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canslim-digest      Wednesday, October 31 2001      Volume 02 : Number 1768



In this issue:

       [CANSLIM] Apologies...
       Re: [CANSLIM] Shorting Techniques, DougC and all
       Re: [CANSLIM] Shorting Techniques, DougC and all
       Re: [CANSLIM] Shorting Techniques, DougC and all

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

Date: Wed, 31 Oct 2001 10:12:35 -0700
From: Warren Keuffel <wkeuffel@xmission.com>
Subject: [CANSLIM] Apologies...

Sorry for taking up the bandwidth -- somehow I sent to the list what I
thought was a private message.

Warren


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- -In the email body, write "subscribe canslim" or
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------------------------------

Date: Wed, 31 Oct 2001 11:01:31 -0600
From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] Shorting Techniques, DougC and all

IMHO, TradingMarkets.com is a treasure chest. You know the old saying "when
the student is ready, the teacher will arrive"? That's how I feel about it.
It's a collection of people who are very knowledgeable about the markets and
trading in many time frames. What's unique about the site is that they
realize that successful trading is not about besting other traders, but in
successfully trading your "edge" (a Mark Douglas term). With that premise in
mind, they share their knowledge, experience and techniques in a friendly
environment. They are very customer responsive, very personable and very
dedicated to what they do. As always, everybody has their own opinions, so,
as others have commented in previous posts, there are participants like
Goran Yordanoff who leave. I suspect this was an ego thing. There were some
really nasty posts flying back and forth between he and others on the
Traderswire chat a few months back. Sometimes personalities just don't fit.

Give it a whirl. And, as I always say, if you join, mention me, I get free
prizes!!! <g>

Katherine
kmalm@earthlink.net


- ----- Original Message -----
From: "Andreas Himmelreich" <judgejimmy@web.de>
To: <canslim@lists.xmission.com>
Sent: Wednesday, October 31, 2001 11:02 AM
Subject: AW: [CANSLIM] Shorting Techniques, DougC and all


> Doug, Katherine,
>
> thank you very much for this discussion. I was wondering how to built up
> knowlege on the short side. Just ordered the book.
>
> What is so good about  TM.com?
>
> Andreas
>
<snip>


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

Date: Wed, 31 Oct 2001 10:53:18 -0700
From: DougC <dzc@qwest.net>
Subject: Re: [CANSLIM] Shorting Techniques, DougC and all

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Besides his suggestions of criteria for longs or shorts what I like about 
Bouchers book is his discussion of Economics.
After being an active investor for a couple years I'm beginning to see the 
advantages of getting a bigger picture outlook of what's going on with the 
US and Global economy and the impact of technology trends. He's also got 
very strong ideas about the social security, minimum wages, etc. Over the 
winter I'm going to be reading a  few of the other books he suggests.

For a time I was looking up the individual stocks on the new high and new 
low lists every day. But I find I dislike learning about a stock after it's 
already broken out of a pattern. So now I just use the lists to get an idea 
of the direction of the market. If neither side is above 50 for a few days 
or more than there's not enough conviction in any direction to get too 
heavily invested. Since I have a full time job I find it easier to just set 
up a watch list for shorts/longs based on my scans of DGO and keep an eye 
on those instead of going through all those lists on TM.  I'm following 
Boucher's suggestion to not add more than two shorts/longs per week. It's 
keeping me out of trouble. His suggestions for risk control and the timing 
of buying/selling are excellent. Far better and more reasonable than WON's 
I think. It was reassuring to me that Boucher,  a graduate in Economics 
from Berkeley, did research with a Stanford Phd that verified and enhanced 
a lot of WON's ideas. And I was surprised that Boucher is even more 
conservative in his stock selection than WON but also is not afraid to turn 
it all upside down and short stocks. Not sure why WON had such a hard time 
with shorting. Heck...even I can do it.

Here's how I use options. I go to CBOE.com. Look up the stock I'm 
interested in. Look for puts 1 or 2 strikes in the money and 4 to 6 months 
out (depends a little on volume - not all the stocks I pick have enough 
option volume to get a reasonable spread- and a lot of times the further 
out you go the less volume there is). I've looked into option valuation a 
little, but not a lot, and not sure it's worth the trouble. At least that's 
what my broker confirms. You'll find that not all stocks you pick to short 
even have listed options and then those that do are so thinly traded that 
you'll be taking on too much risk and/or paying too much of a spread to 
make it worth while. But my attitude has been once I find a stock with an 
option like I suggest above I pretty much have got to play it no matter 
whether it's theoretically over/under valued. If the goal is to play the 
stock in the direction it's going then option over/undervaluation is 
secondary. When a stock moves, if you've got an option that's in the money 
by more than 1 strike, it's pretty much going to move with it point for 
point. Hope that makes sense. I'm by no means an expert on options. Just 
giving you my point of view. I'm sure others here have a better 
understanding of option valuation than I do.


