

I certainly see the value of studying the proper groups and surrogates within such a process. Since I know those like the back of my hand at this point in time, I can at least skip a lot of the foot work to develop the watch lists. Yet, when we discuss about a new bull market being led by new leaders, I find it incongruent with the projections and complexity of how large and massive the global infrastructure needs are for the new network building process that has not yet been completed to reach mass market levels to say some of these groups will be 'non participants'. That's not to say they are going to lead any new bull market, but at least at this point in time I find it odd to not think they will participate on some level in the process and that they should simply be abandoned. Perhaps not at previous growth rates in the hypergrowth range, but certainly in long term franchise building rates of growth. I understand the walls of resistance they have to climb in terms of overhead supply having fallen 65 - 90% from their highs. I also understand that the entire process will include a fairly large shake out with the true leaders emerging within the groups. Regardless, it looks like a lot of time will be needed for things to work themselves out. I assume that Weinstein's comment that the overhead resistance in companies like Juniper, Ciena, Qualcomm, Brocade, Broadcom, Checkpoint, BEA Systems, Siebel, etc... makes them 'less attractive' than stocks breaking out to new highs applicable here. Oh, the pain just goes in both directions, doesn't it?

BB


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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13164 of 23034
Subject: Re: FORE! Date: 3/1/2001 5:58 PM
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Although it was generous of you to offer up the suggestion of recommending my post, I don't want to be responsible for attracting any unwanted 'noise' over on this board to disrupt any flow.

There's rarely any flow, and what there is is often interrupted. Our ranks have swelled as the markets have tanked and Fools have become disenchanted with the Gardners and the Faithful. As to the latter, some of it's deserved and some of it isn't. Nonetheless, many people are beginning or have begun to understand that stocks and companies are not the same thing and are valued in completely different ways. If they now begin to learn just how markets work, all to the good. If they instead just give up, as so many have, perhaps that's all to the good as well. After all, there are far more index instruments now than there were two years ago. One can even create his own fund.

I've even read commentary on viewing the group not only as defensive in nature, but as one of the ways to play the aging baby boom population. How does that jive with the 'theory' that these groups are traditional 'defensive' plays which would indicate some form of rotation in as well as out during the appropriate portion of the economic cyclical wheel?

Cyclical stocks don't move in waves, as they seem to on a two-dimensional chart, i.e., they don't inexorably return to their starting point. Rather they spiral, moving up and down, but generally moving upward. This is the case with many pharmaceuticals, autos, chips, etc. Therefore, someone who wants to buy, for example, PFE or MRK at a cyclical bottom and hold it for the rest of his life would probably not be sorry as long as he understands that much of his profit will go up in smoke at intervals during the time he holds the investment. If he can't stand that, then he will need to learn how to time the market.

Pharmaceuticals, in other words, will cycle down when technology resumes its ascent, but they will not likely return to the bottoms they reached the last time. To make the most of these cyclical movements, one has to sell at the top of the cycle and move on to something that's just emerging from a cyclical bottom, such as technology stocks may now be doing or will be doing in the not-too-distant future. Otherwise, at the end of twenty or thirty years, he is ahead far less than he might have expected he would be, though he will most likely be ahead to at least some degree unless he made a lot of poor choices and did nothing to rescue himself from them.

it appears a plethora of mid-caps have been heading for small-cap status over the past few months.... I guess this might encourage some 'new' small-cap study

Perhaps, but that would be looking into the wrong end of the telescope. Just as it's better for an MA to rise to meet its stock rather than for a stock to fall to meet its MA, it's better for a smallcap to become a midcap rather than vice-versa. Not only would the latter event imply extraordinary weakness, but the amount of overhead supply to work through would defeat all but the most persistent of stocks. The type of smallcap to which CANSLIM refers is making its first run, as so many IPOs did during the last two years.

Are RSI and 200 DMA pretty much ignored these days

I wouldn't say they're ignored. A more important question is whether or not they are necessary. The singlemost important concept to understand -- whether examining the stock market, wholesale and retail stores, economics in general -- is the nature of demand and supply. Demand and supply rule everything. Unless one understands how demand and supply drive prices, he will be lost.

When it comes to charting, the next most important concepts to master are support and resistance and the nature of trend. These are explained in exhaustive detail elsewhere, so there's no need to get into it again. Suffice it to say here that if one understands these concepts, he has no need for indicators unless for some reason he requires confirmation of what he's already seen in the chart (you don't need indicators, for example, to pick up on the idea that the Naz is in a downtrend).

As regards MAs and RSI, the first is an indicator of trend. The second is an oscillator, used when a stock or market has stopped trending and is oscillating in a range. Again, these are explained elsewhere. The point I want to make here is that if one can't tell whether a stock or index is moving up or down or sideways without putting a moving average on it, he should probably look at a lot more charts.

At the risk of sounding like a flagellant, it is extremely important to learn the basics first. Indicators are not even the frosting on the cake. They may even be less than the sprinkles on the frosting on the cake. Focus on the cake, not the sprinkles. On the one hand, premise, timeframe, risk tolerance. On the other, support/resistance, demand/supply, price/volume. Simple as they are to understand, anyone who thinks he can skip all this is going to make some expensive mistakes.

do we view the seriousness of their stage 4 declines and all of the overhead resistance any different than a stage 4 stock having declined in a 'normal year' that is not a 'non bear market/bubble correction, bottom seeking phase'?

Yes, largely because of fundamentals, which is what distinguishes CANSLIM from technical approaches. Minor, intermediate, and even major corrections serve to relieve pressure and introduce new buyers into the market (without them, the market can't rise). Decline such as this -- which could easily turn into a bear market if we don't rebound from here, and may become a bear market anyway if we just bounce along the bottom -- are far more serious because everyone's faith in the fundamentals has been shaken. All of these companies will have to prove that they are still on track and are not to be counted amongst the casualties. Announcements such as AMCC's today do not help. And the fact that comparisons will be difficult until at least Q1 2002 doesn't help (even though the market is "forward-looking", it generally looks forward only six months, implying that tech stocks are likely to be in the dumps until Q3 of this year).

A possible change of leadership also clouds the picture. Genuine bear markets generally end in a change in leadership. However, CSCO, ORCL, SUNW, INTC etc have been counted out before, and they've always come back. Maybe they won't be back this time, and a responsible investor has to entertain this possibility. This places an extra burden of proof not only on the old leaders but also on those who would take their places.

What kind of damage control and time frame do those groups and their leaders require to work through the bottoming process, basing process and the breaking out process of those lower ranges?

Impossible to say. So many of those orders which propelled the shares of real companies came from sources which no longer exist. The effects of that are being seen now, and one could argue that this quarter will represent a baseline. The first comparison to this baseline will be a year from now. But anticipation of favorable comparisons will move prices higher in advance of the event (prices rise due not to earnings, but to expectations of earnings).

I assume that Weinstein's comment that the overhead resistance in companies like Juniper, Ciena, Qualcomm, Brocade, Broadcom, Checkpoint, BEA Systems, Siebel, etc... makes them 'less attractive' than stocks breaking out to new highs applicable here

Perhaps. Again, this is where the fundamental work comes in. New isn't necessarily better. If the old new leaders such as those you mention are able to show some stuff, there's no reason why they can't co-exist with upstarts who threaten to take away their market share, as long as confidence in the markets remains and there's enough liquidity to support both.

--Db

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Author: Binturong Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13166 of 23034
Subject: Re: FORE! Date: 3/1/2001 6:51 PM
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Say it isnt so Bruce!!!!!

Binturong

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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13174 of 23034
Subject: Re: FORE! Date: 3/2/2001 5:09 AM
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Boy, was I tainted by the Gardners (as well as Malkiel's) comments in regards to TA.

I am really not trying to ruffle anyone's feathers, but what exactly has you convinced that TA is (or goes part way towards) finding "the answer", if that is what you have in fact concluded?

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Author: steel Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13177 of 23034
Subject: Re: FORE! Date: 3/2/2001 8:12 AM
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I am really not trying to ruffle anyone's feathers, but what exactly has you convinced that TA is (or goes part way towards) finding "the answer"

First of all, this is not a religious board, and no one said they were looking for an "answer".

Second, investing and getting to know yourself is a process. There is no finality in the way an "answer" implies.

Third, you need to start asking the right questions before you can make any progress. The question you ask won't really get you anywhere.

Fourth, if you are really interested in the process of investing/trading, you should start with the FAQ and then start asking questions.

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Author: BruceBrown Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13178 of 23034
Subject: Re: FORE! Date: 3/2/2001 8:21 AM
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I am really not trying to ruffle anyone's feathers, but what exactly has you convinced that TA is (or goes part way towards) finding "the answer", if that is what you have in fact concluded?

Let me just say that I'm a big believer in long term investment. Everyone knows that. I find it absurd that I am writing this post in support of something I so easily ignored or was 'unaware' of, but it is also fitting as I am currently "in the classroom" so to speak and imagine that the classroom will be a never ending learning environment.

Why take the time to investigate and at least read about as well as learn to apply some of the basic technical tools if one is interested? Simple - to add additional tools to one's investing kit. Why did I take the time to learn how to read a balance sheet and income statement? Simple - to add additional tools to my investing kit. That doesn't mean I'm rushing out today and applying what little I have come face to face with at this point because that would be 'dangerous' without further study, practice and application at least with "what if scenarios". Likewise, you can't just read a balance sheet upon first learning and say "now I'm going to run out and buy XYZ because the sheet looks good". Yet, you can start to apply things and compare this to that to start to get an idea. It was a clue in 1999 that Lucent was not a picture of stealth beauty.

I have no idea what the technical analysis of Lucent said throughout 1999, but based on the balance sheet metrics itself, I was 'encouraged' to remove it from my portfolio. At the time, comparing it to Cisco, Nortel and other technology companies in and around the surrounding space was an exercise many were doing. It's interesting that eventually Cisco and Nortel were met with pretty much equal declines in their share prices. How could one have used a combination of all the tools available to zero in on those three and what their share prices have done since late 1999? Tools are tools and plenty of people must have been using what they had in their toolkit to tinker with the engines. To say that it was a 'random' event fails to account for all of the critical factors that went into the 'event'. Capital markets, financing, credit, inventory, competition, supply and demand, support and resistance, balance sheet/income statements, overall market condidtions, sentiment, etc... .

Apply that entire scenario now to the overall application and enabling software sector. Oracle, Siebel, Ariba, i2, CommerceOne, Agile, SAP, PeopleSoft, PurchasePro, BEA Systems, IBM, Microsoft, Broadvision and right on down the line. Where have their balance sheets/income statements been over the past two years and what has the technical things said about the overall sector in light of the economic situation? Is there a rhyme or reason for it all? Sure, we know business is not as good as it was before. Take a look at how much each of those stocks have lost in value. Everything is being really cut to fit the environment. Will it last forever in terms of the economic downturn? History points to the conclusion that business won't always remain bad for these individual sectors. What tools can we use to help our chances with opportunity? Mapping out each sector both on a fundamental and a technical basis seems to be making more sense to this particular investor in terms of increasing one's odds of being a complete package which perhaps actually leads to better risk aversion (as to opposed to a hit and miss strategy). That all sounds good in theory, but it will take work, devotion and patience to develop a 'complete' package.

