5-2-16 Market Open

[Mike]

This is an interesting method. Thank you for posting Mike.

Two questions:

1. In today's environment, does this investor buy breakouts or does he follow the CANSLIM market direction calls?
2. Have you decided to use his selling rules and hence adapt your own method (adaptation is key to survival?)



Pascal

Pascal,

I have adopted the sell rules. I have made one change to the sell rules to accommodate gap up buying opportunities. I will chase a gap up on high volume. Ashish Dave in his presentation said he needs to place a buy within 2% of the pivot. He also said he will chase in a gap up situation. Instead of the classical pivot reference for sell rule #2, I use a close on Friday below the lows of the gap up day as the revised sell reference.

Nominally I follow IBD market calls; I will make buys before a follow-through day if quality stocks are setting up in proper bases and they break out. The one IBD market call giving me the most restraint is uptrend under pressure. There are no sell rules associated with the general market, just the six rules I listed. It is a system that has no discretion and thus a real candidate for someone who tends to overtrade.

In the table below I show the method applied to the rally that began with an FTD on 2/17/16. I don't consider the rally to be particularly robust, but you can see that the method keeps you out of trouble plus possibly allows for significant gains. The only stock on the list that does not conform to the 100% above-average breakout is MTSI, a stock I owned at the time from an alternative buy point that was 7% lower than the pivot. With the mentioned exception, the table shows the stocks with good CANSLIM traits that broke out on volume 100% or greater than average. I didn't necessarily capture 100% of the buy opportunities, but with a diligent effort, I am sure I caught most of them. The current performance is summarized by unrealized and realized P/L.