Adairm, I'm an investor/trader. I use O'Neil as part of my investing and position trading program.
Yes, his new book and the information provided at their new site does break some new ground. Additionally, since things have changed in the markets he's updated some of his ideas. I'd recommend it.
In reviewing the posts on this board it's appears that most fall into one of three categories. (1) They don't have a clue concerning what O'Neil's work is about or (2) they have been exposed to some of his ideas in a brief manner by reading the books once; seeing posts on message boards; read some articles in the paper; etc. or (3) have studied his program in some detail.
Unfortunately, those in categories (1) and (2) aren't going to be able to offer much as it pertains to O'Neil and when they do it's probably going to be incorrect. In (3) you will find those that follow his methodology to the letter or those that have made changes to it whether they realize it or not.
In my postings I've tried to follow his ideas without breaking any of his rules. The reason is simple. If someone is trying to learn his program and they see examples that don't exactly follow what's stated in his books, IBD, etc., they will probably be confused.
I'll admit I'm not very good in expressing myself in an orderly and logical manner when putting out messages. That can be a cause for confusion and when done I've tried to correct them.
BRCM is a great stock but it's handle fell further than O'Neil recommends. It didn't have the proper buying action when it should have broken out. One could definitely have bought MVSN when you mentioned but again the handle was technically wrong. Experienced O'Neil users will sometimes make exceptions to the rules and get away with it-other times they won't. When they don't they'll probably exit before they are anywhere near the 7% to 8% loss that O'Neil recommends. They will know that the chart pattern is faulty and will move out quickly and frequently with gains before the stock price crash's through the pivot point.
My posting's regarding BRCM were intended to point out that the handle's decline is greater than accepted by O'Neil. That doesn't mean that someone with your experience might not buy it. That doesn't mean that it might not go on to much greater highs. What it means, as you well know, is that the probability of a failure in the breakout is much greater than it would be if the handle had only declined 10% to 15% and we had experienced volumes in excess of 150% when it rose through it's buy/pivot point.
The shorter time frame I mentioned is in regards to the possibilities of one of two things occurring for those that follow O'Neil's rules to the letter. In one instance we may form a new cup and handle with proper handle. BRCM has already passed it's pivot point and the formation of a new cup and handle is a possibility.
In the second instance, one that more experienced O'Neil users might use, would require that a new handle start forming right now. The high on Friday is slightly less than 5% past the earlier pivot point established on 7/17. In this instance, you could trace a cup from the 7/17 date to the 8/25 date, with an extended (higher) right side lip. A proper handle that doesn't correct more than 15% from that date and breaks out after at least seven or more days through a new pivot point (buy point) of $274 7/8 will provide the minimum necessary time for a new cup and handle of seven weeks.
If neither of the above occur, than anyone following O'Neil's rules probably won't enter it unless it establishes an ascending base pattern.
A long winded and probably confusing post, but for those that want to follow O'Neil's methodology there are lot's of things that have to be taken into account. Many people pick and choose the parts that they like. That's usually because after studying his program and then starting to implement it, many of the good charts used for entry purposes need to be discarded when certain parameters aren't met. When some of these companies do well, one is inclined to make adjustments. That's fine but for real O'Neil advocates, they know that his entire approach is based on finding the best companies and then buying them at the best time. If you do that then the probability of a failure has been reduced to a minimum.
In his books he indicates that it took him two to three years to learn his program. He says "For most people the learning curve is about the same." As he goes on to say, anything worth learning takes time. |