Both FA and TA are tools that are widely used and adhered to by the overall investment community. As with any tool, just because you have it in your toolbox doesn't mean that you understand what each tool can and cannot do. Yet, the notion that some of the best tools are simply zigs and zags which can best be ignored (such as some of the conclusions that Malkiel came to in his academic conclusions or that I personally read in one of Tom and David's investment books and believed for so long at face value) seems to be a wide stroke of the pen which warrants deeper study. I'm taking the steps to uncover what is below those broad brush strokes.

Does that mean I will end up an expert with every tool in the box? No. Does that mean that everybody who knows the tools will be able to use each tool properly each time? No. Yet it might lead me or others to choose the right tool for the right job to help get the project completed better. As I mentioned with my golf analogy, learning the basics of some of the most obvious tools seems to be the place to start. Supply and demand. Support and resistance. Bases, breakouts, advances, groups, etc... . One can't hit every club in the bag in every condition on an equal basis. I'm still exploring the 7 iron with a ball sitting on a perfect chunk of grass to make a clean hit. To say I could hit that club on an uphill slope out of wet sand into a 40 mph wind over a tree onto a sloping green at this point would be misleading. Maybe I'll never be able to pull off that shot, but we'll see where it all leads over the years.

BB


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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13179 of 23034
Subject: Re: FORE! Date: 3/2/2001 9:38 AM
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I have no idea what the technical analysis of Lucent said throughout 1999, but based on the balance sheet metrics itself, I was 'encouraged' to remove it from my portfolio. At the time, comparing it to Cisco, Nortel and other technology companies in and around the surrounding space was an exercise many were doing. It's interesting that eventually Cisco and Nortel were met with pretty much equal declines in their share prices. How could one have used a combination of all the tools available to zero in on those three and what their share prices have done since late 1999? Tools are tools and plenty of people must have been using what they had in their toolkit to tinker with the engines. To say that it was a 'random' event fails to account for all of the critical factors that went into the 'event'. Capital markets, financing, credit, inventory, competition, supply and demand, support and resistance, balance sheet/income statements, overall market condidtions, sentiment, etc... .

I realize that this is a rhetorical question, but as long as we're attracting all this attention, why not use a specific example to make a point, particularly since the point with regard to LU is so easy to make?

And, yes, I know that many fundamentalists will complain that we're using hindsight, but it is impossible to avoid using hindsight to teach. Every single text is based on hindsight. Anyone using balance sheets and P&Ls to teach fundamental valuation is using old data. If realtime is important to anyone, we noted the March top in realtime, as well as the most recent top a month ago. Anyone wanting realtime advice on what to do with one stock or another is either going to have to pay for it or learn how to do it himself.

As far as LU goes, many investors would have exited LU when it broke its UTL (uptrendline) in late '98, but an LTBH could have been excused for simply hanging on since he could have justified (rationalized) the decline due to the market-wide decline. In other words, there may not necessarily have been anything wrong with the company per se.

Once the stock recovers, it does not again break that line until late '99, and here's where the premise and one's risk tolerance cross downstage and take the pink & amber pinspot. The stock holds at previous support at around 52. Is that the line in the sand? Should the line be moved lower? All that should have been part of the plan. But even if one were making it up as he went along, 52 would not be an unreasonable place to draw that line. If he were also picking up on deteriorating fundamentals, he might decide that a triple (assuming he bought it at the right time) was just fine and that better opportunities lay elsewhere.

If, on the other hand, he were to decide that the ensuing rally was heartening and that he should stand by his beloved, the failure to follow through on the new high at the end of '99 should have rung a bell. This "failure" phenomenon is detailed in Mamis and Sperandeo, so I won't go into it here. But that, coupled with the extraordinary move just a few days later, would have moved all but the most obstinate to get out and stand aside.

Let's assume, however, that one of our gentle readers was among the obstinate. After all, the stock halted its decline at that same 52 (more or less) level. It even gapped up to make yet another new high attempt. Which failed. But then it found support at that same old level yet again.

In my original answer to Bruce, I noted that support that is tested over and over again is likely to hold on subsequent tests. If it does not, something is wrong. That something is generally a fundamental problem, and even if that fundamental problem has not been revealed, one is better off standing aside until the problem is exposed rather than hold on and hope for the best.

The breach of 50, after more than a year, was important, and even the most obstinate could not have denied that something was wrong (though "could" is the wrong word since some clearly remained in a state of denial, and still do). A stop just below 50, or even as low as 45, would have salvaged a huge portion of profits, though one may yet have resisted placing such a stop due to tax liability.

About taxes.

There are many considerations regarding taxes which those who speak in bumper-stickers don't consider. For one thing, many if not most of the people who have profits in one issue or another did not buy the issue when it was twelve cents. They bought it much later. Therefore their profits are not nearly what the "don't sell" group assumes they are, hence a far lower tax liability in real dollars.

Second, not everyone pays taxes at the highest rate. Many pay nearly half that.

Third, there are an awful lot of people who I imagine wish that they had gone ahead and sold in March and paid those taxes rather than lose 60 or 70 or 90% of their investment. Granted their investments are now worth only a fraction of what they were worth then, but boy did they save on taxes!

There's more, but this is enough for now.

There's far too much religiosity in TMF. CANSLIM is one of the few strategies that combines fundamentals and technicals. If the pure fundamendalists and the pure technicians would just pull the poles out of their butts and work together more closely, many more people would make -- or at least save -- a great deal of money.

--Db




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Author: bankedout One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13186 of 23034
Subject: Re: FORE! Date: 3/2/2001 12:11 PM
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Well said DB,

I'm relatively new to this board, I've only been reading it for about a week. Thanks to your responses, I don't even feel the need to participate. It's obvious you understand how the market works and it is nice of you to share that knowledge for those who are trying to learn.

Keep up the good work.

The Banker--I'm a canslimmer too.

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Author: 50nBroke Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13188 of 23034
Subject: Re: FORE! Date: 3/2/2001 12:22 PM
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Bruce:

I read you with interest over at NOK in mid 2K.

Glad to see you "have seen the light".

You wrote:

" it is also fitting as I am currently "in the classroom" so to speak and imagine that the classroom will be a never ending learning environment."

Rule #4 of IBD's Secrets to Success [today's Highlite]

Never Stop Learning

I'm there here in the seat next to you. When is the first Final Exam?

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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13190 of 23034
Subject: Re: FORE! Date: 3/2/2001 12:35 PM
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<<Thanks to your responses, I don't even feel the need to participate>>

Whoa! While I appreciate all the recs, I can't say I understand them as I haven't said anything that I haven't already said many times before. Nonetheless, it's clear that quite a few people are having their opinions expressed by proxy or are even having questions answered, at least in part.

Understand, however, that I'd much have these opinions expressed and these questions asked than collect recs. A message board isn't a lecture venue; it's a forum. So say what's on your mind.

The Fool has unfortunately made the choice to strangle discussion of TA. The Fool On The Hill and Post Of The Day venues are models of propagandizing. The only way that the rabble can make its thoughts regarding TA and the dark side of LTBH known is through the Best Of, since this is something over which the Fools have no control.

I'd like to see the Fools back off a little and at least re-evaluate the subject of TA with an open mind (don't kid me, Otter). But that's unlikely since they now have such a substantial financial stake in their POV. It seems they'd rather sink with it than evolve, even after finally admitting their errors with regard to data mining. Therefore the FA/TA subculture will most likely have to find a home in the underground (those of you who were around in the sixties will understand this), i.e., a selection of message boards.

Too bad.

--Db

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Author: bankedout One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13192 of 23034
Subject: Re: FORE! Date: 3/2/2001 12:45 PM
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Sorry DB,

I'll post when I have something to say. I'm just glad that you are here to answer peoples questions. Once you understand why the CANSLIM rules are laws, there should be no more questions. Sure people can memorize the rules, but success is understanding why the rules are rules in the first place. I'll see you around. I enjoyed the odd price, stop loss comment. That's new for me and makes sense of course. Should bag a couple of bucks off of that one in the future. As for now I'm all cash. I do see the NYSE is looking a little healthier today. Maybe my cash will find a home in the near future.

The Banker

P.S. I've noticed you mention your website or something a few times. Do you have a link? Thanks in advance.

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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13193 of 23034
Subject: Re: FORE! Date: 3/2/2001 12:48 PM
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<<I've noticed you mention your website or something a few times. Do you have a link?>>

See below.

--Db

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Author: bankedout One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13194 of 23034
Subject: Re: FORE! Date: 3/2/2001 12:50 PM
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Thanks EOM

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Author: gassah Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13196 of 23034
Subject: Re: FORE! Date: 3/2/2001 1:27 PM
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<<If realtime is important to anyone, we noted the March top in realtime , as well as the most recent top a month ago>>

And the September top. ;)

nic


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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13202 of 23034
Subject: Re: FORE! Date: 3/2/2001 3:53 PM
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Yet, the notion that some of the best tools are simply zigs and zags which can best be ignored (such as some of the conclusions that Malkiel came to in his academic conclusions or that I personally read in one of Tom and David's investment books and believed for so long at face value) seems to be a wide stroke of the pen which warrants deeper study. I'm taking the steps to uncover what is below those broad brush strokes.

As I'm sure you are aware, Malkiel and The G's are not the only people who think those zigs and zags are basically irrelevant. Pretty much the entire thesis of EMT and MPT says that as well, and even much the same thing about FA.

I am not saying that you must believe those theories, but I think you have to first digest them and if you want discard them before you decide that TA is in fact a tool that belongs in ANY box. And to a certain extent I feel the same about FA.

I'm sure it's obvious which way I lean, but it is only after what I think is fairly thorough investigation. I don't see any evidence that an individual can outperform the market on a consistent basis using publicly available data, and that the main constituent of any success (defined as long-term outperformance) when it does happen is due to luck.

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Author: BruceBrown Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13203 of 23034
Subject: Re: FORE! Date: 3/2/2001 3:55 PM
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I realize that this is a rhetorical question, but as long as we're attracting all this attention, why not use a specific example to make a point, particularly since the point with regard to LU is so easy to make?

Lucent is a perfect example to look back and use. Even as the balance sheet began showing some red flags that were concerning, the stock continued to climb from the $30 range all the way to the $70's. This, in spite of each quarter coming in with worse and worse fundamentals.

I'd like to see the Fools back off a little and at least re-evaluate the subject of TA with an open mind (don't kid me, Otter).

Yes, that would be nice. At least it would be a welcome addition to a well rounded diet rather than reading yet another Warren Buffett article.

Based on the information that one encounters in reading the suggested Burrow book reading list - I find that the lack of material regarding TA in the Fool articles and headlines to be a little disappointing. It could only add to the experience here at the Fool. It certainly wouldn't subtract. Are there no Fools on staff that are well versed in the subject? I suppose I shouldn't even ask that.

