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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (20130)	8/31/2003 5:47:59 PM
From: chowder	Read Replies (1) \| Respond to of 23153

Gottfried, Yes, RSH meets the criteria I look for in a selection. High relative strength number, and rising. Good money flows, which shows me the stock has underlying strength, (strong hands - institutional buying, more than willing to support the price on a pull back). In a good performing sector and one of the better performers in that sector. And, the price breaking out to a new high on above average volume. Now, this is important, especially those new to buying stocks that show strength. There are two guidelines that must be followed. 1. Losses must be cut at 8% max in the event of a price pullback. The reason for this is that these strong performing stocks have some very handsome gains for a lot of people. If the price stalls, and it always does, these stocks can pull back sharply on profit taking. It's not unreasonable to see a strong performing stock give back 20-30% of it's recent gain on a profit taking session. Although these stocks often make that territory back up rather quickly, we don't know when market conditions will change. Even the winners will lose money if the condition of the market turns bearish. So, one doesn't want to get caught holding the bag with a loss greater than 8%. 2. The entry on these stocks breaking out to a new high is important. The breakout price for RSH was $28. I don't want to buy a stock that has extended itself more than 5% above the breakout. The reason for this is that the breakout point is a new support level. If the stock pulls back to support, I can still hold the stock because it hasn't met my 8% stop. If the stock drops 3% below that support level, you have a false breakout and your 8% stop gets hit. Therefore, you don't suffer much damage, in the event the breakout isn't going to continue higher. The price was moving on anticipated news. When the news gets digested and people settle down, the price usually consolidates to start a new base. If you chase the stock too far up, the consolidation puts you in the red on your position, even though the trend is still up. So, entry is important from the standpoint that you'd like to catch that first 5%. RSH is 8-9% above the breakout point. Any weakness on Tuesday could be an opportunity to buy. I had a similar thing happen to me a couple of weeks ago on CLZR. (I think that's who it was.) The price started jumping because a company official let it slip to an IBD reporter that they would beat numbers and raise targets. I bought beyond the 5% extended point and got whipsawed on the "sell the news" crowd. I allowed the forward looking earnings to keep me in the stock because I thought that would provide further price gains down the road. The problem was I couldn't maintain good loss control because I bought when the price was extended. My immediate profits turned into a loss. I don't recall the amount, 6-7% I think. Anyway, the lesson learned was to not buy an extended price off a news announcement or an anticipated news announcement. Try to buy within the 5% breakout point or wait for the "sell the news" crowd to bring the price back down to support. CLZR's profit taking session on the "sell the news" has turned the entire technical picture around for CLZR. Sometimes these stocks bounce back quickly, sometimes they don't. That's why good loss control is necessary. stockcharts.com[h,a]daclyiay[pc20!b50!f][vc60][iut!Ub14!Lc20!Lg!Lj[$spx]]&pref=G dabum