Watchlist Performance

[Mike]

Many of you indicated in a survey that Pascal took that your investing time frame is medium to longer term. Some of you know that I as a CANSLIM investor have a medium to longer term horizon and have been posting a watch list of CANSLIM high growth stocks in the stock selection portion of this site. Pascal provided me a tool that allowed me to estimate the historical performance of picks. I summarize some of it here.

In general 71% of the long picks have ended up with gains or the positions are actively held with gains. Many of the positions are considered still active in the sense that they have triggered a buy signal and have yet to trigger a sell signal. I list the current active picks here along with the date the symbols were uploaded to the site, the date the buy trigger was activated and the Trade Profit/Loss to date. The active list of stocks are here:

21944

The stock picks that have either stopped out at a loss or have triggered some other sell rule (often hitting a profit target) are here:

21945

The normal stop loss for my portfolio is 7% of purchase cost. This is why there are many trades closed out at a 7% loss. The normal profit target for running my portfolio is 25% unless the stock is exhibiting very strong performance and then I look for ways to increase the profit target. In this analysis if the stock price after triggering a buy order closes below the 50-day moving average and then subsequently undercuts the lows of that day the stock is sold as it undercuts the low. Undercutting the 50-day moving average is usually a sign of pending failure.

[Pascal]

These are great returns Mike!

One question: is there a reason why most of the losing positions come from the 50D bounce rule?

Should you not reconsider that rule and maybe avoid it all together? It could be that leading stocks that come back to their 50MA eventually fall below it and fail? You maybe could use some "porosity" factor for picks that follow this specific rule, because they are around the "50D danger zone."

Anyway, this is what jumps to the eyes when I see the Active and Closed trades organized as you did.


Pascal

[Mike]

These are great returns Mike!

One question: is there a reason why most of the losing positions come from the 50D bounce rule?

Should you not reconsider that rule and maybe avoid it all together? It could be that leading stocks that come back to their 50MA eventually fall below it and fail? You maybe could use some "porosity" factor for picks that follow this specific rule, because they are around the "50D danger zone."

Anyway, this is what jumps to the eyes when I see the Active and Closed trades organized as you did.


Pascal

Pascal, thanks for the insight. In practice when I buy at the 50-day I don't let it go minus 7% before I cut and run. I will go back and adjust the sell rule when I buy at the 50-day to stop out if the price closes 2% or more below the 50-day which is closer to how I really operate.

[kimmd]

Mike-
Are you using a hard intraday stop of 7% loss or 25% gain or do you sell the next day based on the closing price violating the stop?
I enjoy your work!
-kim mcmorries

[Mike]

Mike-
Are you using a hard intraday stop of 7% loss or 25% gain or do you sell the next day based on the closing price violating the stop?
I enjoy your work!
-kim mcmorries

Kim,
This analysis uses a hard stop of -7% and +25% profit. In some cases stocks that are exhibiting really strong gains (up 20% in less than 3 weeks) the profit target is raised. Also, if a stock subsequent to purchasing breaks out of a new base the profit target is raised to 25% above the buy point in that base. An additional stop loss is used in the analysis if the case of a 50-day moving average failure. If a stock closes below the 50-day the intraday low of that day becomes a hard stop.

The 50-day moving average break rule actually reduces performance but this was adopted because in real life stocks that fail the 50-day causes many investors to cut and run. Pascal has noted that buying at 50-day bounces has reduced performance. I actually do well with my own purchases at 50-day bounces. I suspect the simple buy rule used in the analysis is too simple. When I buy at the 50-day I am looking at the total market and making a decision as to whether the pull back to the 50-day is likely to be met by a bounce or is the general market giving clues that the whole market has an issue.