ParkTwain's Parlor

Good to hear from you Park.

[IIC]

Welcome back...Doug

Here is a copy of a note ("my approach to stock speculation") that I recently sent to a new online acquaintance:

------------------------------------------------------------------------

I operate in the stock market only (no options or other).
I am interested only in "price breakout setups" (and
follow-throughs from breakouts) involving a stock
making an all-time high price. That is, I'm less
interested in the company's fundamental business
activities than in how its stock is behaving compared
with its own past history. I have been interested
in finding HIGH PROBABILITY scenarios for stock price
gains -- that is, where there is a >50% chance of
at least 15% gain in about 3 weeks. I have had good
results in the past couple of years (when I have had
the time to devote to developing my ideas) by using
the following approach.

At the end of each day's market activity, I look for
all stocks making a new 52-week high and that have
at least a certain minimum RSI (a particular technical
indicator of a stock's strength versus its own past
history) reading. I can get this list at this website:

http://www2.barchart.com/high.asp?=&sort=8&what=ALL&force=high%2easp

For each stock on this list with an RSI of at least 65,
I examine the long-term stock chart to see whether
today's price is also a new all-time high, or is near
(whether about 10% above or below) that stock's all-time
high price. If today's price represents a jump just
above its previous all-time high, then that stock
becomes a candidate for me to buy in the near future
(depending on its behavior over the next few market
sessions). If today's price is just below that
stock's all-time high, then I add it to a "watch list"
in anticipation of the day when it will in fact
"breakout" beyond the all-time high price. If today's
price is just above (but no more than about 5%) that
stock's all-time high, then I will also consider
buying it, if certain additional technical indicators
are presently favorable.

When I buy a stock under these circumstances, I am
looking for a 10% to 20% gain in a matter of a few
weeks. If the overall market is bullish, this gain
can happen pretty quickly. I will carry up to
4 or 5 positions at one time.

The main sources of ideas that have influenced my
present thinking are:

* How I Made $2 Million in the Stock Market, by Nicolas Darvas

This book is about how a novice in the stock market
(1950s and 1960s) figured out how to watch for price
moves out of an established price range as being the
key to identifying a stock that will make a significant
run-up in price.

* How Charts Can Help You in the Stock Market, by William Jiler

This book is a set of lessons about various kinds of
important patterns that one can observe in a daily
stock chart.

Each of these books emphasizes the importance of
recognizing patterns of price, previously established
price ranges, and high-volume price moves above or below
an established price range.

You can observe for yourself, among any large set of
stock price charts that you want to view, that after
a stock's price surpasses its own all-time high,
that the rate of price appreciation noticeably changes
to the upside. You can look for this situation
without any close knowledge of the business that the
company is in, etc. For additional safety in making
selections, one can also consider the strength of the
company's industry, the stock's price/earnings ratio,
the stock's price/earnings ratio to earnings growth
rate ratio, etc.

I won't consider trading a stock whose price per share
is below $5.00 or whose average daily volume is less
than 50,000 shares traded per day.

I like to use the charting features of this web site:

http://tinyurl.com/m9397

//PT

I have been out of the market for the last couple of months, due to other things taking up my time. I have finally spent a little time tonight looking at a few charts based ONLY on today's list of new 52-week highs. Here are a few ideas for candidates for new long positions based on all-time high breakout scenarios.

----------------------------------------------------------
(data as of 4/27/2006 market close)
(* = bending my own rules a bit to consider this stock)


BUY NOW Candidates - very recent all-time high brkout on HIGH VOLUME (brkout date)

ASX (4/27/06) New news re Taiwan's legalization of Taiwanese chip
companies building plants in mainland China
BAC (4/27/06)
CB (4/25/06)
CHH (4/26/06)
CSGP (4/27/06)
DP (4/27/06)
NGA* (4/27/06)
SCL* (4/27/06)
SYM (4/27/06)
TMK (4/27/06)
WFC (4/27/06)
WOOF (4/27/06)



Within 10% ABOVE prev ATH of at least 30 calendar days ago
(these should be relatively safe to buy and hold for
about a 10% gain over some number of weeks)

AMP, AP
BWP
CE, CELL, CHKE, CLX, CSR
DKS, DLLR
FD, FLA
IBI, IFS
MANT, MYE
NSR
PBG, PFWD
SIAL, SPSX
TOO
UACL*, UPCS
ZVXI


WATCH LIST, within 5% BELOW prev ATH of at least 30 calendar days ago
(be prepared for an upcoming breakout scenario
for these stocks)

ATAC
BBW
CL
DTV
GMT
IIVI
JILL
LTD
SUMT*
UTK

[Gatorman]

Did you have a change of heart out there in Vegas and are concentrating on Roulette rather than stocks?

