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INM Aug '08 - Meet Ups Can Help Avid Investors Build Chart Reading Skills
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
CANSLIM.net


Having recently spoken to the directors of several Meet Up groups, it seems that the most avid followers of this investment system are most anxious to learn more about interpreting charts.  I had an opportunity to speak for the monthly Meet Up group in San Diego last week, and I will visiting the folks at the Santa Monica group on August 27th, where I plan to do my best at covering some of the most asked about topics.  (See http://ibd.meetup.com/ to find a local group near you.)  There is not enough that can be said about how to improve your trading using charts and Technical Analysis. 

The word that I have been getting is that more than just a couple of people in California are looking for something "more sophisticated" than a standard cup-with-handle chart pattern, or other bullish chart pattern.  They are clamoring for "early" entry points or "alternative entry points" they can make any argument for.  First, maybe one should ask if they are finding a fair share of successful examples following the textbook models of past great winners, or if they are getting frustrated or bored with trying to do that.  Either way, why are they now wanting to stretch outside of the system's guidelines?  Have they built a good profit cushion or achieved "above average" results in the past year by following the rules and being disciplined?  Where is the wisdom in straying from the guidelines which are specifically designed to stack the odds in investors' favor?

There is a word for this lack of discipline - cheating!   As a person dedicated to teaching others the right tactical way to approach investing in growth stocks, I don't believe it is the thing to do.  There is not a lot to be gained by getting into a stock early, before a proper breakout has occurred, as it might not ever break out.  We need to see the breakout with heavy volume to see the proof of institutional buying demand (the I criteria). In fact, there are even some cases where a perfectly sound looking breakout to new highs still faces some technical chart resistance.  Here is an example: Sun Hydraulics Inc (SNHY).

There was above average volume behind its July 30th, 2008 gain to a new all-time high, and that has it clear of all resistance due to overhead supply, which is good.   However, the upward trendline connecting prior chart highs is still a technical resistance level to have in mind.  Its earnings increases have been impressive, but sales revenue growth has been under the +25% guideline. And another thing to be concerned with is the fact that it has an earnings announcement due out within the next week.  So, if SNHY is going to rally for a several fold gain, would it really be that important to have bought it at $38 versus $42 per share? 

If anything, I would rather look for later entry points. Considering that it is still too early to tell if it will rise many fold, at least the breakout to new highs was a reassuring vote that a sustained rally may be possible.  Rather than worry about getting in early, I believe in waiting to see proof of heavy buying demand. And if it starts to make a more parabolic rise above the upper limit of its trading channel, that would make it more obvious that it is attracting institutional buyers.  In this case we are not talking about an example that already made a many-fold rise, so the stock is not dangerously extended from a sound base to where such a rally (above an upward trendline) might otherwise be considered an ideal time to sell into strength.

One of the most important things we can do is be disciplined about our buys.  If we start bending the rules, performance is likely to suffer.  Cheating is not the answer, and yet everyone seems to be tempted to try and get an edge.  I guess I keep going back to the point that the guidelines are there to help us keep our emotions and what we think out of the whole process.  The idea of injecting more guesswork into the decision making process seems to be inviting many potential problems.  Unless you've built a good profit cushion, you probably should stick to following the rules as carefully as possible. 

About 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.


Comments contained in the body of this report are technical opinions only and are not necessarily those of Gruneisen Growth Corp. The material herein has been obtained from sources believed to be reliable and accurate, however, its accuracy and completeness cannot be guaranteed. Our firm, employees, and customers may effect transactions, including transactions contrary to any recommendation herein, or have positions in the securities mentioned herein or options with respect thereto. Any recommendation contained in this report may not be suitable for all investors and it is not to be deemed an offer or solicitation on our part with respect to the purchase or sale of any securities.

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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.

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