You want to learn about Foolish Flow ratios, gross margin, net margin, cash to debt ratios, DCF, ROIC or how to dig through the balance sheets - it's all here. You want to read a report that says - "The Foolish Flow ratio went from .97 last quarter to 1.12 this quarter. That's still in the range we like to see, but the direction warrants something to watch in the future to see what the trend is." - you can do it. Why not add to the coverage of the fundamentals by including the technicals as well? Would it hurt to write things in these same exact reports that discuss the balance sheet metrics by including things such as "The stock has continued to hold its support at $64 over the past few months and has found resistance to the upside in the $71 range. Those are two key areas we will want to be focusing on going forward to see if the stock breaks out to either side on significant volume."? Of course, that would require all Fools learn more about TA. If one can learn and grasp the concepts of combing through a balance sheet, why not learn and comb through the basic technicals? I would imagine if they announced an upcoming online seminar for technical analysis that the demand might be pretty healthy for participants.

In support of the Fool, the Lucent balance sheet was discussed and written about in the Rule Maker daily column on many occasions. In retrospect, what really would have made the 'coverage' of the Lucent story during 9 or 10 quarters of looking at the weakening numbers would have been to combine the fundamental story with the technical story. That would have given a nice full picture. Think of the value add of doing this. At least it would have been dynamite reporting. Perhaps adapting will be an element in the future. Who knows? Were not we all skeptical of eating Sushi the first time we finally gave in after years of dismissing it by eventually going to a Sushi restaurant to try it out?

BB

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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13204 of 23034
Subject: Re: FORE! Date: 3/2/2001 3:56 PM
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Third, you need to start asking the right questions before you can make any progress. The question you ask won't really get you anywhere.

It was a specific question to a specific person who has undergone somewhat of a Pauline conversion with regards to TA. Therefore, it is in fact a relevant question to ask.

Fourth, if you are really interested in the process of investing/trading, you should start with the FAQ

I've read the FAQ and much of the material that is relevant to it.




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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13205 of 23034
Subject: Re: FORE! Date: 3/2/2001 4:12 PM
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<<If one can learn and grasp the concepts of combing through a balance sheet, why not learn and comb through the basic technicals?>>

This is beginning to seem like Invasion of the Body Snatchers. But if you really are Bruce Brown, you have only to look at the post before yours to answer your questions:

I don't see any evidence that an individual can outperform the market on a consistent basis using publicly available data, and that the main constituent of any success (defined as long-term outperformance) when it does happen is due to luck.

They don't see it because they don't look for it. And when it's presented to them, they don't believe it (I went through a series of emails on this with Otter, but the end result amounted to zip).

The Fools and the Faithful believe they have evidence that their approach works. But when asked to present that evidence, they are unable to do so, at least without stumbling over the logical fallacy problem. Instead, they just talk louder and more forcefully about how TA is hokum, which is why we stopped trying to make any changes in that attitude years ago (I wonder what Shark is doing these days?).

The CANSLIM board can't exist without TMF, of course. And every other messaging system is pretty clunky compared to TMF, which attests to the value of committed financing, so I wouldn't be interested in following such a board elsewhere.

But if the Fools were to attempt to realize a synthesis of FA and TA, TMF could become a power that would make the current franchise look like a lemonade stand. Unfortunately, the Gs are no longer hungry, if they ever were, so this idea is most likely a complete non-starter.

--Db

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Author: ilmostro Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13206 of 23034
Subject: Re: FORE! Date: 3/2/2001 4:27 PM
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. But when asked to present that evidence, they are unable to do so,

Db?? asking for evidence?? Thanks for the laugh!!!!!!!

Bryan

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Author: BruceBrown Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13207 of 23034
Subject: Re: FORE! Date: 3/2/2001 5:11 PM
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As I'm sure you are aware, Malkiel and The G's are not the only people who think those zigs and zags are basically irrelevant.

I'm aware. I just mentioned those names because I have read them in the past. Once again, I'm not the qualified person to be asking.

I'm sure it's obvious which way I lean, but it is only after what I think is fairly thorough investigation. I don't see any evidence that an individual can outperform the market on a consistent basis using publicly available data, and that the main constituent of any success (defined as long-term outperformance) when it does happen is due to luck.

I don't have any data to refute this, so I won't even try. I'm just aware of the ideas presented in the reading material. I watched in "real time" over the past year on the Silicon Investor boards a certain poster make public posts on the majority of the message boards of investments I hold. He provided links to his own charts that he created and the reasons he saw that the stock was going to be going down. Support, resistance, volume, double top, head and shoulders, etc... - you name it - he listed it. He then stated he had taken a short position and offered suggestions for points where we longs might want to set stops to protect capital before the declines got rolling. BEA Systems, Juniper, Brocade, Siebel, Veritas, Checkpoint, Ariba and right on down the list. As I look back on all of those elements he personally used, graphed and posted for all to see - it would be difficult for me to say that it was pure luck on his part and that protection of one's capital using those skills (I wasn't shorting, but just watching his work and suggestions) was not a benefit. There have been plenty of posts on message boards with similar types of comments, but the one I am mentioning was all well thought out and presented with reasons and graphs to show why he was doing what he was doing. Now, what his long term track record is in up markets as well as down markets - I don't know. If he uses the same set of skills, I would assume he knows what he is doing in both directions.

Back to the principles of the CANSLIM method or "The Gorilla Game" method. It would appear that both strategies offer some additional 'tools' that might help with risk aversion over the years in stock selection at appropriate times. At least we know why Microsoft and Intel were better investments for the heart of the PC technology adoption life cycle than Apple or IBM would have been. There have been additional and will be future opportunities in technology to apply those criteria as well. Although one can't know the outcome in a particular niche game from the beginning, paying attention to dynamics of a particular game can certainly increase your odds of finding the leader and avoid being left holding the non leaders for the longer haul.

Since the appropriate time for the "M" in CANSLIM is not exactly at hand at this time, I cannot pass judgement on the method until I see it in operation at some point in the future. However, based on how the entire web architecture group moved from 1998 to 2000, had I been using CANSLIM during that time frame to follow the groups in tandem as well as studying the technical charts of stocks breaking out of bases and the eventual topping out of each one throughout the course of 2000 before they each rolled over and fell into stage 4 declines, I would have been looking at different things than I actually did pay attention to throughout it all. Yet, I imagine the group did attract some CANSLIM interest because of meeting the criteria.

I don't know what you hold for investments or consider market beating performance. Yet, with stocks in technology having risen so high and falling so far, I certainly would like to have some tools in my arsenal to avoid watching an investment, after rising, go from $200 to $50 or $244 to $54 or $82 to $21, etc... and just toss it off as 'I guess I'm just not lucky'.

Likewise, if an entire group is showing strength in the future and advancing to the point that things break out of bases and there is support within the group to confirm that as well as buying demand - I don't want to sit around and watch it by saying "it must just be luck". Without having years of experience watching all of that time and time again, I might be bold in saying that I don't see it as random.

BB




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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13209 of 23034
Subject: Re: FORE! Date: 3/2/2001 5:42 PM
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if an entire group is showing strength in the future and advancing to the point that things break out of bases and there is support within the group to confirm that as well as buying demand - I don't want to sit around and watch it by saying "it must just be luck". Without having years of experience watching all of that time and time again, I might be bold in saying that I don't see it as random.

I suspect that the primary reason why non-chartists and anti-chartists alike have viewed charts and TA as they have has been the prevailing view amongst those groups over so many years that TA is voodoo and charts are just squiggles.

I used to think that this view was held simply because no one had ever pointed out to them that charts are simply a record of transactions, just like a P&L. The purpose of the P&L, however, is to show earnings, sales, and so forth, and how assets relate to liabilities. The purpose of a chart is to show how many people are buying what and how much they're willing to pay for it (anyone who's ever been involved in creating a menu will understand this immediately).

But pointing out the function of a chart is not enough. Charts and TA remain objects of contempt amongst the Faithful, even though the squiggles on a 10-Q have become increasingly as meaningless as are supposedly the "squiggles" on a chart, and even though a stochastic or the MACD are no more voodoo than PEGs or discounted cash flow.

All that is left, then, it seems, is the seeming conclusion that fundamentalists believe that prices are driven by something other than investor behavior (or investor psychology), that consumers -- whether individual or corporate -- need not act in any way in order for revenues and earnings to occur.

If this is the case, then debate over whether charts have value or not, regardless of any admission or lack thereof as to what it is that charts display, is not the issue, and is doomed to endless and fruitless wrangling. Perhaps the real issue is a determination of just what it is that drives markets and generates wealth. Once one has made that determination, the next step is to find a means of observing "it" and measuring it.

--Db


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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13210 of 23034
Subject: Re: FORE! Date: 3/2/2001 6:31 PM
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They don't see it because they don't look for it.

Respectfully, I do indeed look for it.

The thing I haven't found is evidence that the HUGE random factor involved in the results is reduced to the point where it is no longer the major determinant.

For every "correct" prognosis (i.e. one that pans out)put up by a TA'er (or FA'er for that matter) there will be another that is incorrect. Pointing to this or that success by this or that practitioner really proves nothing other than he or she was, for want of a better word, lucky. I am NOT saying NO skill or aptitude is involved, just that it does not overcome the "luck factor" in the long run, and therefore doesn't lead to reliable long run outperformance.

Without wanting to sound condascending, but have you in fact fully digested EMT in its various guises?




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Author: mkunka Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13211 of 23034
Subject: Re: FORE! Date: 3/2/2001 6:43 PM
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>>For every "correct" prognosis (i.e. one that pans out)put up by a TA'er (or FA'er for that matter) there will be another that is incorrect.

Which is why you have to cut your losses when you are wrong. You can cut your losses at 8% or 80% or anywhere in between, but part of the job includes determining when you are wrong and getting out and not just hanging on to yesterday's analysis.

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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13212 of 23034
Subject: Re: FORE! Date: 3/2/2001 6:54 PM
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I don't know what you ......consider market beating performance.

Outdoing a benchmark index (say the S&P500 or even better the Total Market index or even, even better a Global Market index) over the long term.

I certainly would like to have some tools in my arsenal to avoid watching an investment, after rising, go from $200 to $50 or $244 to $54 or $82 to $21, etc... and just toss it off as 'I guess I'm just not lucky'.

The thing is, so would everyone. That is basically what, since market time immemorial, people have been looking for. It is tantamount to saying "I want a secret". The thing is, how are you going to get something secret out of something so public?

People often criticise the Fools for being too wrapped up in their own ideology. In some respects I agree, I don't think that for instance you can apply Rule Breaker/Maker criteria (or GG for that matter) and expect to get long term outperformance. However, when it comes to cleaving to a mantra, the TA'ers are pretty damn good at it themselves, and often quick to dismiss anyone who challenges their thinking. I realise the same thing could be said of me, but one thing I will say is that I have tried to look at both sides of the coin. I could be wrong, but I'm not sure the same can be said of most TA'ers.

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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13213 of 23034
Subject: Re: FORE! Date: 3/2/2001 6:55 PM
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but part of the job includes determining when you are wrong and getting out

And you have found a way to do this reliably?