  At 10:22 AM 10/31/01 -0600, you wrote:
>Doug,
>
>Thanks so much for thorough reply. Isn't TM.com terrific? I've been a 
>member since early 2000, but only recently started reading Boucher. He's 
>scary smart. I just recently purchased his book after the TM conference, 
>so haven't dug in enough to absorb all of his techniques. What I learned 
>at the conference, however, was that he is a CANSLIMer at his core, but 
>has refined his technique to lower risk. Very attractive. (Also *love* his 
>notion of using the "mental bank" and have recently started work on 
>setting up my own.)
>
>I think your comment about patience is key. Seems like you need a steel 
>stomach and plenty of patience to play shorts to their best advantage. 
>Fine line between patience and knowing when the trade's working against 
>you, though.
>
>With respect to your scanning criteria, do you ever use the TM indicators 
>for Boucher's bottom RS/EPS/New lows list or any of the other downtrending 
>indicators? Or do you just stick to using DGO? If you do use TM 
>indicators, is your success rate better/worse/same as using DGO?
>
>I'd like to followup with you on using puts at some point. I've been doing 
>all my shorting in my cash account, but it drives me crazy that I don't 
>know options and can't take advantage of shorting in my SEPIRA.
>
>After I've absorbed all your input, I'm sure I'll have many more questions 
>for you!
>
>Katherine
><mailto:kmalm@earthlink.net>kmalm@earthlink.net
>>
>>----- Original Message -----
>>From: <mailto:dzc@qwest.net>DougC
>>To: <mailto:canslim@lists.xmission.com>canslim@lists.xmission.com
>>Sent: Wednesday, October 31, 2001 9:53 AM
>>Subject: Re: [CANSLIM] Shorting Techniques, DougC and all
>>
>>Hi Katherine
>>
>>I've only been playing the short side of the market since April '01. Just 
>>want to make you aware of my limited experience with it.  I only use Puts 
>>which limits my risk and which is why my broker allows it in my IRA 
>>rollover. I look for Puts about 4 to 6 months out and 1 to 2 strikes in 
>>the money.  The best guidelines I've seen so far for picking longs or 
>>shorts are those of Mark Boucher. He's got a book out called The Hedge 
>>Fund edge that lists his criteria for longs/shorts regarding both 
>>fundamentals and chart patterns. It's the best way to go for a beginner 
>>like myself. He also has a 10 week course on the Trading Markets.com 
>>site, that's free if you're a member, which has pretty much the same info 
>>on short selection as the book. But I think if you're not a TM member you 
>>can also just buy the course for something like 40 bucks if you go to 
>>tradersgalleria.com. There are guys like Goran Yordanoff who day trade 
>>and position trade using mostly technicals and money flow indicators of 
>>stocks he believes are overvalued. He was a big shorter of ADVP at it's 
>>'breakout' and apparantly did very well. I think his style is very 
>>advanced and would not recommend it for a beginner. But if you are 
>>investing full time and have access to all the real time institutional 
>>money flow info and are adept and reading charts and other technical 
>>indicators then I'm sure you could also do it.
>>
>>1. Just watching the major indices is the first step. Being aware of head 
>>and shoulder formations, double bottoms, price/volume action. The amazing 
>>thing about tracking growth stocks daily is that the number of stocks 
>>meeting your criteria for longs/shorts and the look of their chart 
>>formations is about the most perfect indicator of market direction there 
>>is. Some people also keep track of the number of daily new highs vs. new 
>>lows of stocks with EPS and RS greater than 80 for the longs and EPS and 
>>RS less than 50 for the shorts. If you're getting a whole bunch more long 
>>candidates than short candidates then you might want to lighten up on the 
>>shorts.
>>
>>2. I first sort through DGO for stocks with the worst fundies. Example of 
>>criteria are EPS and RS less than 50, last years annual revenues 
>>declining and next years est. of annual rev declining and last two 
>>quarters earnings less than same quarter previous year or negative. Also 
>>debt of greater than 50% and fund/bank ownership of stock over 20% help 
>>add down fuel. Criteria like that will pretty much guarantee you will be 
>>looking at stocks under the 50dma and 200dma which is where you want to 
>>be when you are playing the short side.
>>
>>3. Again Mark Boucher has good summaries of what he thinks are the best 
>>chart patterns. Basically it's the same chart patterns you would look for 
>>in a long but just upside down. i.e. inverted C&H, inverted flag or 
>>pullback from a low. The puts I've got on right now in DCN and EK were in 
>>runaway mode, meaning a few gap downs on increasing volume, then the 
>>stock based or pulled back up over a 4 week or more period then started 
>>to break down again. You jump in when they hit new lows.
>>
>>4. Most of my own short picks that I've made using the criteria I 
>>mentioned above have made money. Patience pays.  Since I use options I 
>>limit my entire position to 2% of my account since with an option it's 
>>always a possibility something can go wrong before you can get out and 
>>you can end up with a 100% loss. Mark Boucher doesn't necessarily have % 
>>numbers he follows for getting out of a losing trade. He uses the low of 
>>whatever chart pattern he's in. For shorts that would be the top of a 
>>flag. And for C&H, believe it or not, it could actually be all the way to 
>>the low (or peak) of the cup. But with options/puts I usually don't wait 
>>that long.I don't use technical indicators. Just price/volume action.
>>
>>5. With my puts I take half profits at 50% then try to hold out for 100% 
>>for the rest. That's the max.
>>
>>Hope that helps.
>>
>>Doug
>>
>>At 08:31 AM 10/31/01 -0600, you wrote:
>>>Wanted to followup on your comments in the TARO thread, DougC.
>>>
>>>I know WON isn't a great fan of shorting. He barely mentions it in 
>>>HTMMIS and generally blows off any questions about it in his seminars. 
>>>So that leaves me to my own vices! Frankly, I never shorted a stock in 
>>>my life until March 2000 and then it was easy. Pick a stock, any stock, 
>>>it'll go down. Well, at least until the first bounce. Point is, I've 
>>>been working to perfect my shorting skills (sure as I do so, Mr. M will 
>>>go right back up!).
>>>
>>>I've been accumulating notes from my experiences the last year and would 
>>>like to get feedback from the members as to:
>>>
>>>(1) Under what market conditions will you short or not short?
>>>(2) What is your best method for scanning for short candidates?
>>>(3) What patterns have created your best shorts?
>>>(4) What techniques do you use for managing your short positions? For 
>>>example, setting stops for profits, setting stops for stop-loss (i.e, 
>>>what signals do you use to know the position is moving against you and 
>>>what limit do you place), mental or open protective stops, etc.
>>>(5) What do you use to determine if you've been in the short long 
>>>enough? For example, is it based on time, % profit, change in pattern, etc.
>>>
>>>I found Stan Weinstein's book to be incredibly helpful, but it doesn't 
>>>really get to the nitty-gritty of these finer points. Would sure 
>>>appreciate any feedback.
>>>
>>>Katherine
>>><mailto:kmalm@earthlink.net>kmalm@earthlink.net
>>>
>>>
>>>
>>

