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INM Aug '06 - Skeptics and Fans Have Contrasting Points of View
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
In the more than 10 years that I have been publishing market commentaries and stock analysis I have encountered a small handful of people who I would have to label as “unduly skeptical” of my work after suffering a routine defeat where a stock failed. Of course, I have also heard from those who have enjoyed some tremendous success and taken time to share their stories of victory. I will continue to work hard to confront the skeptics and point all toward victory. Meanwhile, these stories must be shared.
One such encounter with a skeptic recently centered on the action in a company called Alliance Data Systems Corp (ADS), a high-ranked leader that was recognized as a recent standout by CAN SLIM® standards. A reader complained that ADS had been “crushed”, and as they put it, “with no indication that it should be sold until 7/20/2006.” What was amazing was that the person had not followed along with the daily analysis that was provided on the stock which clearly cited the 7/13/2006 violation of the 50-day moving average (DMA) line as a sell signal. In fact, there were daily mentions leading up to that day that had repeatedly called attention to the importance of support at the 50 DMA, warning that, “A considerable break below technical support would be a sell signal.”
For several days after that 50 DMA violation, the 7/14/06 low of $51.59 was cited as the next important point to watch for support. Our notes on the stock said, “An eclipse of the recent low ($51.59) would be a concern and 8% below the purchase price would be a sell signal.” Anyone that was toughing it out in the stock should have known without question that the 7/20/06 technical breakdown on heavy volume was yet another clear sell signal.
However, there seems to be at least one person in the world who insists that the coverage provided on ADS was misleading. Eventually, after my pointing out all that had been done to communicate key points of the analysis provided on ADS, I even went so far as forwarding a screen capture showing where an anonymous customer of mine bought ADS, then sold it for a loss on 7/13/06, exiting on the day it had first flashed a clear sell signal (and was noted accordingly). Of course, this was my way of demonstrating how disciplined investors limit losses once a stock falls 7-8% from their buy point.
At that point the battle was lost. The skeptic decided to cancel his membership and forever be a skeptic. I see this as an example that, rather than follow the rules and have faith in the proven system, some people just want to do whatever they think is best, and on top of it, they want to blame others for their failures instead of taking responsibility for their actions.
Thankfully, I received a call from another member later that same week. He had a dilemma about how to handle his position in another stock we have written about before. It turns out that he had bought 1,000 shares of Hansen Natural Corp (HANS) at $14.00 back in early 2004 when he had heard me mention it on the radio and seen it in the reports. Along the way it has split 2-for-1 in August 2005 and 4-for-1 on July 10th, 2006. He had sold some shares earlier and recouped his initial investment, so he didn’t have 8,000 shares, but he had still held on to 6,000 shares. Trading at around $45, those shares are now worth about $270,000. Obviously, he is a believer and not a skeptic!
Even more amazing, this person pointed out that it was only because of his holdings in HANS that he had been able to purchase a piece of commercial real estate. And after owning the property less than a year, a buyer offered him a price that was about $60,000 more than he had paid for it. He sold the property and realized a large capital gain, but that gain made the thought of selling HANS for additional gains seem undesirable. But unfortunately, when you have a big winner and it is finally time to sell, you can’t spend a lot of time worrying about the tax consequences. The best thing to do is sell when you’ve identified clear signs of deterioration, pay the taxes, and move on.
We talked about the idea of buying put contracts or any options strategies that might be used to lock in the gains without actually incurring any great tax consequences. I pointed out that when I took the CAN SLIM® Certification program out in
It would not be right for me to take all of the credit for the huge HANS win, or take all of the blame for the disappointing action in ADS. There are a lot of tough decisions that need to be made by investors along the way. I feel confident that I am doing a good job as long as I am doing my best to point out the most ideal buy candidates, then calling attention to the ongoing buy signals and sell signals.
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net :
Kenneth J. Gruneisen has successfully completed the CAN SLIM® Certification Program. Mr. Gruneisen became a Registered Representative in 1987 and his career includes experience offering personalized assistance to investors with more than a decade of experience as a Registered Principal managing a branch office.
The recommendations made by CAN SLIM® certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil & Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil & Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.