CANSLIM & Momentum Investing 02 (Aug 09 - Dec 24)

[teachme]

Thank you all very much for your warm welcome.

Unlike in the past, nowadays I seldom posts because of the lack of time. I have two very young kids, a loving wife who always nag me to spend more time with the kids, a full-time day job and a part-time job(investing/trading) which should really be a full-time job - anything less can be dangerous.

I really respect the forummers here who are able to make frequent contributions to this forum and yet be successful investors. Perhaps some even make time to be good fathers.

Some, like millionairemind, even trade two markets (US and Singapore). How do you find the time to be successful in both markets? Amazing!!

I trade those two markets too. However, I consistently lose money in the US market. I guess a lot has to do with lack of time to research the US market. After studying the Singapore stocks, I have little time left for the US ones.

You don't have to be of the calibre of MM, winston, kenny etc to post here.

Ha! I certainly am not of their calibre. However, I think I am enough calibre to appreciate good posts when I read one and recognize higher calibre forummers. By the way, my nickname teachme suggests that I am an amatuer which I was some time ago. I chose that nickname when I started out as an amatuer trolling investment forums, trying to learn from the gurus. Alas, an amatuer is not knowledgeable enough to distinguish between what is good and bad investment advice for him. Now, experience has sharpened my judgment. When I think someone is good, he probably is good.

[teachme]

You see me too up... I make mistakes until

Talking about mistakes ... I would like to share a painful mistake I made on Monday. I sold out on Monday. Everything!! Some stocks that I sold out at a small loss broke out with monstrous gains later. It is very frustrating but one thing I am sure is that this will not be the last time.

Last Friday, SSE(Shanghai composite) broke down below 50-day moving average. I am on high alert on the SSE by then. On Monday, it fell 5.8%. Clearly, SSE's rally was dead then. I sold out everything on Monday. Given China's increasing economic clout on Asia, I dared not ignore market signals coming out of Shanghai. I thought I was right when I woke up Tuesday morning and saw that the US market has slipped into market correction. The next few days prove me wrong.

My question to fellow CANSLIM practitioners is how do you react after the market has gone into correction mode? Do you sell out everything as soon as you can or do you sell out bit by bit, the same way that Millionairemind advise when buying after a follow-through day?

[millionairemind]

TM,

We all learn together from the market... it is the best teacher...

We all kena wallop left, right and center together too...

As long as we all keep learning.. and not making the same mistakes twice, we are OK

Cheers,
mm

[Aspellian]

My question to fellow CANSLIM practitioners is how do you react after the market has gone into correction mode? Do you sell out everything as soon as you can or do you sell out bit by bit, the same way that Millionairemind advise when buying after a follow-through day?

Hi TM,
I am only beginning to follow CANSLIM and limited experience. My formulated rule is to sell ALL on correction. Because during a correction, how do you know when/how much to sell when the price rebound (if it ever rebounds) when market still on correction mode? I feel that its a case of self-denial if you refuse to sell all during correction. You HOPE when you should FEAR.
No point fighting the market. If you are courageous and skilled, you can tiptoe in to short.
This is definitely different from Uptrend when you can average UP and ride the wave.

Anyway, if you hit 7% stop loss from your purchase price, you will be taken out and you still have to sell ALL IRREGARDLESS of Uptrend or Correction. Never be rebellious and argue with "the invincible hand".
Protection of capital to fight another battle is utmost priority.

PS: of cos all these applicable only if you practise CANSLIM to the "T".

Keep on posting. We can then learn more from each other!
If you are really keen on CANSLIM, I suggest you read CANSLIM thread word-for-word right from the start (if you have not done so) and of cos, Oneil's books.

[BlackCat]

Talking about mistakes ... I would like to share a painful mistake I made on Monday. I sold out on Monday. Everything!! Some stocks that I sold out at a small loss broke out with monstrous gains later. It is very frustrating but one thing I am sure is that this will not be the last time.

I could have written the paragraph above - I sold most of my holdings last week.

Was it really a mistake?

I believe everyone gets screwed by the market sometimes. Trend followers (the 'M' in CANSLIM) get whipsawed by volatility, like last week. Value investors lose out in bull markets, where high priced junk zooms higher and their carefully analuzed 'value stocks' sink (like buffet in the dot com era). Swing traders who try to trade the short term bounce will lose out during a powerful bull movement, like in March, when there are no pullbacks to trade...whatever you do the market will get u you sometime.

The key is to limit our losses when the market does get us. With only one purpose: Don't get killed.

For me, since I'm following IBD's Big Picture as a way to time the market and limit my exposure to bear markets, the frequent whipsaws are a cost of doing business, like an insurance policy. I will usually sell out my losing trades - the ones I have no conviction in - first, then within a few weeks sell my remaining holdings as the downturn proves itself.

[kennynah]

within a few weeks sell my remaining holdings as the downturn proves itself

this could break all bones in the body.... a couple of days of adverse price movements can already severely deplete one's account...

[Aspellian]

within a few weeks sell my remaining holdings as the downturn proves itself

this could break all bones in the body.... a couple of days of adverse price movements can already severely deplete one's account...

I couldnt agree more... sometimes when market drops 10% in a single week, stocks can easily drop more than 50%!! impossible??? look at the charts - even blue chips are not spared in a bear market.

[BlackCat]

So far I havent had this problem, as since I've been following IBD (abt 18 months), the trends have been long lasting and clear enough that the times I've been 'saved' (from the big bad bear markets) have made up for the whipsaws.

What I fear most is volatility. Non trending markets could kill me slowly.

[OE2008]

So far I havent had this problem, as since I've been following IBD (abt 18 months), the trends have been long lasting and clear enough that the times I've been 'saved' (from the big bad bear markets) have made up for the whipsaws.

What I fear most is volatility. Non trending markets could kill me slowly.

BC,

Just curious, what were the broad market calls of IBD in the 17 months bear market and did it call the bottom at anytime from Mar 09 upto date. Hope you could share if it is not in breach of their proprietary rights (only the past will do; no need for current view).

I am considering whether it is worth subscribing to?

[BlackCat]

Hi OE2008,

The follow thru day for the current rally was 12th Mar, and it only broke last week (probably a false signal as it turned out).

So they did call the bottom. BUT there were false signals before that (sometime in June 08, 29th Jul 08, 2nd Dec 08), which I lost money on as they were not big enough to be 'tradable rally' (for me: 20% and at probably at least 4 weeks). Before this there was a small tradable rally in comodity stocks (Mar to Jun 08) correctly flagged where I made a bit.

In addition, some of what I recorded end of last year: http://profithunting.blogspot.com/2008/12/ibds-follow-through-day-does-not-work.html. Its point is that the FTD indicator is not to be followed blindly - from memory, IBD was even saying things like 'our indicator has turned positive but from market conditions we dont take this to be a rally'.

Sorry I don't have records of all their calls (other forumers may be able to help?) or time to collate them (on holiday now).

I gained more than I lost following it. But I could not adopt a stragegy of immediately going long on a FTD or going short as soon as they signal a downtrend.