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<html>
Besides his suggestions of criteria for longs or shorts what I like about
Bouchers book is his discussion of Economics. <br>
After being an active investor for a couple years I'm beginning to see
the advantages of getting a bigger picture outlook of what's going on
with the US and Global economy and the impact of technology trends. He's
also got very strong ideas about the social security, minimum wages, etc.
Over the winter I'm going to be reading a&nbsp; few of the other books he
suggests. <br>
<br>
For a time I was looking up the individual stocks on the new high and new
low lists every day. But I find I dislike learning about a stock after
it's already broken out of a pattern. So now I just use the lists to get
an idea of the direction of the market. If neither side is above 50 for a
few days or more than there's not enough conviction in any direction to
get too heavily invested. Since I have a full time job I find it easier
to just set up a watch list for shorts/longs based on my scans of DGO and
keep an eye on those instead of going through all those lists on
TM.&nbsp; I'm following Boucher's suggestion to not add more than two
shorts/longs per week. It's keeping me out of trouble. His suggestions
for risk control and the timing of buying/selling are excellent. Far
better and more reasonable than WON's I think. It was reassuring to me
that Boucher,&nbsp; a graduate in Economics from Berkeley, did research
with a Stanford Phd that verified and enhanced a lot of WON's ideas. And
I was surprised that Boucher is even more conservative in his stock
selection than WON but also is not afraid to turn it all upside down and
short stocks. Not sure why WON had such a hard time with shorting.
Heck...even I can do it.<br>
<br>
Here's how I use options. I go to CBOE.com. Look up the stock I'm
interested in. Look for puts 1 or 2 strikes in the money and 4 to 6
months out (depends a little on volume - not all the stocks I pick have
enough option volume to get a reasonable spread- and a lot of times the
further out you go the less volume there is). I've looked into option
valuation a little, but not a lot, and not sure it's worth the trouble.
At least that's what my broker confirms. You'll find that not all stocks
you pick to short even have listed options and then those that do are so
thinly traded that you'll be taking on too much risk and/or paying too
much of a spread to make it worth while. But my attitude has been once I
find a stock with an option like I suggest above I pretty much have got
to play it no matter whether it's theoretically over/under valued. If the
goal is to play the stock in the direction it's going then option
over/undervaluation is secondary. When a stock moves, if you've got an
option that's in the money by more than 1 strike, it's pretty much going
to move with it point for point. Hope that makes sense. I'm by no means
an expert on options. Just giving you my point of view. I'm sure others
here have a better understanding of option valuation than I do.<br>
<br>
<br>
&nbsp;At 10:22 AM 10/31/01 -0600, you wrote:<br>
<font face=3D"arial" size=3D2><blockquote type=3Dcite cite>Doug,</font><br>
&nbsp;<br>
<font face=3D"arial" size=3D2>Thanks so much for thorough reply. Isn't TM.co=
m
terrific? I've been a member since early 2000, but only recently started
reading Boucher. He's scary smart. I just recently purchased his book
after the TM conference, so haven't dug in enough to absorb all of his
techniques. What I learned at the conference, however, was that he is a
CANSLIMer at his core, but has refined his technique to lower risk. Very
attractive. (Also *love* his notion of using the &quot;mental bank&quot;
and have recently started work on setting up my own.)</font><br>
&nbsp;<br>
<font face=3D"arial" size=3D2>I think your comment about patience is key.
Seems like you need a steel stomach and plenty of patience to play shorts
to their best advantage. Fine line between patience and knowing when the
trade's working against you, though.</font><br>
&nbsp;<br>
<font face=3D"arial" size=3D2>With respect to your scanning criteria, do you
ever use the TM indicators for Boucher's bottom RS/EPS/New lows list or
any of the other downtrending indicators? Or do you just stick to using
DGO? If you do use TM indicators, is your success rate better/worse/same
as using DGO?</font><br>
&nbsp;<br>
<font face=3D"arial" size=3D2>I'd like to followup with you on using puts at
some point. I've been doing all my shorting in my cash account, but it
drives me crazy that I don't know options and can't take advantage of
shorting in my SEPIRA.</font><br>
&nbsp;<br>
<font face=3D"arial" size=3D2>After I've absorbed all your input, I'm sure
I'll have many more questions for you!</font><br>
&nbsp;<br>
<font face=3D"arial" size=3D2>Katherine</font><br>
<a href=3D"mailto:kmalm@earthlink.net">kmalm@earthlink.net</a><br>
<blockquote>&nbsp;
<dl>
<dd>----- Original Message -----=20
<dd>From: <a href=3D"mailto:dzc@qwest.net">DougC</a>=20
<dd>To:
<a href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</a>=
=20
<dd>Sent: Wednesday, October 31, 2001 9:53 AM=20
<dd>Subject: Re: [CANSLIM] Shorting Techniques, DougC and all<br>
<br>