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Author: ab1stock Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13214 of 23034
Subject: Re: FORE! Date: 3/2/2001 7:05 PM
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I'm sure it's obvious which way I lean, but it is only after what I think is fairly thorough investigation. I don't see any evidence that an individual can outperform the market on a consistent basis using publicly available data, and that the main constituent of any success (defined as long-term outperformance) when it does happen is due to luck.


And this is different from any other system how? And if this is indeed your prime tenet, why bother in the stock market at all?

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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13216 of 23034
Subject: Re: FORE! Date: 3/2/2001 7:09 PM
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And this is different from any other system how?

No, as I have said I don't think it is any different to any other system. IMHO no "system" gives you a discernable long term outperformance edge.

And if this is indeed your prime tenet, why bother in the stock market at all?

To have a chance at beating fixed return investments.

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Author: mkunka Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13217 of 23034
Subject: Re: FORE! Date: 3/2/2001 7:15 PM
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>>And you have found a way to do this reliably?

Yes, having a loss is the most 100%-reliable indicator that I am wrong. Cutting losses at 8% is to provide a little bit of room for error.

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Author: ab1stock Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13218 of 23034
Subject: Re: FORE! Date: 3/2/2001 7:18 PM
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And if this is indeed your prime tenet, why bother in the stock market at all?

To have a chance at beating fixed return investments.


But then, by your admission, this would be by luck. And if you say, "but the LTB&H'er has been shown to make consistent gains of x amount over so many years by simpling investing and sticking with it, I say not everyone has 50 years, or 20 years, or 10 years. Bear markets can last years and produce astounding destruction of capital that can take years to overcome. It would be luck to get started at the right time in market history. How many people have Wal-Mart, Coke, Cisco, McDonalds of Microsoft since near their IPO's.

I believe you look for something that you think cannot be shown and have already made up your mind does not exist. As I've said to you before, the only proof that any "strategy" works, are the returns in your personal portfolio.

ab

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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13219 of 23034
Subject: Re: FORE! Date: 3/2/2001 7:24 PM
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But then, by your admission, this would be by luck.

You got it. That is why I used the word "chance".

But then, by your admission, this would be by luck. And if you say, "but the LTB&H'er has been shown to make consistent gains of x amount over so many years by simpling investing and sticking with it, I say not everyone has 50 years, or 20 years, or 10 years. Bear markets can last years and produce astounding destruction of capital that can take years to overcome.

I agree with you somewhat. But remember the discussion is about market beating performance, not whether the markets will continue to outperform fixed return instruments.

the only proof that any "strategy" works, are the returns in your personal portfolio.

That is hardly proof. That is just one return in a much bigger dataset.



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Author: ab1stock Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13220 of 23034
Subject: Re: FORE! Date: 3/2/2001 7:27 PM
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I agree with you somewhat. But remember the discussion is about market beating performance, not whether the markets will continue to outperform fixed return instruments.


Actually, I think your discussion is about market beating performance, mine is about beating the crap out of the market.



the only proof that any "strategy" works, are the returns in your personal portfolio.

That is hardly proof. That is just one return in a much bigger dataset.


But for me it is the only datapoint that matters.

ab



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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13221 of 23034
Subject: Re: FORE! Date: 3/2/2001 7:30 PM
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<<The thing I haven't found is evidence that the HUGE random factor involved in the results is reduced to the point where it is no longer the major determinant.>>

I made a post which addressed all the points which you've brought up in this and subsequent posts, and it vanished into the ether. And I don't want to do it again.

But there's really no need to do it again because everything you've said, all your objections, spring from this one remark.

For whatever reason, you were deeply impressed by Malkiel's work. Perhaps this was the first book on the markets which you read. Perhaps not. It's not at all unusual for people to read something -- whether first up or not -- that strikes a chord. It might be Lynch, or Buffett, or Fisher, or O'Neil, or Graham and Dodd, or Edwards and Magee, or Tobias, or any one of dozens of other authors and works. Once that chord is struck, a conclusion is reached, even if reaching that conclusion is done unintentionally or subconsciously. Every subsequent book read, if any, is then challenged to negate or at least subvert the conclusion reached. And it should come as no surprise that those subsequent books are often found wanting, particularly if they present a very different POV.

If you believe that markets are truly random, that prices rise and fall for no discernible reason, that earnings are booked or not regardless of what's done or not done by a given company, that investors buy and sell with no intent whatsoever, then there is no basis for debate, and no evidence presented in favor of either fundamental or technical analysis will make the slightest difference. A lot of posts can be generated, but they will be intermittent monologues, not a dialog.

I hope whatever it is you're doing works out for you.

--Db


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Author: ilmostro Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13222 of 23034
Subject: Re: FORE! Date: 3/2/2001 8:00 PM
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That is hardly proof. That is just one return in a much bigger dataset.
**************************************
But for me it is the only datapoint that matters.

ab


So how do you guard against overconfidence? Since your "beating the crap out of the market" can be the result of just luck?

Thanks,
Bryan



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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13226 of 23034
Subject: Re: FORE! Date: 3/2/2001 9:07 PM
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For whatever reason, you were deeply impressed by Malkiel's work.

I wasn't the one who brought up Malkiel.

If you believe that markets are truly random, that prices rise and fall for no discernible reason, that earnings are booked or not regardless of what's done or not done by a given company, that investors buy and sell with no intent whatsoever, then there is no basis for debate

I didn't say that.

Obviously if a company decides that, for the hell of it, it will blow up all of its operations tomorrow and announces that it will do so, the stock will fall, and not for a random reason.

What I believe is random, or more accurately dominated by randomness, is the MARKET OUTPERFORMANCE factor that any TA, FA or combined system will garner. One practitioner may vastly outperform, one may vastly underperform and another may do anything in between. I don't think there is any conclusive evidence as to what seperates the underpeformers from the outperformers.

A lot of posts can be generated, but they will be intermittent monologues, not a dialog.

They don't have to be. For instance, I asked you a question which has yet to be answered: have you digested EMT? I am seriously interested in your answer.

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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13227 of 23034
Subject: Re: FORE! Date: 3/2/2001 9:09 PM
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Actually, I think your discussion is about market beating performance, mine is about beating the crap out of the market

And there are millions upon millions trying to do the same thing, many with vast resources behind them.

I'm not saying that you won't be able to do it, far from it, but you will need good fortune (and lots of it) in your favor to do it.

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Author: joelinda1 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13228 of 23034
Subject: Re: FORE! Date: 3/2/2001 9:16 PM
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JDCRex wrote: However, when it comes to cleaving to a mantra, the TA'ers are pretty damn good at it themselves, and often quick to dismiss anyone who challenges their thinking. I realise the same thing could be said of me, but one thing I will say is that I have tried to look at both sides of the coin. I could be wrong, but I'm not sure the same can be said of most TA'ers.

From my experience in working with many members of this board over the last few years, I would completely disagree with this. Most good technical analysts understand the importance of fundamentals but it may not be as relevant if their time frame is short term. Most experienced technical analysts also understand and accept the limitations of technical analysis.

Like Bruce Brown, I came here from a purely fundamental approach to investing. I currently use both fundamental and technical analysis in my investing. I know several technical analysts here that have put a great deal of effort in attempting an understanding of fundamental analysis. I know of far fewer fundamental analysts that have any true interest in learning basic TA.



Linda

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Author: steel Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13229 of 23034
Subject: Re: FORE! Date: 3/2/2001 9:29 PM
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It is tantamount to saying "I want a secret". The thing is, how are you going to get something secret out of something so public?

This is BS.

Great performance, in any endeavor, has little to do with "luck" or with "secrets".

Great performance has to do with hard work, dedication, intelligent application of time and effort, persistence, and guidance from others who have been successful.

If you want to settle for index returns, just invest in an index -- why are you even wasting your time on these boards? If you can't improve your results over spy qqq or another index play by applying ta or fa principles, why even bother with talking about these issues here? Isn't it just a waste of time and effort?

I get so tired of hearing all the same old tired arguments and complaints, mostly from those who haven't done ANY of the homework.

Guess what. Lots of us are achieving enormously successful results, well exceeding index results. You may choose to believe it, or believe that it's all luck. That's fine. But don't waste our time with your "beliefs" here.

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Author: steel Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13231 of 23034
Subject: Re: FORE! Date: 3/2/2001 9:38 PM
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I don't think there is any conclusive evidence as to what seperates the underpeformers from the outperformers.

Now I see your problem.

You are looking for a "system" that beats the market.

Guess what? There isn't any.

Investors "beat" the market, not systems.

Like I said, you haven't even read the FAQ on this board yet. Maybe you should do so before continuing to litter the board with commentary.

If you are looking for a "system", you've come to the wrong place. This is a place for discovering something about yourself and how those discoveries can help you become a better 'marketeer'.

Remember always that people beat markets, not systems. Lynch, Buffett, Druckenmiller, etc. cannot be simply defined as representing various "systems". And you certainly cannot call their market beating performance over long periods of time "lucky" or "accidental".




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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13232 of 23034
Subject: Re: FORE! Date: 3/2/2001 10:24 PM
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Great performance, in any endeavor, has little to do with "luck" or with "secrets".

So consistent long term outperformance devoid of luck is available is it?

I get so tired of hearing all the same old tired arguments and complaints, mostly from those who haven't done ANY of the homework.

I have done a fair bit of a homework.

Guess what. Lots of us are achieving enormously successful results, well exceeding index results.

I have NEVER said that people do not exceed index results.

WHY they do, and how much is attributed to random factors, is what I am questioning.

I am not entirely sure you understand what I am saying.




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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13233 of 23034
Subject: Re: FORE! Date: 3/2/2001 10:30 PM
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You are looking for a "system" that beats the market.

No I'm not, because I don't think one exists.

Like I said, you haven't even read the FAQ on this board yet.

And like I said in a previous reply, I have read the FAQ and plenty of supporting material to boot.

Remember always that people beat markets, not systems. Lynch, Buffett, Druckenmiller, etc. cannot be simply defined as representing various "systems". And you certainly cannot call their market beating performance over long periods of time "lucky" or "accidental".

Well, actually you can. And Buffett is, to me, a quite different case because he is not what I would term as a completely passive investor.



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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13234 of 23034
Subject: Re: FORE! Date: 3/2/2001 10:32 PM
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Most good technical analysts understand the importance of fundamentals but it may not be as relevant if their time frame is short term.

I'm not talking in terms of TA vs. FA.

I am questioning whether it is possible to maintain consistent outperformance of the market using publicly available data.

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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13235 of 23034
Subject: Re: FORE! Date: 3/2/2001 10:39 PM
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Rex, this is probably going to irritate you, but if I had either the interest or the time, I'd engage you, and I have neither.

The board is here to give those who are interested in discussing CANSLIM or learning about CANSLIM a place to do just that. I'm here partly to help newbies through the CANSLIM maze and also to share experiences in re market dynamics. I have no interest in converting anyone, which is why I don't "travel", or haven't since I made a few posts on the Gorilla Game many moons ago. Neither am I interested in debating the virtues or lack thereof of CANSLIM with anyone who hasn't even bothered to read the FAQ, much less the book on which the board is based.

