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Hi nukejohn,

Today ClearStation's Kensey sent out two alerts to suggested Longs. They were ODP and PXLW. I took a look at their Point and Figure Charts and saw, for me, a good chart for ODP of progressive stair steps up and another scenario for PXLW of a recovery from a fall. ODP looked best, so I went to Big Charts - Java Chart and found the following:

Your four point analysis would have signalled a BUY on 12/5/01 at a closing cost of 17.37. The Beta is 1.04 and (I need to look up what you said for the percentage) @10% the low stop would be 15.633 and @12% it would be 15.29. The upper limit to change the stops would be @115% 19.98. Since 12/5 the stops have not been reached, nor has the upper limit to change stops been reached. Today's closing price is less than the price on 12/5, 16.70. If it would have been a BUY on 12/5 at 17.37, why isn't it a better buy now at 16.70? There are no BUY triggers from your system, but there are BUY signals from ClearStation by Kensey's system. Isn't this a go - go situation that should be used?

Usually ClearStation is after your signals to buy, and, since I do not have a Watch List, it works as a substitute in a way. Most of the time, their signals do not look good as the price has gone up indicating to me that some of the gain has been made already and that I would be getting only the tail end of the rise. This one is different, it seems.

I looked further into ODP, Office Depot, and found that it was at a much higher level in the first half of 99, began a big dip through 00, and began its stairstep upwards all through 01. It's current range of the past 52 weeks is between $6.00 and $17.49, which means that it is creating new highs as it rises. Office Depot is a good company as far as I know watching the TV ads and seeing the stores everywhere, discount at that. Retail, necessary stuff, discount, well known = good in my book.

So, nukejohn, what is your take?

Thanks, Anne
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Just adding something....

I remembered to check the Money Flow that SheDevil pointed out. For ODP, Office Depot, it is steadily going up gradually just like the stock price and is definitely in positive territory.

Betty, SheDevil, thanks for all the leads to places to look; I am using the Point and Figure Charts as a visual clearing station and the Big Charts for Details to follow nukejohn's system and to check for money flow. I have NO idea how I managed without them before! Thanks greatly!!!

Anne
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Okay Anne, let's look at ODP,

http://finance.yahoo.com/q?s=ODP&d=c&k=c3&a=m26-12-9,r14,v&p=e50&t=6m&l=on&z=m&q=l

First, I should point out that if I were following ODP using my system, the first buy signal came on June 28th at $10.00. I would have been in ODP until Sept 17th, when the markets reopened and ODP dropped to 11.00 (at the open), where I would have been stopped out (a modest 10% gain in 3 1/2 months, but better than a loss). Since the beta is 1.04, I would use a 10% stop loss order. For beta's <1.00 I use 8%, 1.0-1.4 I use 10%, >1.4 I use 12%.

The next true buy signal where ODP met my RSI, volume, and MACD was Nov 20th intraday (likely early in the day) at around $15.75. I would still be in ODP, as there was never a stop loss that has been hit, so my basis would be 15.75. A side note that I don't think I have explained is ---- Any time I have a stock that has risen 10% (remember I have a 15.75 basis), which ODP did when it closed at 17.37, I reset my stop to my purchase price. So right now strictly following my system I would have been in at 15.75 and have a stop loss at 15.75.

However, I am not particularly excited by the behavior of ODP. It has had two cahnces to show it's upside potential, and on neither occasion has it rocketed higher. What I really like to see is a stock that rockets higher within 2-3 weeks of my purchase. The dissappointing aspect of ODP has been the lack of any real big volume days other than 12/05.

Because there is only a limited amount of capital to invest, quite frankly I would be looking for better opportunities, and I would likely close my position in ODP. This is one of the few areas where I don't have hard and fast rules, but I use my gut feel. In essence, if I have been in a stock twice in six months, and on both occasions it has increased modestly, but shows no signs of taking off for a 30-40% gain or better, I would have to consider closing the position. The primary reason is that I would always see other opportunities that look to have better returns.

But you are correct that had you recently started following ODP, 12/5 was a true breakout day (say a purchase at 17.37 and a 10% stop loss).

Just from experience and looking at the charts, I have a gut feel that ODP will hit the stop loss before it goes up to 19.98, but you just never know.