<dd>Hi Katherine<br>
<br>

<dd>I've only been playing the short side of the market since April '01.
Just want to make you aware of my limited experience with it.&nbsp; I
only use Puts which limits my risk and which is why my broker allows it
in my IRA rollover. I look for Puts about 4 to 6 months out and 1 to 2
strikes in the money.&nbsp; The best guidelines I've seen so far for
picking longs or shorts are those of Mark Boucher. He's got a book out
called The Hedge Fund edge that lists his criteria for longs/shorts
regarding both fundamentals and chart patterns. It's the best way to go
for a beginner like myself. He also has a 10 week course on the Trading
Markets.com site, that's free if you're a member, which has pretty much
the same info on short selection as the book. But I think if you're not a
TM member you can also just buy the course for something like 40 bucks if
you go to tradersgalleria.com. There are guys like Goran Yordanoff who
day trade and position trade using mostly technicals and money flow
indicators of stocks he believes are overvalued. He was a big shorter of
ADVP at it's 'breakout' and apparantly did very well. I think his style
is very advanced and would not recommend it for a beginner. But if you
are investing full time and have access to all the real time
institutional money flow info and are adept and reading charts and other
technical indicators then I'm sure you could also do it. <br>
<br>

<dd>1. Just watching the major indices is the first step. Being aware of
head and shoulder formations, double bottoms, price/volume action. The
amazing thing about tracking growth stocks daily is that the number of
stocks meeting your criteria for longs/shorts and the look of their chart
formations is about the most perfect indicator of market direction there
is. Some people also keep track of the number of daily new highs vs. new
lows of stocks with EPS and RS greater than 80 for the longs and EPS and
RS less than 50 for the shorts. If you're getting a whole bunch more long
candidates than short candidates then you might want to lighten up on the
shorts.<br>
<br>

<dd>2. I first sort through DGO for stocks with the worst fundies.
Example of criteria are EPS and RS less than 50, last years annual
revenues declining and next years est. of annual rev declining and last
two quarters earnings less than same quarter previous year or negative.
Also debt of greater than 50% and fund/bank ownership of stock over 20%
help add down fuel. Criteria like that will pretty much guarantee you
will be looking at stocks under the 50dma and 200dma which is where you
want to be when you are playing the short side.<br>
<br>

<dd>3. Again Mark Boucher has good summaries of what he thinks are the
best chart patterns. Basically it's the same chart patterns you would
look for in a long but just upside down. i.e. inverted C&amp;H, inverted
flag or pullback from a low. The puts I've got on right now in DCN and EK
were in runaway mode, meaning a few gap downs on increasing volume, then
the stock based or pulled back up over a 4 week or more period then
started to break down again. You jump in when they hit new lows. <br>
<br>

<dd>4. Most of my own short picks that I've made using the criteria I
mentioned above have made money. Patience pays.&nbsp; Since I use options
I limit my entire position to 2% of my account since with an option it's
always a possibility something can go wrong before you can get out and
you can end up with a 100% loss. Mark Boucher doesn't necessarily have %
numbers he follows for getting out of a losing trade. He uses the low of
whatever chart pattern he's in. For shorts that would be the top of a
flag. And for C&amp;H, believe it or not, it could actually be all the
way to the low (or peak) of the cup. But with options/puts I usually
don't wait that long.I don't use technical indicators. Just price/volume
action.<br>
<br>

<dd>5. With my puts I take half profits at 50% then try to hold out for
100% for the rest. That's the max.<br>
<br>

<dd>Hope that helps.<br>
<br>

<dd>Doug<br>
<br>

<dd>At 08:31 AM 10/31/01 -0600, you
wrote:<font face=3D"arial" size=3D2><blockquote type=3Dcite cite>
<dd>Wanted to followup on your comments in the TARO thread, DougC.</font>=20
<dd>&nbsp;<font face=3D"arial" size=3D2>=20
<dd>I know WON isn't a great fan of shorting. He barely mentions it in
HTMMIS and generally blows off any questions about it in his seminars. So
that leaves me to my own vices! Frankly, I never shorted a stock in my
life until March 2000 and then it was easy. Pick a stock, any stock,
it'll go down. Well, at least until the first bounce. Point is, I've been
working to perfect my shorting skills (sure as I do so, Mr. M will go
right back up!).</font>=20
<dd>&nbsp;<font face=3D"arial" size=3D2>=20
<dd>I've been accumulating notes from my experiences the last year and
would like to get feedback from the members as to:</font>=20
<dd>&nbsp;<font face=3D"arial" size=3D2>=20
<dd>(1) Under what market conditions will you short or not short?</font>=20
<dd>(2) What is your best method for scanning for short candidates?=20
<dd>(3) What patterns have created your best shorts?=20
<dd>(4) What techniques do you use for managing your short positions? For
example, setting stops for profits, setting stops for stop-loss (i.e,
what signals do you use to know the position is moving against you and
what limit do you place), mental or open protective stops, etc.=20
<dd>(5) What do you use to determine if you've been in the short long
enough? For example, is it based on time, % profit, change in pattern,
etc.=20
<dd>&nbsp;<font face=3D"arial" size=3D2>=20
<dd>I found Stan Weinstein's book to be incredibly helpful, but it
doesn't really get to the nitty-gritty of these finer points. Would sure
appreciate any feedback.</font>=20
<dd>&nbsp;<font face=3D"arial" size=3D2>=20
<dd>Katherine</font>=20
<dd><a href=3D"mailto:kmalm@earthlink.net">kmalm@earthlink.net</a>=20
<dd>&nbsp;=20
<dd>&nbsp;=20
<dd>&nbsp;</blockquote>
</dl><br>
</blockquote></html>