If you're truly interested in CANSLIM, read the FAQ, read HTMMIS, and read, preferably, Weinstein, Mamis, Wyckoff and Sperandeo. If you're not interested in CANSLIM, but are here primarily to work out some sort of issue with Bruce Brown, then I suggest you contact him by email or confront him on one of the more general interest boards which he frequents.

--Db

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Author: ilmostro Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13236 of 23034
Subject: Re: FORE! Date: 3/2/2001 10:41 PM
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Great performance has to do with hard work, dedication, intelligent application of time and effort, persistence, and guidance from others who have been successful.

Yeah, that's what they all say. Even if they are just lucky they attribute it to hard work.

Hard work does not guarantee success. It is so easy to fool yourself.

Who are you getting this guidance from on this board? And how do you know they have been successful over a long period of time?

Bryan



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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13237 of 23034
Subject: Re: FORE! Date: 3/2/2001 10:51 PM
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Rex, this is probably going to irritate you, but if I had either the interest or the time, I'd engage you, and I have neither.

If you would indulge me just ONE reply, have you gone through EMT and MPT or not?

I'm here partly to help newbies through the CANSLIM maze and also to share experiences in re market dynamics.

Well, I think a way to help newbies would be to show the ALL the arguments, not just W O'N's and fellow travellers.

read the FAQ, read HTMMIS, and read, preferably, Weinstein, Mamis, Wyckoff and Sperandeo

Done FAQ, done HTMMIS, done Weinstein and Wyckoff. Browsed Mamis and Sperandeo.

If you're not interested in CANSLIM, but are here primarily to work out some sort of issue with Bruce Brown, then I suggest you contact him by email or confront him on one of the more general interest boards which he frequents.

Just interested in why the Road to Damascus conversion and the reasoning behind it, is all. And I think much can be learned from public discussions. The reason why I "confronted" him, so to speak, here is because the post came up as one with high recs.

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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13238 of 23034
Subject: Re: FORE! Date: 3/2/2001 11:10 PM
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<<Well, I think a way to help newbies would be to show the ALL the arguments, not just W O'N's and fellow travellers>>

Why? There are hundreds of boards in TMF. To think that any one board could tell everyone everything they want to know about MI, DRIPs, discounted cash flows, ad infinitum is unrealistic at the least. Those who are interested in CANSLIM come here. Those who aren't go wherever.

<<Done FAQ, done HTMMIS, done Weinstein and Wyckoff. Browsed Mamis and Sperandeo>>

So what does this board and the FAQ have to say about systems and strategies? About "proofs"? What did Mark Kunka's log tell you about results? Was he lucky? Why do you think so?

<<Just interested in why the Road to Damascus conversion and the reasoning behind it, is all.>>

So why not take it up with Bruce Brown? I hardly know him, much less what motivates him. Just click on his name and send him an email. But the reasons for his conversion, while of temporary interest to the members of the board, is not a subject for long-term discussion.

<<If you would indulge me just ONE reply, have you gone through EMT and MPT or not?>>

If I were to say yes, then...

If I were to say no, then...

I've delved into many things that have absolutely nothing to do with CANSLIM. They don't belong here. That's why it's called the CANSLIM Board and not The Land of Off-Topic Posts.

--Db


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Author: steel Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13239 of 23034
Subject: Re: FORE! Date: 3/2/2001 11:32 PM
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Browsed Mamis

That's quite humorous!

For awhile there, I thought you were serious!

Sorry for taking the time to engage you, I didn't get the joke!

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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13240 of 23034
Subject: Re: FORE! Date: 3/2/2001 11:36 PM
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Those who are interested in CANSLIM come here.

Who says I'm not interested in CANSLIM?

Or do you only mean those who AGREE with CANSLIM?

What did Mark Kunka's log tell you about results? Was he lucky?

He very may well have been.

Why do you think so?

Because there is absolutely no way of knowing what was happenstance and what wasn't.

Once again, why past success actually means anything tangible for the future is beyond me. I know that one answer (in the form of a question) to that is "well what else do we have to base it on?". Nothing, frankly, but what law exactly says there SHOULD there be something to base it on?

So why not take it up with Bruce Brown?

This is a public forum. I was replying to him in the context of a public post. If he doesn't want to answer in public or otherwise, fine.

I'm not wanting to sound rude or belligerent, but if I want to post here, I will. If I do something egregiously wrong, please report me.


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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13241 of 23034
Subject: Re: FORE! Date: 3/2/2001 11:46 PM
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Browsed Mamis

That's quite humorous!

For awhile there, I thought you were serious!

Sorry for taking the time to engage you, I didn't get the joke!


Well, I am being honest.

I have not yet read "The Nature of Risk" thoroughly.

You think I am utterly incapable of offering an opinion on the stockmarket without it? This book is the unified theory is it?

I'll ask a similar question of you then:-

Are YOU versed in EMT and MPT thought?

If not, then why are you so sure of YOUR ways?

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Author: apevey Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13242 of 23034
Subject: Re: FORE! Date: 3/2/2001 11:47 PM
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hey JDCRex;

your mention of a:
"specific person who has undergone somewhat of a Pauline conversion with regards to TA."

caught my eye while reading this enagaging Thread and I was reminded of an old German Theologian who was confronted by an august body of scholars who expressed their denial of the authenticity of his conversion to Christianity on the road to Damascus by stating "the man must have had epilepsy!....he simply had an epileptic fit! He saw a bright light.....the whole thing is utter nonsense!"

To which the old German gentlemen simply replied;- "Oh blessed epilepsy!.....if only we could all become epileptics!!!! <GGG>

OT,knee



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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13243 of 23034
Subject: Re: FORE! Date: 3/2/2001 11:50 PM
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<<I'm not wanting to sound rude or belligerent, but if I want to post here, I will. If I do something egregiously wrong, please report me.>>

Wow.



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Author: steel Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13245 of 23034
Subject: Re: FORE! Date: 3/2/2001 11:53 PM
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then why are you so sure of YOUR ways?

I'm not sure of my "ways" -- I'm sure of myself.


And I don't need lots of acronyms to take make me feel secure.

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Author: HCourtney Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13246 of 23034
Subject: Re: FORE! Date: 3/3/2001 12:03 AM
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>> I'm not saying that you won't be able to do it, far from it, but you will need good fortune (and lots of it) in your favor to do it. <<

A trader that relies on luck will be looking for another profession right quick. Trading is a learned skill that is mastered only thru good old-fashioned hard work, study, and experience. TA utilizes very, very specific techniques that play the best odds that exist w/in the endlessly repeating patterns/cycles of the marketplace. A trader relies on "good fortune" only as much as the trained athlete. Yes there are more poor traders who lose than skilled traders who win {thank God); there are also a lot more bad actors than good ones, it doesn't mean acting is not a true art.

The market is an auction, therefore the driving force is supply & demand. Value is determined by perception of the participants at the moment the item is up for bid, evidenced by their willingness to buy or sell at this or that price. Van Gogh died broke, a few years ago his "Sunflowers" sold for 80 million bucks. Another culture in another 100 years may use it for kindling. The recent dot.com bubble, or the fact that well-established reliable companies' stock have fallen along w/the rest of the market, illustrates the significance of perceived value.

Technicians use charts to read the emotional crowd, the so-called "dumb-money" that makes up most of the participants, as well as those on the other side - the relative few, the professionals, the manipulators. TA attempts to get on the side of this "smart-money" by reading the tracks of their intentions that charts reveal.

You keep saying "no proof, no proof" but if a successful technician was to show you his portfolio and his specific trades then you¹d just say "sure but you¹re just one winner among a thousand losers" or "you just got lucky during such and such period". Have you checked out legitimate sites like TradingMarkets.com, Pristine, HRE? Are all these well-respected, successful, sometimes brilliant people just charlatans? Do you believe that the markets are manipulated by professionals? If not, then you simply don't understand the process, which given your obvious experience and knowledge I just can't believe. Professionals make their living, a very nice one, by reading supply & demand, playing the naive against the naive. You say you've read the Burrow, so what about accumulation/distribution? Do you believe it? If the smart money is distributing stock on the way up and at tops, and accumulating on the way down and at bottoms, since this is the way they make money, and if one can detect this on a chart, what is to prevent one from playing with those big boys?

Technicians play the best odds in a particular situation. Let me give you a very specific, common technique as an example: Buying pullbacks. It's popular because it works (however, as it becomes more and more well known, it will work less and less well, since common knowledge closes that door of market inefficiency that the technician relies upon).

Stocks go up, pause, retrace a bit, resume the uptrend, then repeat the process. Over and over and over again. A trader finds a stock that is in a strong uptrend, and then buys on the pullback to support, in anticipation that the ut will continue. This is based on that old chestnut, an object that is in motion tends to remain in motion until something stops the damn thing. A strong uptrend can be determined by simple visual inspection of the pv chart, as well as ma's, tl's, RS. Would you agree that it is possible to determine that as of *today* a certain stock XYZ is in a strong uptrend relative to the rest of the market? Is it making higher highs and higher lows? Does volume come in stronger on the rallies and diminish on the reactions? Are the reactions shallow? Are they shorter in time than the rallies? Are rallies more volatile (but not too volatile, indicating a top)? Are the price bar spreads generally greater on the rallies, C>O, closes near the highs? Are the spreads on reactions tighter? As the reaction nears previous support, are the closes higher than the open and near the tops of the range? Does it find support at several cross-points - a prime retracement level, a ma, a previous high (resistance becomes support), a trendline? Perhaps it also forms a certain congestion pattern, a bull flag or triangle. Or a certain candlestick reversal pattern, a doji or hammer. Is the overall market strong? Is the parent index strong? Is the sector strong? How is a correlating stock performing? If you're buying intraday, what are the tick and trin doing as price approaches your buy point? What is the time cycle? Is it a reversal period? You say you¹ve read Db's site and the other material, so I assume you're familiar with at least some of this.

I'm not being facetious, the technician looks for as many confirming factors in his favor as he can, that's essential to the craft. One reads only what is actually *there*, you don't let your imagination create opportunities than don't really exist just because you wish to trade that day or you¹ve had a bad streak and reallllly need to get some confidence (and cash) back. The technician removes emotion from the equation by looking at certain predetermined criteria and acting or not acting upon that information. He/she plans the trade and trades that plan and does not waver during the holding period.

You also look at reward:risk. Where is the nearest point of resistance in the timeframe that you are trading? This is your target/reward. Where is the nearest support that if broken will show you were wrong? This is your protective stop price, the amount of risk. Traders generally look for 2:1, 3:1 and greater reward/risk ratio. Smart traders, those who survive, are more concerned with controlling risk that seeking profits. This is as much a part of trading as technical analysis. A professional always knows he can be wrong. Control risk properly, choose high probability setups, and profits will come of their own.

