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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: Jim Battaglia who wrote (5023)	7/12/1998 10:05:00 AM
From: JZGalt	Read Replies (2) \| Respond to of 18928

You do need to take into account where the price is into relationship to its high. Tom suggested something similar when I looked at initially starting up the AIM portfolio related to the oil service industry and after thinking about it for a while I discarded it. My reasoning went like this: If you assume that you can position the cash level according to the history of the stock (or fund), then what do you do if you decide to buy something like CSCO or SWY or SAI??? With a low in the past 5 years around 8 and a high above 90 and a current price above 90 in CSCO, the high/low calculation would put you squarely in the stratosphere on the cash percentage. If CSCO continues to perform and grow, it is unlikely that the high cash levels would ever be put to work unless of course you put the Buy SAFE into negative territory. <grin> No matter how you use the previous high/low calculation or in whatever format, you are implicitly assuming that the stock is somehow going to revisit the general area of those lows and you need the cash level to provide funds for that day. I can see how this methodology would work if you were investing in old style cyclical industries or industries which have an inherent large boom/bust pattern, but the some of the best money in using a method like AIM is in the growth cyclicals IMO. That is why I took a look at the site I mentioned before. This method had been fairly accurate (in various forms) of finding near term bottoms within a sector. I speculated that if AIM cash levels were to be deployed in a near term bottom, then they should be relatively low. Admittedly, all of this is from looking at the methodology for less than two weeks and playing with the software for a few days so take the observations with a very large grain of salt. ---- Dave