- --=====================_236359916==_.ALT--


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- -To subscribe/unsubscribe, email "majordomo@xmission.com"
- -In the email body, write "subscribe canslim" or
- -"unsubscribe canslim".  Do not use quotes in your email.

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

Date: Wed, 31 Oct 2001 12:01:55 -0600
From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] Shorting Techniques, DougC and all

This is a multi-part message in MIME format.

- ------=_NextPart_000_0206_01C16203.D5BC5CC0
Content-Type: text/plain;
	charset="iso-8859-1"
Content-Transfer-Encoding: quoted-printable

Agreed on Boucher's economics outlook. Maybe the MBA in me, but when I =
look at a stock, I always "build a case" for it before putting it on my =
watchlist. Fundamentally, how is it doing? What gives its =
products/services competitive advantage? Is it sustainable? Who are the =
competitors? Even more important, what are the macro events that would =
drive its business and its industry? Is that a short or long term move? =
What is the macroeconomic environment that the industry is operating in? =
Is it sustainable/in flux? What fiscal or monetary events would =
help/hinder the move? I've always called it "building scenarios." =
Boucher has confirmed how important this is and then builds a more =
rigorous model around it. Got to love it.

Again, thanks for the additional input on shorting and options. Now I =
just need to percolate on it.

Katherine
kmalm@eathlink.net
  ----- Original Message -----=20
  From: DougC=20
  To: canslim@lists.xmission.com=20
  Sent: Wednesday, October 31, 2001 11:53 AM
  Subject: Re: [CANSLIM] Shorting Techniques, DougC and all


  Besides his suggestions of criteria for longs or shorts what I like =
about Bouchers book is his discussion of Economics.=20
  After being an active investor for a couple years I'm beginning to see =
the advantages of getting a bigger picture outlook of what's going on =
with the US and Global economy and the impact of technology trends. He's =
also got very strong ideas about the social security, minimum wages, =
etc. Over the winter I'm going to be reading a  few of the other books =
he suggests.=20

  For a time I was looking up the individual stocks on the new high and =
new low lists every day. But I find I dislike learning about a stock =
after it's already broken out of a pattern. So now I just use the lists =
to get an idea of the direction of the market. If neither side is above =
50 for a few days or more than there's not enough conviction in any =
direction to get too heavily invested. Since I have a full time job I =
find it easier to just set up a watch list for shorts/longs based on my =
scans of DGO and keep an eye on those instead of going through all those =
lists on TM.  I'm following Boucher's suggestion to not add more than =
two shorts/longs per week. It's keeping me out of trouble. His =
suggestions for risk control and the timing of buying/selling are =
excellent. Far better and more reasonable than WON's I think. It was =
reassuring to me that Boucher,  a graduate in Economics from Berkeley, =
did research with a Stanford Phd that verified and enhanced a lot of =
WON's ideas. And I was surprised that Boucher is even more conservative =
in his stock selection than WON but also is not afraid to turn it all =
upside down and short stocks. Not sure why WON had such a hard time with =
shorting. Heck...even I can do it.

  Here's how I use options. I go to CBOE.com. Look up the stock I'm =
interested in. Look for puts 1 or 2 strikes in the money and 4 to 6 =
months out (depends a little on volume - not all the stocks I pick have =
enough option volume to get a reasonable spread- and a lot of times the =
further out you go the less volume there is). I've looked into option =
valuation a little, but not a lot, and not sure it's worth the trouble. =
At least that's what my broker confirms. You'll find that not all stocks =
you pick to short even have listed options and then those that do are so =
thinly traded that you'll be taking on too much risk and/or paying too =
much of a spread to make it worth while. But my attitude has been once I =
find a stock with an option like I suggest above I pretty much have got =
to play it no matter whether it's theoretically over/under valued. If =
the goal is to play the stock in the direction it's going then option =
over/undervaluation is secondary. When a stock moves, if you've got an =
option that's in the money by more than 1 strike, it's pretty much going =
to move with it point for point. Hope that makes sense. I'm by no means =
an expert on options. Just giving you my point of view. I'm sure others =
here have a better understanding of option valuation than I do.


