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Strategies & Market Trends : The 56 Point TA; Charts With an Attitude -- Ignore unavailable to you. Want to Upgrade?

To: DanZ who wrote (24449)	12/20/1998 2:30:00 PM
From: Doug R	Read Replies (2) \| Respond to of 79275

Hi Dan, I guess I'll field this one for Ivan. A stock gaps down 30% or more. Such a stock is an optimal risk/reward buy AFTER the following occurs: First...wait at least 3 weeks after the gap. Then...track the price looking for the first day that it makes a new post-gap intraday low and closes with the bid at least one tick off the low on greater volume than each of at least the previous 3 days (the "signal"). Set a stop loss 2 ticks below the signal day low. I call it the Post Gap Dead Cat Exhaustion Bottom (PGDCEB). ASHW worked just decently after the signal on 12/8. I was able to sell for a nice % gain on that one but I bought back in on Thursday expecting a double bottom. When it performed another PGDCEB signal instead, it became an opportunity (actually a requirement) to avg. down on it. Looks like there's several of us in the same boat you've been loading up. Doug R

To: DanZ who wrote (24449)	12/21/1998 12:15:00 PM
From: ivan solotaroff	Respond to of 79275

Dan, Thanks for the post. The signal day referred to is a "trick" discovered by Doug, called the Post-Gap Dead-Cat Exhaustion Bottom (or PGDCEB). It's a play used for stocks that have gapped 30% or more sometime in the past, and are currently making a new low on volume signigicantly higher than the past three days, so long as the stock closes a tick or two above the low of the signal day. Yes, it is a form of climactic sell-off, and yes, a fall below 4 would trigger an automatic sell signal (actually, anything below 4 1/8 would, though I'd be tempted to endure another teeny bit of pain before I'd sell. I certainly wouldn't go into a close with the bid below the signal day low; that would be asking to get gapped down at the following open. My major concern with ASHW, which doesn't seem to have materialized, is that, as a sub-$5 stock, it is no longer marginable by non-market making Americans. Canadians and other "off-shore" people can margin (and therefore short) the stock, as can market-makers. That being the case, there is always a danger that you, as a long, are going up against someone else who, by definition, has twice your powder. So far that doesn't seem to have been the case, though I did see one 25K go by at bid. Good luck, especially if you do average down. Ivan