Canslim

These are my most recent stock trades using CANSLIM. I have pretty much been doing this for my own longer term stuff (longer term for me meaning over a few days anyway ) and for a small managed account. So far I have had my best year ever with it and I like it.

Brandon
 
Quote from billb2112:

Thanks for taking the time to reply and show the charts. I can see the cup and handle for CHKR, and I really don't have a problem identifying it especially after the fact, but what made you get in at 9.90? I see the handle drifting downward and you bought at that point. I thought it was supposed to be two or three days to form the handle, then 2 days of high volume breakout before you buy.

I haven't O'Neills book in quite some time. I'll revisit the 30 pages he takes to explain this and see if I can get a better understanding.

As far as the other charts you showed, I didn't really a hard cup and handle formation. That's the subjective part that gets me I suppose.
More...

I got out at $9.90 just coz once a stock is above $10 I always tend to think of it as a strong point that Id not like to see it break..so when it did break it I just got out.

Personally I have not had very good luck with the cup and handle pattern, so I dont use it much. Id just rather look at a chart and see a nice base or a flag, something like that gets me a lot more excited than Cup with Handle. I think too many people watch it, so there is too much incentive to screw with it now. Thats only my opinion though, and others have great luck with the cup and handle...Im just not one of them.

Brandon
 
I was not going to post this one..but I just will and not put in the symbol. The reason I was reluctant is that it trades about 1000 shares a day, sometimes its trade 100 and sometimes not any at all. I have more shares then Id want to have to get out of all at once, but given the execution risk its still a very small position.

The company grew its earnings at 998% last quarter, 550% the quarter before that, 173% before that and 273% before that. Its a good example of why I dont look at RS though, as its RS rating at the time I got in was only 28. I am long from an average of $9.12 per share and am up about $1 right now.

Brandon
 

Attachments

Ahhh ... that's more of what I was looking for. I'd rather go in on something that's a little less subjective. I was thinking about resubscribing to IBD to see if I could make something work for my longer term investments as well.

Quote from Brandonf:

I got out at $9.90 just coz once a stock is above $10 I always tend to think of it as a strong point that Id not like to see it break..so when it did break it I just got out.

Personally I have not had very good luck with the cup and handle pattern, so I dont use it much. Id just rather look at a chart and see a nice base or a flag, something like that gets me a lot more excited than Cup with Handle. I think too many people watch it, so there is too much incentive to screw with it now. Thats only my opinion though, and others have great luck with the cup and handle...Im just not one of them.

Brandon
More...
 
One of the areas aside from RS that I tend to not exactly follow O'Neil on is PE ratio. I am by no means a value investor, but I like to see some sort of value component in a stock I am buying. One of the filters that I use is that the PE on the stock can not be more than 10% above that of the SP500, and my preferance is to see it at no more than 2/3 of the SPs overall PE.

Brandon
 
I don't use CANSLIM but I use a method highly-correlated with it, but using different technical criteria and a lot more risk management. It's done well over the past 3 years. Long term canslim performance has also done will since 1997 when AAII started tracking it (along with many other mechanical systems).

I can't speak to canslim.net specifically, but I would suspect that if their picks are canslim based, that their returns would highly correlate with the aaii returns for the canslim methodology.

From AAII:

2000 38%
2001 54.4%
First half 2002 15.4%

Note that the AAII model has no market timing element, so it can not implement the 'M' part of CANSLIM. This likely impacts performance in a negative way. Eyeballing the chart going to June 03, the performance looks great (which would match well with my results for this year). Overbought RSI is irrelevant, in my view. The only relevant factor is: does the system make money if followed. The indication seems to be yes, it does.

Again, I have no experience with canslim.net specifically, and am speaking of the canslim methodology in a general way.



The reason I ask
Is that everyone uses the premise that it's supposedly a good way to pick stocks for a longer term investment. Perhaps there is some merit, but I was never able to get it to work consistently.

I have read both of ONeill's books and had subscribed to the online and print IBD. And tried to implement the method faithfully. I finally decided I could do better on my own, daytrading rather than trying to implement this system.