   At 10:22 AM 10/31/01 -0600, you wrote:

    Doug,
    =20
    Thanks so much for thorough reply. Isn't TM.com terrific? I've been =
a member since early 2000, but only recently started reading Boucher. =
He's scary smart. I just recently purchased his book after the TM =
conference, so haven't dug in enough to absorb all of his techniques. =
What I learned at the conference, however, was that he is a CANSLIMer at =
his core, but has refined his technique to lower risk. Very attractive. =
(Also *love* his notion of using the "mental bank" and have recently =
started work on setting up my own.)
    =20
    I think your comment about patience is key. Seems like you need a =
steel stomach and plenty of patience to play shorts to their best =
advantage. Fine line between patience and knowing when the trade's =
working against you, though.
    =20
    With respect to your scanning criteria, do you ever use the TM =
indicators for Boucher's bottom RS/EPS/New lows list or any of the other =
downtrending indicators? Or do you just stick to using DGO? If you do =
use TM indicators, is your success rate better/worse/same as using DGO?
    =20
    I'd like to followup with you on using puts at some point. I've been =
doing all my shorting in my cash account, but it drives me crazy that I =
don't know options and can't take advantage of shorting in my SEPIRA.
    =20
    After I've absorbed all your input, I'm sure I'll have many more =
questions for you!
    =20
    Katherine
    kmalm@earthlink.net

       =20
        ----- Original Message -----=20
        From: DougC=20
        To: canslim@lists.xmission.com=20
        Sent: Wednesday, October 31, 2001 9:53 AM=20
        Subject: Re: [CANSLIM] Shorting Techniques, DougC and all


        Hi Katherine


        I've only been playing the short side of the market since April =
'01. Just want to make you aware of my limited experience with it.  I =
only use Puts which limits my risk and which is why my broker allows it =
in my IRA rollover. I look for Puts about 4 to 6 months out and 1 to 2 =
strikes in the money.  The best guidelines I've seen so far for picking =
longs or shorts are those of Mark Boucher. He's got a book out called =
The Hedge Fund edge that lists his criteria for longs/shorts regarding =
both fundamentals and chart patterns. It's the best way to go for a =
beginner like myself. He also has a 10 week course on the Trading =
Markets.com site, that's free if you're a member, which has pretty much =
the same info on short selection as the book. But I think if you're not =
a TM member you can also just buy the course for something like 40 bucks =
if you go to tradersgalleria.com. There are guys like Goran Yordanoff =
who day trade and position trade using mostly technicals and money flow =
indicators of stocks he believes are overvalued. He was a big shorter of =
ADVP at it's 'breakout' and apparantly did very well. I think his style =
is very advanced and would not recommend it for a beginner. But if you =
are investing full time and have access to all the real time =
institutional money flow info and are adept and reading charts and other =
technical indicators then I'm sure you could also do it.=20


        1. Just watching the major indices is the first step. Being =
aware of head and shoulder formations, double bottoms, price/volume =
action. The amazing thing about tracking growth stocks daily is that the =
number of stocks meeting your criteria for longs/shorts and the look of =
their chart formations is about the most perfect indicator of market =
direction there is. Some people also keep track of the number of daily =
new highs vs. new lows of stocks with EPS and RS greater than 80 for the =
longs and EPS and RS less than 50 for the shorts. If you're getting a =
whole bunch more long candidates than short candidates then you might =
want to lighten up on the shorts.


        2. I first sort through DGO for stocks with the worst fundies. =
Example of criteria are EPS and RS less than 50, last years annual =
revenues declining and next years est. of annual rev declining and last =
two quarters earnings less than same quarter previous year or negative. =
Also debt of greater than 50% and fund/bank ownership of stock over 20% =
help add down fuel. Criteria like that will pretty much guarantee you =
will be looking at stocks under the 50dma and 200dma which is where you =
want to be when you are playing the short side.


        3. Again Mark Boucher has good summaries of what he thinks are =
the best chart patterns. Basically it's the same chart patterns you =
would look for in a long but just upside down. i.e. inverted C&H, =
inverted flag or pullback from a low. The puts I've got on right now in =
DCN and EK were in runaway mode, meaning a few gap downs on increasing =
volume, then the stock based or pulled back up over a 4 week or more =
period then started to break down again. You jump in when they hit new =
lows.=20


        4. Most of my own short picks that I've made using the criteria =
I mentioned above have made money. Patience pays.  Since I use options I =
limit my entire position to 2% of my account since with an option it's =
always a possibility something can go wrong before you can get out and =
you can end up with a 100% loss. Mark Boucher doesn't necessarily have % =
numbers he follows for getting out of a losing trade. He uses the low of =
whatever chart pattern he's in. For shorts that would be the top of a =
flag. And for C&H, believe it or not, it could actually be all the way =
to the low (or peak) of the cup. But with options/puts I usually don't =
wait that long.I don't use technical indicators. Just price/volume =
action.


        5. With my puts I take half profits at 50% then try to hold out =
for 100% for the rest. That's the max.


        Hope that helps.


        Doug


        At 08:31 AM 10/31/01 -0600, you wrote:
          Wanted to followup on your comments in the TARO thread, DougC. =

          =20
          I know WON isn't a great fan of shorting. He barely mentions =
it in HTMMIS and generally blows off any questions about it in his =
seminars. So that leaves me to my own vices! Frankly, I never shorted a =
stock in my life until March 2000 and then it was easy. Pick a stock, =
any stock, it'll go down. Well, at least until the first bounce. Point =
is, I've been working to perfect my shorting skills (sure as I do so, =
Mr. M will go right back up!).=20
          =20
          I've been accumulating notes from my experiences the last year =
and would like to get feedback from the members as to:=20
          =20
          (1) Under what market conditions will you short or not short?=20
          (2) What is your best method for scanning for short =
candidates?=20
          (3) What patterns have created your best shorts?=20
          (4) What techniques do you use for managing your short =
positions? For example, setting stops for profits, setting stops for =
stop-loss (i.e, what signals do you use to know the position is moving =
against you and what limit do you place), mental or open protective =
stops, etc.=20
          (5) What do you use to determine if you've been in the short =
long enough? For example, is it based on time, % profit, change in =
pattern, etc.=20
          =20
          I found Stan Weinstein's book to be incredibly helpful, but it =
doesn't really get to the nitty-gritty of these finer points. Would sure =
appreciate any feedback.=20
          =20
          Katherine=20
          kmalm@earthlink.net=20
          =20
          =20




