Hi Paul <CA>. This was a rare case where we did not get at least one P&F sell signal before the carnage. IMHO, the value of P&F is that you see the smart money getting out before the big drop.
I have an on-again, off-again study where I go to the library to research the old Investor Business Dailies, looking for stocks that pounded 20% or more over a very short period of time. From this list of stocks, I throw out all stocks that are not Value 1 or 2, or not above their Bullish Support Lines (BSL) or not having an RS in a column of X's. This eliminates 90% of the stocks. So far (over 18 months or so), every single stock that had RS in a column of X's, VL 1 or 2 and above it's BSL gave at least one sell signal before the damage was done. There is an old post where Tom Dorsey, posting through Jan, gave an example of how DURA, a strong stock, gave several P&F sell signals before it dove. Wish I could find it.
My point is, that in the vast majority of cases a solid stock will give several P&F signs of weakness before it gets killed. CA was obviously the exception. IMO it was the exception because the insiders were also caught by surprise and therefore their sales did not come early enough to tip off the chartsters. I know that there was insider selling last month, but no more than normal.
Stick to 1) good fundamentals, 2) above the BSL and 3) RS in a column of X's and you will probably have plenty of warning before a stock tanks. CA was the exception.
duke60 |