[IIC]

Yeah...where are you Park???

Park,

Hope everything is ok or that you are on vacation.

Miss reading your posts...


Tag

Today's list of new 52-week highs is 14 pages long. Amazing!

http://www2.barchart.com/high.asp?=&sort=8&what=ALL&force=high%2easp

Bought EVST and NICH this morning. Almost bought SINT but will wait.

Here's a really interesting article from Brett Steenbarger about the nature of the market's decreasing volatility: http://biz.yahoo.com/tm/060313/14038.html

Here's the punch line:

//
Before I present some eye-opening findings, allow me to propose a thesis:

Every market has its personality, and that personality is defined by two traits: Volatility and Trendiness. A volatile market is one that moves a great deal from time period to time period. A trendy market is one that tends to move in the same direction from one period to the next. Over time, markets change their personalities, which is to say they change their volatility and trending. This is part of what makes markets so difficult to trade: just as traders adapt to one market personality, another is likely to take its place.

What we've seen in recent years in the S&P 500, however, is a personality change worthy of Jekyll and Hyde. I believe this accounts for the common perception among retail and professional traders alike that the recent period has been one of the most difficult on record to trade. ...

So let's put these findings together: We are seeing reduced volatility *and* we are seeing reduced trendiness. That means that traders are able to take less movement out of trades *and* they are less likely to see movement carry over from one period to the next. Is it any wonder that traders are experiencing such difficulty? We have never seen a market personality quite like this one, in which low volatility has also been accompanied by low trending.

But now the bad news. I've also performed historical studies of trendiness on a five-minute basis (reported on my research site). The proportion of trending occasions is nowhere near even the one-half level; it's more like one-third. That is because of the low volatility: a third of the time the market doesn't move at all (price stays constant) and another third of the time the market reverses. The short-term momentum trader is thus in the worst of all possible worlds, as low volatility produces a lack of movement and low trending produces a lack of follow-through on moves.

I believe traders--especially short-term traders of the stock indices--need to take these findings very seriously. To the extent that the loss of trending is created by increased arbitrage and program trading, there is no assurance that it will reverse. Moreover, we've seen that the loss of volatility in the market can also persist--and even get worse. To blindly hope that the market will "get better" is not a trading plan, much less the plan for a trading career.

The good news is that there are trading instruments with far higher levels of volatility and trendiness, and those include many individual stocks. (One look at this is on the Trader Performance page of my personal site). Note that this makes stock picking and portfolio selection more important than ever. There aren't any universal laws in trading, but this one might come close: Make sure the personality of what you trade fits with how you trade.
//

Here are the results of my latest batch of research.

I spend most of my time looking for stocks that are just breaking out to all-time highs (ATHs). As a by-product of this research, I also find a few other kinds of setups. I will do a position trade at no more than 5% above support and look for a quick 10% to 15% gain by about 10 market days. In almost all general market conditions, I can use this approach to find many more candidates than I can actually trade. I will open positions in no more than 5 stocks at a time.

I always start by looking at each day's new highs list (sorted by Relative Strength Index) found here:

http://www2.barchart.com/high.asp?=&sort=8&what=ALL&force=high%2easp

I look for stocks making a new ATH (or just passing resistance that leads to a very high next resistance level) vs. a previous ATH made at least 30 day ago and where the RSI is at least 65 and uptrending for at least 1 month. Wilder ADX and Chaikin Money Flow are my preferred corroborating technical indicators, found at stockcharts.com.

I will update the lists below after I dig into the technicals of these charts during another day or two of work.

>> = best looking opportunity based on a superficial price-volume chart read.