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<META http-equiv=3DContent-Type content=3D"text/html; =
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<BODY bgColor=3D#ffffff>
<DIV><FONT face=3DArial size=3D2>Agreed on Boucher's economics outlook. =
Maybe the=20
MBA in me, but when I look at a stock, I always "build a case" for it =
before=20
putting it on my watchlist. Fundamentally, how is it doing? What gives =
its=20
products/services competitive advantage? Is it sustainable? Who are the=20
competitors?&nbsp;Even more important, what are the macro events that =
would=20
drive its business and its industry? Is that a short or long term move? =
What is=20
the macroeconomic environment that the industry is operating in? Is it=20
sustainable/in flux? What fiscal or monetary events would help/hinder =
the move?=20
I've always called it "building scenarios." Boucher has confirmed how =
important=20
this is and then builds a more rigorous model around it. Got to love=20
it.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT>&nbsp;</DIV>
<DIV><FONT face=3DArial size=3D2>Again, thanks for the additional input =
on shorting=20
and options. Now I just need to percolate on it.</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT>&nbsp;</DIV>
<DIV><FONT face=3DArial size=3D2>Katherine</FONT></DIV>
<DIV><FONT face=3DArial size=3D2><A=20
href=3D"mailto:kmalm@eathlink.net">kmalm@eathlink.net</A></FONT></DIV>
<BLOCKQUOTE dir=3Dltr=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
  <DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV>
  <DIV=20
  style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
  <A title=3Ddzc@qwest.net href=3D"mailto:dzc@qwest.net">DougC</A> =
</DIV>
  <DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3Dcanslim@lists.xmission.com=20
  =
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
 </DIV>
  <DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Wednesday, October 31, =
2001 11:53=20
  AM</DIV>
  <DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] Shorting =

