C-A-N-S-L-I-M: A Simple, Easy to Use Stock Picking System Message Board

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Non-Tech : C-A-N-S-L-I-M: A Simple, Easy to Use Stock Picking System

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To: Jeffrey L. Henken who wrote (10)	7/12/1999 1:30:00 AM
From: John T.	Read Replies (1) of 42

Buying at the Right Time -- Jeffrey, in your last post you used the term "over bought." I don't know if you are referring to the fact that MNMD is near an all time high or that its Stochastic indicator is over bought in that it is above the 80 reference line. Perhaps you are referring to both events. In any event, you are raising an issue of timing -- buying at the right time. The N in CANSLIM stands in part for "New Highs: Buying at the Right Time." According to O'Neil the right time to buy a stock is when it is close to or actually making a new high in price after undergoing a price correction and consolidation (base-building period). You should avoid buying once the stock is extended more than 5% or 10% from the exact buy point off the base. The Stochastic indicator is a short-term timing indicator. It indicates whether a stock's price is overbought or oversold in relation to its recent past. It is not unusual for the Stochastic indicator to remain in an overbought condition for a long time period as the stock's price continues to climb. I would not refrain from buying a good CANSLIM candidate just because it is at an all time high or because its Stochastic indicator is over bought. Macrovision Corp (Nasdaq:MVSN) is a good example. Take a look at the price chart for Macrovision Corp (Nasdaq:MVSN): clearstation.com You will see a classic cup-with-handle formation. The cup extends from on December 21, 1998 to April 30, 1999. The handle extends from April 30 to June 2. The break out from the cup-with-handle came on June 2. On that day, MVSN closed at 56 1/4, an all time high, and the Stochastic indicator was in over bought territory. June 2 was the right time to buy MVSN. Also, notice that since mid-June, MVSN has advanced more than 20 points while its Stochastic indicator has been extremely over bought. MVSN shows that sometimes the right time to buy a stock is when it is at an all time high and when its Stochastic indicator is over bought. At this time, MVSN does not qualify as a buy under CANSLIM because it is over extended from its base-building period. MVSN is on my watch list. If it enters into a new price consolidation pattern, like a flat-base pattern, I may consider buying on a break out. OT Jeffrey, how do you create italics and bold type in your messages?

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