6-22-12 Comments

[Riskslayer]

Hi Mike,

I thought the overall failure rate of all FTD's (regardless of DD's) was around 60-65%.

Last Th, Jun 21's DD would have been a d4 DD.

The high failure rate stats you cite for DD's on d1, d2, and d3 are certainly consistent with everything I heave read or heard on the subject from you and others (e.g. Minervini, Zanger, etc)...

But, mathematically, a 30% failure rate relating to a d4 or d5 DD would actually be much better than the *average* FTD.

30% seems too high to me, I would have guessed d4 or d5 DD would lead to something like a 70-75% failure rate?

Assuming 30% is the correct number, what am I missing?

Thanks,

Shawn

[Mike]

Hi Mike,

I thought the overall failure rate of all FTD's (regardless of DD's) was around 60-65%.

Last Th, Jun 21's DD would have been a d4 DD.

The high failure rate stats you cite for DD's on d1, d2, and d3 are certainly consistent with everything I heave read or heard on the subject from you and others (e.g. Minervini, Zanger, etc)...

But, mathematically, a 30% failure rate relating to a d4 or d5 DD would actually be much better than the *average* FTD.

30% seems too high to me, I would have guessed d4 or d5 DD would lead to something like a 70-75% failure rate?

Assuming 30% is the correct number, what am I missing?

Thanks,

Shawn

Shawn,

You are right that the overall failure rate is high for any FTD when the criterial for failure is a rally where the market does not go up 10% or more from the FTD and the rally last at least 5 weeks which is the criterial I usually use. IBD didn't disclose their criterial which is obviously looser. But both sets of data show extremely high failure rates for distribution very close to the FTD.