* = stock that does not fully meet my preferred criteria (at least 5.00/sh, at least 50K avg daily volume per Yahoo quotes; no banks, no REITs, no foreign companies, no insurers, no electric utilities, no mining, no trusts or funds)

-------------------------------------------------------------------------

CATEGORIES OF SETUPS:

* High Next Resistance (including bullish gap fills)
* Imminent ATH Breakouts (use alert to signal breakout)
* Recent ATH Breakouts (WATCH for any retracement)
* Recent ATH Breakouts, followed by support test
* Turnaround after long-term downtrend
* IPOs after bounce


DATA COVERAGE: market closes from 3/2/2006 to 3/13/2006



---High Next Resistance (including bullish gap fills)
---(Some of these have not quite broken out to reach the zone of high next resistance.)

ACXM, AIRM, ALXN, AMCC, AMKR, ARGN, ARNA, ARTG, ASYT, ATRL, AVNX, AWGI, AZPN
BDY, BEL, BLD, BWNG
CCUR, CGTK, CHMP, CHRZ, CPSS
DAR
EDS, EGLS, EXEL, EXFO
FCGI, FFIV, FIX, FNSR
>>GLW, GPI
HYC
IFSIA, IKN, ININ
LGTY
MEH, MEK, MYGN
OATS, OPNT
PMCS
RNAI, >>RTN
SHLO, SILC, SMSI, STEL, >>STLW
TNOX, TTG*, TWTC
>>URI
VYYO
ZOLT



---Imminent ATH Breakouts (use alert to signal breakout)

>>ABAX, ADS, AFG, AIR, ALD, AVM
CMC
DLLR, >>DRS
ECOL, EYE, EZPW
FLOW
GIII
HCR, HOM*
ICTG*
KERX, KMX
MIL, MNKD, >>MPR*, MVK
NBIX, NC, NDAQ
PAY, PJC, PMI, PWEI
RMK, RNT
SAFT, SYKE
THLD, TOO, TTI
VVI
X



---Recent ATH Breakouts (WATCH for any retracement)

ALOG, >>ALNY, >>ANDS, ASF, >>ATU
CONR, >>COST, CSL
>>DDE, >>DRS, >>DTG
ECL, EFD, ESCH
FDC, FDX, >>FUL, FVE
GBX, >>GD, GFX*, GRMN
>>HEI
IED, IOTN
KNL
>>LFB (acq target)
MDCI
>>NOC
PAY, PCYO*, PROS*
>>RONC*, >>ROP (look for retrace to ~43/sh)
SCST, SINT, SRCL
USAP*, >>UUU*
VTIV
>>WY



---Recent ATH Breakouts, followed by support test

AKN*, AVL, AWR
BABY, >>BECN
CHAP, CTSH
ESLR, >>EVST
>>FTO
IPSU
>>KNOT
>>LFB
>>NICH
>>PH
SPN



---Turnaround after long-term downtrend
---(Sellers likely are extinguished.)

ACME, APAC, APN
DDIC
EVOL
MFA
TRMS
UPCS



---IPOs after bounce
---(Fundamentals and the company's "story" figure more prominently for these.)

ACUS
DEIX, DRH
LVS
MWIV
>>QLTY
>>RNVS, RUTX
UDRL

Bought some IOTN this morning. Watching ECL after yesterday's breakout.

That's why I posted that link to the ESPN.com page. It shows on Duke's schedule to date the ranking of the teams played. I take it that the ranking shown for each of Duke's opponents was as of the day of that game.

[skiracer]

Duke has beaten only one team (Texas) that was Top 10 at the time all year. (Redick had 41 in that game with 9 3-pters, and Texas guards had lots of turnovers.) They just barely beat Memphis, Boston College, and Va. Tech. So I'm not sold on their chances in the tourney beyond the Sweet 16.
http://sports.espn.go.com/ncb/clubhouse?teamId=150

I'm pretty sure Memphis was #6 when Duke beat them. Boston College was #10 an at home. Texas was #2 at the time Duke beat them. But none of that means anything in the tournament. Does Duke get a #1 seed? If not who are the #1 seeds.

Sorry, I was way off on Memphis and BC.

I thought Memphis was Top 10 at the time?