Some of the things I've mentioned are specific to ST traders, but much of it can apply to IT or even LT traders. The point is TA is a craft, even an art, and it¹s quite, quite real. To say that you've read the Burrow, or the books, doesn't mean you grasp the thing. When I first got into Canslim it took me a solid six months of living it to "get it". Even if you decide to take it seriously, maybe you¹re just one of the thousands of bad technicians who never catch on and never will. Fine with moi, we¹re allllllways happy to take your money. But to peruse the material, w/o ever actually, sincerely working within the actual process, is not the way to arrive at a conclusion of validity. Try paper trading for a reasonable period of time. At least 10 or 20 trades. Fail at it. Then find a good technician and detail your trading style, including charts of your specific trades during the experiment, if he's worth his salt he'll show you what you did wrong. TA is not the failing, it's the inadequate trader.

Harold

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Author: ewile One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13247 of 23034
Subject: Re: FORE! Date: 3/3/2001 12:11 AM
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(applause from the gallery!!!)


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Author: 2ndSon Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13248 of 23034
Subject: Re: FORE! Date: 3/3/2001 12:20 AM
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nihilism, n. Systematic denial of the reality of experience and rejection of all value or meaning attributed to it.[<nihil, nothing.] -ni'hil*list n.

People, save your energies for something useful.

rick

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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13251 of 23034
Subject: Re: FORE! Date: 3/3/2001 1:22 AM
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And I don't need lots of acronyms to take make me feel secure.

I'm not saying that you do, but you are seemingly criticisng me for discarding something which you think I have not looked into (when in fact I have).

I am merely asking you if you are familiar with EMT and MPT.

If not, then why not?

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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13252 of 23034
Subject: Re: FORE! Date: 3/3/2001 1:46 AM
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A trader that relies on luck will be looking for another profession right quick.

I somewhat agree but I'd add: "a trader who doesn't have a good measure of luck will be looking for another profession right quick".

Technicians use charts to read the emotional crowd, the so-called "dumb-money" that makes up most of the participants

Dumb money makes up most of the participants?

Where are you getting this information from?

Have you checked out legitimate sites like TradingMarkets.com, Pristine, HRE?

Yup. They sure are making money off the stockmarket. By charging subscriptions to have other people look at their material.

Buying pullbacks. It's popular because it works

It outperforms does it? And what research do you base this on?

(however, as it becomes more and more well known, it will work less and less well, since common knowledge closes that door of market inefficiency that the technician relies upon).

You bet. That's the thing, if something does work using publicly available data it is doomed to self destruct.

Stocks go up, pause, retrace a bit, resume the uptrend, then repeat the process. Over and over and over again.

Yup, they do. Saying which one will keep going up, keep pausing keep retracing, keep etc etc PRIOR to the event is an impossibility, IMHO.

Traders generally look for 2:1, 3:1

And who sets these odds?

Historical precedent?

How has it been proven that what has happened in the past in the market is a reliable indicator of what will happen in the future?

Is the overall market strong? Is the parent index strong? Is the sector strong? How is a correlating stock performing? If you're buying intraday, what are the tick and trin doing as price approaches your buy point? What is the time cycle? Is it a reversal period?

And where are the studies showing that by applying these criteria you will be able to outperform in the long run?

TA is not the failing, it's the inadequate trader.

How do you KNOW?

How do you know that when TA succeeds it's the result of the adequate trader and adequate TA and not exogenous factors?

Fine with moi, we¹re allllllways happy to take your money.

And so are the brokerage houses, the magazines, the subscription services, the software companies and the various other sundry organisations that benefit of off traders' attempts at chasing outperformance.

Try paper trading for a reasonable period of time. At least 10 or 20 trades.

At least 10 or 20 trades???? Surely, you've missed a few zeros here. 10 or 20 trades proves next to nothing.

To say that you've read the Burrow, or the books, doesn't mean you grasp the thing.

Exactly the same can be said in the other direction. Just because you have gone through EMT (assuming you have) doesn't mean that you have grasped it.

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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13253 of 23034
Subject: Re: FORE! Date: 3/3/2001 1:49 AM
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People, save your energies for something useful.

Respectfully, I fail to see how challenging your preconceptions isn't useful, no matter how you come out the other side of the process.

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Author: HCourtney Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13254 of 23034
Subject: Re: FORE! Date: 3/3/2001 2:02 AM
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>> Dumb money makes up most of the participants? Where are you getting this information from? <<

Your broker.

Harold


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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13255 of 23034
Subject: Re: FORE! Date: 3/3/2001 2:10 AM
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>> Dumb money makes up most of the participants? Where are you getting this information from? <<

Your broker.


In all utter seriousness, I would really like to know where you get the notion that "dumb money" makes up most of the participants (and while you're at it, what the definition of "dumb money" is. You mentioned market professionals, also define them please). It really is quite an important point with regards to the current discussion.

If you don't have an answer, just say so.

However, if you want be churlish, go right ahead.

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Author: ab1stock Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13258 of 23034
Subject: Re: FORE! Date: 3/3/2001 5:23 AM
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Respectfully, I fail to see how challenging your preconceptions isn't useful, no matter how you come out the other side of the process.

Really, I think you demand a level of proof that is unattainable. Again I reiterate that the only measure of performance that should matter is in your own portfolio.

I believe most people are on the CANSLIM board to learn from db, et al, about CANSLIM specifically and TA in general so they may try and beat indexing. An endeavor such as investing or trading that relies on events in the future will obviously involve measures of luck or randomness. People are looking for an edge and the devotees of this method believe they've found it or want to learn more to try it. It will work for some but not others, there's too much slop and uncertainty. I think the best you'll get is that for those who understand CANSLIM (or any method) and its limitations, it is working well for them, individually.

We are all short chapters in an already completed but unread novel. The overall affect of our individual forays into the market will be to not change the overall picture one wit. The only reason to continue to try is because we cannot see who will be successful. The Gardner's greatest failing is in having so many believe they can beat the market at all. The vast majority will be simply recycling money into and out of the system.


Or perhaps, like me, you just enjoy stirring the pot and the argument is more fun than any otherwise artifical conclusion.

ab

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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13259 of 23034
Subject: Re: FORE! Date: 3/3/2001 6:12 AM
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Or perhaps, like me, you just enjoy stirring the pot and the argument is more fun than any otherwise artifical conclusion.

Yes, to a certain extent, but I do genuinely believe that many people have not examined as much data and as many concepts as they really should have to come to an even partial conclusion. They listen to the guru that is giving them the most pleasant message (you CAN be a gun-slingin' out-performin' market wizard using publicly available information!!!) rather than the ones who don't provide such a cheery, ego-boosting doctrine.

And just for the record yet again: I don't say that outperformance is NOT attainable, just that underperformance is equally likely to be attained, and probably more so given commissions, spreads, taxes and so on. And once again: knowing who will outperform and how they will outperform before the event is to my mind impossible.

That someone would actively seek to ignore the opposite view is, to my mind, ridiculous.

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Author: ConsultHR Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13263 of 23034
Subject: Re: FORE! Date: 3/3/2001 10:09 AM
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Hi BB & DB, and others. This is my first post on your board.

Now that I have learned and applied some tool kits to help me create wealth, e.g. RM, RB, GG, others, I think I'm ready for lesson #2 which is to learn to preserve some of it. ;o)

As I remember, CANSLIM, does address some of these issues. I studied it for a while about 4 years ago before being seduced away by Wade Cook and a broker who relied on Point and Figure charts. Thank goodness I found TMF and all my cyber-friends.

Now those of us who forgot that Mr. Market has the first shot at impacting the price of a stock, shame on us. No problems, mon - the market will remind us from time to time. Like from Apr 2000 til now.;o)

DB: I understand and applaud your efforts to keep the board focused and disciplined. Without this, it becomes merely a gab-fest and definitely confuses serious newbies.
BB: I too have seen some things, TA and others, that may have helped me protect some of my gains. I would like to learn more about them.

Off to re-read How to Make Money in Stocks, A Winning System in Good Times or Bad by William J. O'Neil.

I skimmed you FAQ, very informative. Now I have to go back and study it and the selected reading materials.

HR
since there is all ready another Harold on this board.


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Author: gobowsgo Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13295 of 23034
Subject: Re: FORE! Date: 3/3/2001 5:36 PM
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JDCRex:
It is tantamount to saying "I want a secret". The thing is, how are you going to get something secret out of something so public?
===================================
I think the problem here is that TA debunkers think of TA as a mechanical system that is seen by everyone at the same time in the same way. Under that assumption, how could one gain an advantage over the next TA guy? To them, HTTMIS means that CWH = Buy or that 150% ADV means buy on the breakout. What is missing is context.

The fallacy is that they do not understand the concept of "premise" as db and others have emphasized. They do not understand that everybody is looking at the chart from a unique perspective based on that premise whether it is written in a journal or even understood to be a premise. Two TA users can look at the same chart and one will buy and one will sell. This doesn't mean that one will win and one will lose. Ultimately both could end up with successful trades if they follow their premise as intended at the start point.

TA != Mechanical Investing

Regards,
Gerald




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Author: gobowsgo Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13297 of 23034
Subject: Re: FORE! Date: 3/3/2001 5:44 PM
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JDCREex:
One practitioner may vastly outperform, one may vastly underperform and another may do anything in between. I don't think there is any conclusive evidence as to what seperates the underpeformers from the outperformers.
=================================
If it were truly random, no individual could achieve market beating returns over the long run. Whether some are better or worse at it is irrelevant. What separates the underperformers from the outpersformers is skill, discipline, knowledge, etc. Basically the same things that separate successful people at regular jobs.

Regards,
Gerald



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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13298 of 23034
Subject: Re: FORE! Date: 3/3/2001 5:57 PM
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What separates the underperformers from the outpersformers is skill, discipline, knowledge, etc.

Well, if you want to think that, fine. It seems intuitive: "If I have "the skill", if I put the hard work in, if I'm disciplined and really, really apply myself I will surely outperform".

However, I feel you should make yourself aware that there are some quite detailed studies that have the absolute opposite conclusion. Discard them if you will, but only after you have actually exposed yourself to them.

Once again, are you aware of what EMT has to say?

If not, why not?

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Author: gobowsgo Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13299 of 23034
Subject: Re: FORE! Date: 3/3/2001 6:08 PM
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JDCRex:
Once again, are you aware of what EMT has to say?
==========================
T stands for Theory. If it was a Law, it would be EML.

Regards,
Gerald


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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13302 of 23034
Subject: Re: FORE! Date: 3/3/2001 6:50 PM
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T stands for Theory. If it was a Law, it would be EML.

Yup, I completely agree.

But the original question remains: have you looked into it?

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Author: jitterbug81 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13309 of 23034
Subject: Re: FORE! Date: 3/3/2001 10:21 PM
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<<I = Instituttional sponsorship. Buy stocks with at least a few institutional sponsors with better than average recent performance records.