My problem with the system is that by the time a stock came up on the radar screen, it already had a high RSI and had already been "discovered." And as such might just as well go down as go up in price, as some of them being in the overbought condition. Also the newsprint edition had what I consider a lot of "old" information. Always referring to "IF YOU had done this", here would be the results. All of the examples in total hindsight, and no specific picks beforehand.

If you could find stocks that met all of the other CANSLIM criteria, but had RSI's in the 70 to 85 area, maybe it would work.

So that's why I legitimately ask, is this working for anyone else in a consistent manner and how are you actually picking your stocks? And if the system is so reliable, why doesn't the above mentioned site actually have the brass to pick stocks and show the results?

I guess my mind is closed, at least for the time being, until someone would demonstrate the consistency of the approach.
More...
 
I don't use the cup & handle formation, as it's subjective. I've replaced some of the canslim criteria with other technical criteria. I don't use follow through days or distribution days either, I have other market timing criteria.

The basic concepts of canslim I have not changed though. Just modified some of the technical criteria and added a bit more in terms of risk management and positional sizing (mostly using fixed fractional betting, volatility based stops, a portfolio low water mark to go to cash for a defined period of time a la elder, and a maximum outstanding amount of risk at any one time.

WON's big weakness is in sell rules, he has dozens and dozens of them. The rule of taking most of your profits at 20% unless the stock made that gain in a very short time is a good one I think, but i've just used a simple trailing volatility stop. It's simpler for me to manage that.



Do you folks adhere to his buy and sell rules? More specifically, do you take anything with an 80 or above and wait on a cup and handle formation? It seems like the hardest part of the system is determining whether the cup and handle is a good one or not.

If you deviate from his rules, I'd be interested in hearing what you do. Even if you don't, I'd love to see a chart where you bought and sold.

I've read his book during the bear market days. I never applied any of his techniques in the real world because I didn't like the subjectiveness of the cup and handle.
More...
 
I am a strong supporter of WON's chart reading/TA teachings, however, outside of "top industry group" rating and his proprietary Accumulation/Distribution rating, I don't use his fundamentals.

WON teachs that earnings "makes stocks go up." A pure technician knows that stocks go up due to buying pressure. Why did Joe Public or Big Money buy? Yes, maybe good earnings. Also maybe potential future growth, improvement, etc. Maybe some Inside Skinny. Etc. But the end result is not "why did they buy" but it is "buying is going on, period. End of story."

By monitoring chart action you would see this, in the form of price rise, volume, time itself, etc.

AMR went from $1.50 to $15 on HUGE volume in March/April and started to make new highs. Did AMR fit the WON earnings profile? No.

There are other examples of huge opportunitie stocks that would not fit WON criteria.

Also, WON "shys away from" shorting. A technician trades up and down. Long/short is not an opinion, just a direction. Stay with the trend, etc. Standard trader stuff.

Will you make good profits with WON method? YES. That is documented, yes you will, no discussion.

However I recommend do not be "locked into" WON and be cognizant that other opportunites may exist, especially on the short side.

- PRO-Bill O'Neil but even he can be tricked by the funny-mentals
 
As a quickie follow-up, if two equally attractive stocks come across my radar screen I will assess the following criteria:

STOCK A

Industry Group: A+ (top group)
Accumulation/Distribution: A+ (undergoing strong accumulation by major institutions)

STOCK B

Industry Group: C (middle performing group)
Acc/Dist: B (undergoing some accumulation)


I this example I will likely purchase stock A, all other things, chart pattern, etc, being equal.

WON and also Weinstein teach that the underlying group/sector are responsible for a large part of a stock's move

anyway, my .02 cents

good luck
 
Quote from billpritjr:

I am a strong supporter of WON's chart reading/TA teachings, however, outside of "top industry group" rating and his proprietary Accumulation/Distribution rating, I don't use his fundamentals.
More...

Of course, if you eliminate everything but these two points, what you're doing has very little to do with CANSLIM.
 
You must log in or register to reply here.
Back
Top