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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: The Philosopher who wrote (23)7/14/1999 1:25:00 AM
From: John T.   of 42
 
Buy at the Precise Pivot Point

Christopher, your comment raises the issue of timing:

But the problem I see is that the canslim method seems not to take the current price into account anywhere. It doesn't even look at how the current price fits with past prices.

The N in CANSLIM stands for "New Products, New Management, New Highs: Buying at the Right Time." This principle of CANSLIM takes current price and its relation to past price into account.

One of the objectives of CANSLIM is to buy a stock at the beginning of a big move in price. Precedent shows that big moves usually come after a period of price correction and consolidation.

To qualify as a buy under CANSLIM, a stock should be close to or actually making a new high in price after undergoing a price correction and consolidation. According to O'Neil, the winning investor will buy at precise pivot points. This is when the stock breaks out of its base building period. The day's volume should increase by at least 50% above normal. If you buy before the pivot point you are premature and the stock may never reach the pivot point. If you buy more than 5% or 10% past the pivot point, you are too late.

Each night I scan a Weekly Report of Stocks Approaching or At New Highs in Daily Graphs. I see many stocks that meet all the requirements of CANSLIM, except the requirement to buy at precise pivot points. These CANSLIM candidates are extended more than 5% or 10% above their precise pivot points. Buying any one of these stocks would be gambling. I think this principle of CANSLIM is often over looked by investors.

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