Cardinal Health is certainly well owned with a high percentage of institutional sponsorship. Most likely a negative using the 'heart of the watermelon already being eaten' comment that O'Neil talks about in the book. Once again, I would look to guidance as to what one can determine 'overwned' means in determining a CANSLIM candidate.>>>

Bruce Brown,

Yahoo on CAH:


Ownership
· Insider: 16%
· Over the last 6 months:
· 10 insider sells; 304.0K shares
(0.6% of insider shares)
· Institutional: 77% (91% of float)
(1,301 institutions)
· Net Inst. Buying: 5.63M shares (+2.42%)
(prior quarter to latest quarter)

jitterbug81



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Author: jpcienkus One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13328 of 23034
Subject: Re: FORE! Date: 3/4/2001 2:35 PM
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Wow. I made it all the way through this thread. This is by far the best thread I have ever read here at the Fool. Many thought provoking discussions. It was interesting to see the dynamics of the thread play out. It started as a confession (kind of)and turned into something entirely else. To define that would take too much time.

JDCRex, you are to be commended. You hung in there with your beliefs among all the naysayers (if you will). By the way, what is EMT and MPT? I am truelly interested. Still no answer from the crowd.

BB, it's interesting to hear you want to add some TA to your investing style. I have read many of your posts and it is NOT news that you want to add tools to your kit. I think that is why many love your posts. You are always looking to improve your results and will look at all possibilities.

Dbphoenix, thanks for the excellent board. I have recentlly been lurking for many of the reasons BB so elegantly communicated in his original post.

Please forgive me if this post is disjointed. My brain often works much faster than my fingers. Some would challenge whether my brain works at all, but that's another story.

I consider myself a people watcher. It fascinates me. Why, because human behavior is at times funny, at other times enlightening and always good TV if you get my drift. People never cease to amaze me. The behavior is extraordinary. Emotion drives so much of that behavior. Even mine. I have to laugh at myself many times for the stupid things I can accomplish on my own. Also, I have to chide myself for the sometimes mean things I am capable of with my behavior. I consider myself a nice person but at times I just do things I regret. Sound familiar.

All this talk about TA vs. FA vs. luck. How interesting. I have been buying stocks for only a couple of years. I have gotten clobbered recently by holding Tech stocks when I knew they were overvalued. My background is in economics. I understand supply and demand. Last year, I knew things were crazy. E-business hype was at its zenith. I was invested in the picks and shovels area, but was too blinded by the pundits who said valuation didn't matter with this new economy. I did buy a couple of stocks last year that creamed the market, so I was not entirely devoid of winners. I only confess the above because it is important to what I am about to write, at least IMHO.

I lurk on a lot of different boards. Some of the posters on this thread I have encountered on other boards (and value their opinion) and some I have not. This thread was great theatre. If it were not for the fool, I would not be this far along in my investing education and I feel like I am still in the 1st grade. I am searching for an investing style that meets MY needs and expectations. Kind of like Joe's Investing Gumbo. Some of this, a lot of that, a pinch of this and presto, I have something that works for me. Many posters want to convert others to their style. Please do not do this. How do you know all the factors in ones life that determine what he/she buys, why he/she buys it and what his/her expectation is for the return on the investment? These boards are ment to enlighten. And that they do, at least for me. I am not saying that we should not have differences of opinion or challenge our thinking, but when it gets into personal attacks, then I think we have to draw the line. I heard some personal attacks on the Gardeners. I do not know them personally, but I would like to thank them for providing a mostly unbiased forum for investing discussion. Maybe they don't give TA enough credit, but at least they gave you a board to for CANSLIM.

I would like to think that I am logical. That being said, logic tells me that I have to improve my investing style. I'd like to be LTBH, but that is not prudent for me. I want to beat the average market returns. I don't feel I can do that buy blindly holding companies. I have to realize that many people base there living off the markets and realize their income comes from those of us who don't use all the tools available when making buying/selling decisions.
I have read many peoples insights on why they buy, how they make those decisions and what tools they use to come to a decision. Same can be said for selling. I am going to use a little a bit of many peoples styles to make my style.

I have read recently about the man who forgot he had 1000 shares of I think Quaker. Held them for 30+ years. Now has xyz amount of money. I ask, if he invested in another company(s), would he have even more. What I am trying to say is that LTBH people will pick examples that support their style. All the same, TA'ers will do the same.

I have come to the conclussion that LTBH is not the best style for me. I am forming a style on the fly, because as IBD says, never stop learning. I think that FA and TA need to be used in my style. The institutions move the markets and why not understand what they are doing to improve my chances of great returns. Kind of like betting the "No Pass" line in craps. I like the idea of only making one trade per quarter. I like the idea of knowing what a company does and why it is growing its revenues and profits. I like the idea of having a variety of companies in my portfolio to reduce some of the risk. I like the idea of limiting my losses to say 8-10%, because I know I am not always right. Just ask Fidelity, they have my account. I like the idea of understanding the management. Great management will mostly pervail. I like knowing whether big blocks of stock are being bought or sold. This will help alert me to possible problems with my holdings. I like taking some of the emotion out of my buy/sell decisions by using the charts. I like being a little emotionally attached to my core companies. I like having a little luck on my side when I need it!!

I am off to read some more about investing so that I can continually refine the style that works for me.

Thank you all for this great thread.

Joe

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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13330 of 23034
Subject: Re: FORE! Date: 3/4/2001 4:22 PM
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By the way, what is EMT and MPT? I am truelly interested.

EMT = Efficient Market Theory, (also known as EMH, Efficient Market Hypothesis). Do a search with the term at www.google.com for more info.

Basically, its thesis say that stock markets are basically efficient with all publicly available data extremely rapidly priced into the market. Therefore, it holds that, averaged out, long term outperformance of the market (using public data) is not possible, and any outperformance that does happen is due to chance.

By the way, I don't believe that markets are truly and totally efficient. However, knowing what inefficiencies to exploit adds yet another variable to the equation and, in my opinion, is yet again an exercise in chance. If you follow my thinking the inefficiensies become a sort of market in themselves, and, because they are publicly available, offer no long term edge (devoid of luck) to anyone.

MPT = Modern Portfolio Theory. Again, search at www.google.com

MPT isn't all that modern, developed back a few decades now. It says that the determinant factor of portfolio performance is dictated by what the mix of "asset classes" (i.e. stocks, bonds, REIT's, cash and so on) is in the portfolio rather than individual stock picking. It uses (and this is where I myself think it is sort of wanting) past historical gains to work out the volatility of a given group of assets and the expected return of a given group of assets. Basically, a portfolio can be constructed via MPT that, theoretically at least, offers a certain expected return at a certain level of risk. The points along the risk levels (defined as standard deviations of the returns) which demonstrates the maximum attainable aggregate expected returns of all the asset class combinations produces a curve known as "the efficient frontier". So say you were happy with a 10% standard deviation in return per annum, you would look up to the efficient frontier at that 10% point and it would recommend the theoretically ideal mix of stocks, bonds, cash and whatever. Once you have done a bit of reading on it the issues will become much more apparent than the description above.

Once more MPT is HIGHLY theoretical and not immune to problems of its own. However, it does dovetail into EMT to a certain extent.

*A note: these definitions of EMT and MPT are VERY boiled down and would probably earn me a fail in a finance class if I submitted them as the last word. Please read up for yourself.

What I personally get from the two very academic theories is that, you guessed it, averaged out, the markets are impossible to beat over the long term using publicly available data without a very large factor of luck. i.e. FA doesn't give an edge, TA doesn't give an edge, and a combination of the two doesn't give an edge. Put another way, I'm not saying that you can't beat the market, but that if you do there is absolutely no way of knowing whether you did because of the rationale you were applying or because of chance. Success is no indication of proof, and neither is failure a disproving event for that matter.

I like the idea of knowing what a company does and why it is growing its revenues and profits.

That is fine, but especially as you move further up the market cap tree you have to realise that hundreds of thousands of brains are doing the same thing, some with extremely vast resources behind them. I'm not saying that the synthesis of thinking which generates the current price is always "right", but knowing before the fact when it is "wrong" is, once again in my opinion, impossible. Even if you feel CERTAIN in your bones that you are right you still are placing a bet. There is NO WAY of knowing.

It might not sound like the most cheerful opinion, but I actually think the notion that the market cannot be beaten without luck on your side is kind of liberating. If you still want to go ahead and try, fine, it can be really good fun depending on your risk tolerance and how much money you use to "play" (knowing that you whatever portion of your money you have allocated to the activity is subject very heavily to and underperformance factor). However, if you don't want to "play" you have the easy option of indexing, preferably as broad as possible, without constantly beating yourself up trying to chase outperformance. I know that some here will say that is a wimp's attitude and I just say it because I don't have the guts, skill, dedication, aptitude, mojo or whatever it takes to beat the market. To that I answer, once more, I have not seen any evidence at all that the markets can be consistently beaten over the long term without a large chance factor being on your side.

Whew. That was longer than I thought it would be.










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Author: jpcienkus One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13332 of 23034
Subject: Re: FORE! Date: 3/4/2001 5:27 PM
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Thanks for the information on EMT and MPT. I'll check into them.

By the way, I don't believe that markets are truly and totally efficient. However, knowing what inefficiencies to exploit adds yet another variable to the equation and, in my opinion, is yet again an exercise in chance.

I would tend to agree with you. I think that is where FA & TA play a role in uncovering the inefficiences for explotation.

What I personally get from the two very academic theories is that, you guessed it, averaged out, the markets are impossible to beat over the long term using publicly available data without a very large factor of luck. i.e. FA doesn't give an edge, TA doesn't give an edge, and a combination of the two doesn't give an edge. Put another way, I'm not saying that you can't beat the market, but that if you do there is absolutely no way of knowing whether you did because of the rationale you were applying or because of chance

I want to ponder this a little more before I comment.

Success is no indication of proof, and neither is failure a disproving event for that matter.

I disagree. Continued success is proof. That is the only way to prove it. Now whether you can beat the market for 20+ years in a row is debatable. You have to be able to measure something (in this case returns) to offer proof that your method is successful. In golf the measurement is strokes, in bowling, it's the number of pins knocked down... Returns are the way you keep score. I also want to think about this a little more so that I can offer a more intelligent discussion on your theory.

Joe

PS: sorry for the long post earlier. I actually started rambling and i know that I did not complete all my thoughts. I wanted to spare people at least a little.




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Author: JDCRex Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13333 of 23034
Subject: Re: FORE! Date: 3/4/2001 5:35 PM
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Returns are the way you keep score.

Yes, but one individual's return is not really relevant when you consider the amount of data involved.

Once again, I'm not saying that an individual cannot beat the market, but that if they do it is functionally impossible to tell why they did.

You have to be able to measure something (in this case returns) to offer proof that your method is successful.

But there is a large random influencing factor the only thing looking at the returns proves is that the individual fell on one side of the bell curve of distributions rather than the other. Once again, why (and more importantly whether or not the criteria will mean anything in the future) is not determinable.

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Author: WeldonM Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13347 of 23034
Subject: Re: FORE! Date: 3/5/2001 1:48 PM
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JDCRex: Once again, are you aware of what EMT has to say?

Yes, but I prefer the laws of thermodynamics: you can't win, you can't break even, you can't leave the game.

Much more optimistic, and easier to remember to boot!