Once again, one of the keys to my system is to buy when the 4 signs all line up on the same day. Granted, you are correct that on 12/5 that did happen, and now it is lower, so one would think it should be a better entry point. But that is simply not the way it works (because since then the volume hasn't been what we would like, and the RSI is falling fairly sharply), so now is not a good entry point. Of course, you could buy it if you wish, but always set the appropriate stop loss order so you won't get hurt. I hope that explains it.

Also, this is a system that I have developed using my own trial and error. There are numerous things that could be changed to customize any TA system to your own style. The keys to success are
1) Diversification 2) Money Management (Strict Stop Loss Rules) 3) A set of buy and sell rules that you follow regardless 4) Developing a method to screen stocks to place on your watch list 5) Self Control and Self Discipline to follow your preset rules 6) A system of evaluation and feedback on each purchase and each subsequent sale that allows you to objectively evaluate and modify your system as appropriate.

NukeJohn
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Hi NukeJohn,

Thanks for the lesson. These questions and answers help to clarify the details of your system. The next assignment is to find a really good radar screen.

Just from experience and looking at the charts, I have a gut feel that ODP will hit the stop loss before it goes up to 19.98, but
you just never know.


I am ready to go with your gut feeling. I'm not ready to buy ODP just now, but wanted to check it out. Thanks for your help.

Anne
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Okay Anne, for PXLW

http://finance.yahoo.com/q?s=PXLW&d=c&k=c3&a=m26-12-9,r14,v&p=e50&t=3m&l=on&z=m&q=l

The buy signal from my system occurred on Nov. 14th. The stock was 3% over the 50 day ema, the 14th was the first day the MACD inched into positive territory, the volume was 1.68 million shares, which was slightly over 40% above the ADV, so I would have bought near the close on Nov 14th at $14.35 and entered a stop loss order at 12.63 (12%).

On Nov 19th when the stock closed at 15.84 (more than 10% above my purchase price), I would have raised my stop loss to 14.35 (my purchase price). Now after the stock gets 10% above, now I'm witing on it to get 15% above, when I start increasing my stop loss limits. 15% above my purchase price is 15.50, so when the stock hit 16.75 on nov. 27th, I would start raising my stop loss (14.74). On Dec 6 the stock hit 19, so at that time my stop loss would be 16.72. I would have been stopped out on Dec 10th at 16.72 (a 16.5% gain in less than a month, not great but not bad).

I would keep watching PXLW, and waiting for the RSI to move up, and the volume to break 40 above ADV for my reentry point. Now is not a buying opportunity.

Any Questions?

NukeJohn

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Hi nukejohn,

I would keep watching PXLW, and waiting for the RSI to move up, and the volume to break 40 above ADV for my reentry point.
Now is not a buying opportunity.

Any Questions?


Of course there are questions!!! You like PXLW but think ODP will not go up, a gut feeling. What gave you the go ahead for PXLW, but stopped you on ODP? What caused your "gut feeling"?

Thanks again for the play by play. It makes things really clear.

Anne
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Of course there are questions!!! You like PXLW but think ODP will not go up, a gut feeling. What gave you the go ahead for PXLW, but stopped you on ODP? What caused your "gut feeling"?

Perhaps I didn't explain myself very clearly. Using my system, you really need to buy on the breakout day (when my system gives a buy signal), so you need to be following the stock that day, and not find a stock that broke out a few days ago.

If the stock still has all four criteria met on the same day, even if it is already well above the 50 day EMA, then it's okay to buy it. But what I'm saying about both PXLW and ODP, is that we missed the "best" buying opportunity. ODP has not really shown any volume strength except on 12/5. That does not bode well for the stock to keep going up. It is my suspicion that it will drop (to the stop)before it goes up (at least 15%), but no one ever knows incliuding myself.

As for PXLW, I like the way it has been behaving from a price standpoint, but here again I am not happy with the volume (or the RSI).

http://finance.yahoo.com/q?s=PXLW&d=c&k=c3&a=m26-12-9,r14,v&p=e50&t=3m&l=on&z=m&q=l

I think it has a better chance of continuing upward than ODP, but the bottom line is that with my system you have to buy at the "right" time. Keep watching them, and if all 4 criteria are again met on the same day, then it is the "right" time, even if it is 10% above the 50 day EMA.

What we are trying to do here is buy at the point there is the most upward pressure, and ride the winners and sell the losers (via our preset stop loss points). If we don't buy at the "right" time, we may be stopped out for a loss 50-70% of the time instead of 30-40% of the time.

NukeJohn

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