-WeldonM

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Author: trenchrat Big funky green star, 20000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 14323 of 23034
Subject: Re: FORE! Date: 3/31/2001 6:12 PM
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OK BB!!! OK!!!!...now we begin anew....thank God for new beginnings....t-rat

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Author: BruceBrown Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15396 of 23034
Subject: Re: FORE! Date: 5/25/2001 9:31 AM
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I wanted to revisit the stock of a company I profiled in a post back in post #13152 on March 1. The company is Cardinal Health and the stock is CAH. Notice I took care to separate the two - stock and company.... <gg>

Regardless, the reason I wanted to revisit it has to do with what could be an educational example to comment on in terms of the type of base that the stock has been forming since September/October leading up to yesterday.

If you are not up to speed on rectangles, buzz over to the burrow and read this first:

http://home.talkcity.com//MoneySt/dbphoenix/Rectangles1.htm

As my original post on March 1, I've been paying close attention to this family holding by identifying support and resistance levels and making "plans" on how to react based on those levels (trying to protect a potential Stage 4 development). It hasn't exactly been 'quiet' volume during the past 7 months, but that is evidently standard procedure within a rectangle as the battle between buyers and sellers as well as the support and resistance levels being used for trading purposes tend to create plenty of volume.

The Burrow states:

"There is a lot of energy in these patterns (the longer and/or wider the pattern, the more energy it represents), and when the stocks eventually break out of them either to the upside or downside, the moves can be explosive."

The stock touched $69.16 on March 8th which was a new high at that time before closing at $68.34, but volume was not significant. Since then, it's bumped up again at those resistance levels until May 11th where it rose to a closing high of $70.50 on heavier volume. Since then, a couple of good volume days on May 22 and yesterday, May 24 where the stock appears to have risen out of the rectangle and closed at a new high of $72.01 on a little more volume than the previous new high of May 11th. After so many months, is it possible that these new highs are simply increasing the resistance level in the rectangle to a higher level, or does it appear that things could be setting up for a breakout - be it false or true?

For the sake of studying a possible rectangle in real time, I thought it was interesting to bring up the stock of CAH. The fundamentals of the company in regards to the criteria of CANSLIM have not changed too much from the March 1 post I made outside of another quarter having been reported.

C = Current quarterly earnings per share. They must be up at least 18% or 20%

Recent quarter was 22% better than the y/y period. Operating revenues improved 35% from the year ago period. Management's guidance continues for 20% EPS growth going forward (as it has been for the past 13 years).

A = Annual earnings per share. They should show meaningful growth for the last five years.

Five year actual EPS growth has been an annualized 20.7%. Consensus analyst 5 year forward EPS growth is an estimated 21.5%. Five year actual annualized revenue growth has been 29.1%.

Latest earnings report:

http://biz.yahoo.com/prnews/010426/clth002.html

Chief Executive Robert Walter said in a statement accompanying the results that he is confident in the company's objective of increasing annual earnings per share by 20 percent for the foreseeable future.

"We're confident that our commitments to the financial market are secure,' Walter said in the conference call.

N = New. Buy companies with new products, new management, or significant new changes in their industry conditions. And most important, buy stocks as they initially make new highs in price.

http://www.thestreet.com/stocks/biotech/1197316.html

In the previous quarter, Cardinal Health had just completed their acquisition of Bindley Western Industries in February. This will streamline their distribution process and create synergies of $100 M over the next three years according to management. The stock has made two new highs in price recently. The first on May 11 and the second yesterday, May 24. In addition, since Cardinal Health is a holding company, reviewing the latest quarterly reports identifies each fo the segments and the 'new' developments for each segment throughout their holdings:

http://biz.yahoo.com/prnews/010426/clth002.html

S = Supply and Demand. There should be a small or reasonable number of shares outstanding, not large capitalization, older companies. And look for volume increases when a stock begins to move up.

This company has been around for a long time. Shares outstanding equal 445 Million. Market cap is around $32.1 Billion. A recent 3 for 2 stock split was completed on April 23rd and dividend paid on April 15th. The board, on May 9th, raised the quarterly dividend by 25% beginning in July of this year. It will be the company's 67th consecutive quarterly dividend.

http://biz.yahoo.com/prnews/010509/clw005.html

L = Leaders. Buy market leaders, avoid laggards.

Analysts have pegged Cardinal Health to be considered as the 'gold standard' in this particular industry. Whatever that means? In terms of EPS growth and strength within its niche, Cardinal Health has built itself up over the past decade to be quite a leader in the segment.

I = Instituttional sponsorship. Buy stocks with at least a few institutional sponsors with better than average recent performance records.

Cardinal Health is certainly well owned with a high percentage of institutional sponsorship. 81% (or 96% of the float). Net institutional buying from prior quarter to latest quarter was +2.69% or 9.94 Million shares.

M = The general market. It will determine whether you win or lose, so learn to interpret the daily general market indexes (price and volume changes) and action of the individual market leaders to determine the overall market's current direction.

CAH is traded on the NYSE and is a member of the S&P 500. The "M" for the S&P 500 index certainly has improved since the lows in early March. Taken in context with the DOW, the Nasdaq, the Russel 2000, the small-cap and mid-cap indexes, perhaps we could all debate the merits and status of the current "M". Or we could observe the view that WON took in his IBD in regards to the "M" from the perspective of a bear market being past tense.

On April 26th, in one of the company releases it was stated:

"Cardinal Health shares have outperformed the Standard & Poor's 500 Index by 111 percent since April 2000, when the stock was priced in the low $30 range, and by 4.7 percent since the start of 2001."

The stock is up another 10% since April 26th.


The point was to have some discussion in regards to a rectangle and what one should be focusing on in terms of such a pattern. I would certainly welcome any discussion or comments in regards to the pattern of the past 7 months for CAH to see if it qualifies as a rectangle.

Thanks.

BB



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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15397 of 23034
Subject: Re: FORE! Date: 5/25/2001 9:46 AM
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<<I would certainly welcome any discussion or comments in regards to the pattern of the past 7 months for CAH to see if it qualifies as a rectangle.>>

Yes and no (surprise, surprise). The practical difference between a rectangle and a flat base is that a rectangle presents trading opportunities. For this reason, the distance from high to low needs to be wide enough to make the trade worthwhile. The distance here is essentially 10-15%. That may be wide enough for some people, but considering that one's timing would have to be exquisite in order to make the trade worthwhile, most people would probably consider this to be a flat base a la O'N and just wait for a breakout, which it seems to have done yesterday.

--Db


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Author: BruceBrown Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15398 of 23034
Subject: Re: FORE! Date: 5/25/2001 10:02 AM
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Thanks, Db. Which book on the reading list does the best at discussing rectangles? In addition, do you know of any rectangles currently in progress that could be used as a good real time example for study?

BB

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Author: dbphoenix Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15399 of 23034
Subject: Re: FORE! Date: 5/25/2001 10:27 AM
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<<Which book on the reading list does the best at discussing rectangles?>>

I don't know of any that provide more info than what is available at the website, but that doesn't mean there aren't any. There really isn't much to say since it should be obvious. If it isn't, then it pays to remember one of the standard guidelines: if you have to look for it, it isn't there.

<<In addition, do you know of any rectangles currently in progress that could be used as a good real time example for study?>>

ONIS is or might be or could have been, depending on whether or not it hits 40 before descending to the bottom of what looks to be a rectangle. If it drops to 30 from here, it may wind up forming a descending triangle.

There is also the problem of "harmonic" rectangles, which are lines of consistent support and resistance within the boundaries of the overall rectangle, but I doubt you want to get into that, and I don't have any examples at hand anyway.

--Db


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Author: pwahl Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15400 of 23034
Subject: Re: FORE! Date: 5/25/2001 2:07 PM
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<<In addition, do you know of any rectangles currently in progress that could be used as a good real time example for study? >>

I think LNCR probably qualifies, unless I am confusing rectangles and flat bases. If it doesn't qualify, maybe someone else can point out why not



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Author: LossCutter Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15402 of 23034
Subject: Re: FORE! Date: 5/25/2001 3:05 PM
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ACDO looks like it fits the criteria here for a rectangle.

LC

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Author: ramblinman2 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15406 of 23034
Subject: Re: FORE! Date: 5/25/2001 6:53 PM
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Bruce-


A little bit of number crunching gives Cardinal Health a fair value in the neighborhood of support (60.00)/22% GR./67.00. That said, the market may mark up the group quite a bit more and it may not. What suprises me is the lower premium the market has given CAH compared to ESRX (62.00)/22% GR./87.00.

I like the Generic Drug group too. But all the patent games the large drug makers play has been a hard pill to swallow for these companies. Going forward if legislation is kind enough I believe IVX and ADRX are going to be strong candidates.

Anyway, I like to hang out on this board mostly reading these days what others are doing because I'm moving away from CANSLIM proper, that is to say buying breakouts when I believe a better value is at support or the bottom of (what may or may not become a cwh) using more fundamentals to guide me than just patterns.

Good luck,

Randy



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Author: BruceBrown Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 15409 of 23034
Subject: Re: FORE! Date: 5/27/2001 1:48 AM
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Randy wrote:

A little bit of number crunching gives Cardinal Health a fair value in the neighborhood of support (60.00)/22% GR./67.00. That said, the market may mark up the group quite a bit more and it may not. What suprises me is the lower premium the market has given CAH compared to ESRX (62.00)/22% GR./87.00.

Well, they both have excellent earnings growth, so there's nothing to complain about in terms of the two companies you mention from that perspective. CAH is currently trading at an estimated PE of 29.4 (12 months forward estimated EPS is $2.45) and a trailing PE of 40 (trailing EPS is $1.79). ESRX is also currently trading at an estimated PE of 29. Compare the past 5 years of EPS growth for the two. CAH has 23% and ESRX has 30%.

Two other interesting stocks in the group which do fit the description of a holding company/distribution and have market caps similar to ESRX on the smaller side are AmeriSource (AAS) and Bergen Brunswig (BBC) which are the number three and four players in the holding group category. They are merging which is the 'trend' in the industry to provide better synergies in the distribution business model and save $125 Million in annual costs three years following the merger. The combined two should pull in about $35 Billion in annual revenue. Cardinal Health's acquisition earlier this year of Bindley Western (they bought Bergen Brunswig Medical last year) also will benefit from better "synergies" in their distribution and save $100 Million in annual costs three years from now. Cardinal's trailing 9 months revenues were about $36 Billion. I believe the full 12 months trailing revenue was around $44 or $45 Billion.

As to what the market does or why it does it in terms of which stocks receive a premium over others - it happens. No need to point out the past 12 months performance in all the stocks of CAH, BBC, ESRX and AAS. These are not the types of companies to double the share price on an annual basis based on their EPS growth, but perhaps the group one year ago were too undervalued and that added to their excellent peformance since last spring.

BB

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Author: YoungDude20 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 22990 of 23034
Subject: Re: FORE! Date: 10/27/2010 1:06 PM
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Bruce, are you able to help me determine how you calculated these values for each section? I am new to investing and CANSLIM and am interested in starting this on my own.

Thanks!
MK

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