  Techniques, DougC and all</DIV>
  <DIV><BR></DIV>Besides his suggestions of criteria for longs or shorts =
what I=20
  like about Bouchers book is his discussion of Economics. <BR>After =
being an=20
  active investor for a couple years I'm beginning to see the advantages =
of=20
  getting a bigger picture outlook of what's going on with the US and =
Global=20
  economy and the impact of technology trends. He's also got very strong =
ideas=20
  about the social security, minimum wages, etc. Over the winter I'm =
going to be=20
  reading a&nbsp; few of the other books he suggests. <BR><BR>For a time =
I was=20
  looking up the individual stocks on the new high and new low lists =
every day.=20
  But I find I dislike learning about a stock after it's already broken =
out of a=20
  pattern. So now I just use the lists to get an idea of the direction =
of the=20
  market. If neither side is above 50 for a few days or more than =
there's not=20
  enough conviction in any direction to get too heavily invested. Since =
I have a=20
  full time job I find it easier to just set up a watch list for =
shorts/longs=20
  based on my scans of DGO and keep an eye on those instead of going =
through all=20
  those lists on TM.&nbsp; I'm following Boucher's suggestion to not add =
more=20
  than two shorts/longs per week. It's keeping me out of trouble. His=20
  suggestions for risk control and the timing of buying/selling are =
excellent.=20
  Far better and more reasonable than WON's I think. It was reassuring =
to me=20
  that Boucher,&nbsp; a graduate in Economics from Berkeley, did =
research with a=20
  Stanford Phd that verified and enhanced a lot of WON's ideas. And I =
was=20
  surprised that Boucher is even more conservative in his stock =
selection than=20
  WON but also is not afraid to turn it all upside down and short =
stocks. Not=20
  sure why WON had such a hard time with shorting. Heck...even I can do=20
  it.<BR><BR>Here's how I use options. I go to CBOE.com. Look up the =
stock I'm=20
  interested in. Look for puts 1 or 2 strikes in the money and 4 to 6 =
months out=20
  (depends a little on volume - not all the stocks I pick have enough =
option=20
  volume to get a reasonable spread- and a lot of times the further out =
you go=20
  the less volume there is). I've looked into option valuation a little, =
but not=20
  a lot, and not sure it's worth the trouble. At least that's what my =
broker=20
  confirms. You'll find that not all stocks you pick to short even have =
listed=20
  options and then those that do are so thinly traded that you'll be =
taking on=20
  too much risk and/or paying too much of a spread to make it worth =
while. But=20
  my attitude has been once I find a stock with an option like I suggest =
above I=20
  pretty much have got to play it no matter whether it's theoretically=20
  over/under valued. If the goal is to play the stock in the direction =
it's=20
  going then option over/undervaluation is secondary. When a stock =
moves, if=20
  you've got an option that's in the money by more than 1 strike, it's =
pretty=20
  much going to move with it point for point. Hope that makes sense. I'm =
by no=20
  means an expert on options. Just giving you my point of view. I'm sure =
others=20
  here have a better understanding of option valuation than I=20
  do.<BR><BR><BR>&nbsp;At 10:22 AM 10/31/01 -0600, you wrote:<BR><FONT=20
  face=3Darial size=3D2>
  <BLOCKQUOTE cite type=3D"cite">Doug,</FONT><BR>&nbsp;<BR><FONT =
face=3Darial=20
    size=3D2>Thanks so much for thorough reply. Isn't TM.com terrific? =
I've been a=20
    member since early 2000, but only recently started reading Boucher. =
He's=20
    scary smart. I just recently purchased his book after the TM =
conference, so=20
    haven't dug in enough to absorb all of his techniques. What I =
learned at the=20
    conference, however, was that he is a CANSLIMer at his core, but has =
refined=20
    his technique to lower risk. Very attractive. (Also *love* his =
notion of=20
    using the "mental bank" and have recently started work on setting up =
my=20
    own.)</FONT><BR>&nbsp;<BR><FONT face=3Darial size=3D2>I think your =
comment about=20
    patience is key. Seems like you need a steel stomach and plenty of =
patience=20
    to play shorts to their best advantage. Fine line between patience =
and=20
    knowing when the trade's working against you,=20
    though.</FONT><BR>&nbsp;<BR><FONT face=3Darial size=3D2>With respect =
to your=20
    scanning criteria, do you ever use the TM indicators for Boucher's =
bottom=20
    RS/EPS/New lows list or any of the other downtrending indicators? Or =
do you=20
    just stick to using DGO? If you do use TM indicators, is your =
success rate=20
    better/worse/same as using DGO?</FONT><BR>&nbsp;<BR><FONT =
face=3Darial=20
    size=3D2>I'd like to followup with you on using puts at some point. =
I've been=20
    doing all my shorting in my cash account, but it drives me crazy =
that I=20
    don't know options and can't take advantage of shorting in my=20
    SEPIRA.</FONT><BR>&nbsp;<BR><FONT face=3Darial size=3D2>After I've =
absorbed all=20
    your input, I'm sure I'll have many more questions for=20
    you!</FONT><BR>&nbsp;<BR><FONT face=3Darial =
size=3D2>Katherine</FONT><BR><A=20
    href=3D"mailto:kmalm@earthlink.net">kmalm@earthlink.net</A><BR>
    <BLOCKQUOTE>&nbsp;=20
      <DL>
        <DD>----- Original Message -----=20
        <DD>From: <A href=3D"mailto:dzc@qwest.net">DougC</A>=20
        <DD>To: <A=20
        =
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
=20
        <DD>Sent: Wednesday, October 31, 2001 9:53 AM=20
        <DD>Subject: Re: [CANSLIM] Shorting Techniques, DougC and =
all<BR><BR>
        <DD>Hi Katherine<BR><BR>
        <DD>I've only been playing the short side of the market since =
April '01.=20
        Just want to make you aware of my limited experience with =
it.&nbsp; I=20
        only use Puts which limits my risk and which is why my broker =
allows it=20
        in my IRA rollover. I look for Puts about 4 to 6 months out and =
1 to 2=20
        strikes in the money.&nbsp; The best guidelines I've seen so far =
for=20
        picking longs or shorts are those of Mark Boucher. He's got a =
book out=20
        called The Hedge Fund edge that lists his criteria for =
longs/shorts=20
        regarding both fundamentals and chart patterns. It's the best =
way to go=20
        for a beginner like myself. He also has a 10 week course on the =
Trading=20
        Markets.com site, that's free if you're a member, which has =
pretty much=20
        the same info on short selection as the book. But I think if =
you're not=20
        a TM member you can also just buy the course for something like =
40 bucks=20
        if you go to tradersgalleria.com. There are guys like Goran =
Yordanoff=20
        who day trade and position trade using mostly technicals and =
money flow=20
        indicators of stocks he believes are overvalued. He was a big =
shorter of=20
        ADVP at it's 'breakout' and apparantly did very well. I think =
his style=20
        is very advanced and would not recommend it for a beginner. But =
if you=20
        are investing full time and have access to all the real time=20
        institutional money flow info and are adept and reading charts =
and other=20
        technical indicators then I'm sure you could also do it. =
<BR><BR>
        <DD>1. Just watching the major indices is the first step. Being =
aware of=20
        head and shoulder formations, double bottoms, price/volume =
action. The=20
        amazing thing about tracking growth stocks daily is that the =
number of=20
        stocks meeting your criteria for longs/shorts and the look of =
their=20
        chart formations is about the most perfect indicator of market =
direction=20
        there is. Some people also keep track of the number of daily new =
highs=20
        vs. new lows of stocks with EPS and RS greater than 80 for the =
longs and=20
        EPS and RS less than 50 for the shorts. If you're getting a =
whole bunch=20
        more long candidates than short candidates then you might want =
to=20
        lighten up on the shorts.<BR><BR>
        <DD>2. I first sort through DGO for stocks with the worst =
fundies.=20
        Example of criteria are EPS and RS less than 50, last years =
annual=20
        revenues declining and next years est. of annual rev declining =
and last=20
        two quarters earnings less than same quarter previous year or =
negative.=20
        Also debt of greater than 50% and fund/bank ownership of stock =
over 20%=20
        help add down fuel. Criteria like that will pretty much =
guarantee you=20
        will be looking at stocks under the 50dma and 200dma which is =
where you=20
        want to be when you are playing the short side.<BR><BR>
        <DD>3. Again Mark Boucher has good summaries of what he thinks =
are the=20
        best chart patterns. Basically it's the same chart patterns you =
would=20
        look for in a long but just upside down. i.e. inverted C&amp;H, =
inverted=20
        flag or pullback from a low. The puts I've got on right now in =
DCN and=20
        EK were in runaway mode, meaning a few gap downs on increasing =
volume,=20
        then the stock based or pulled back up over a 4 week or more =
period then=20
        started to break down again. You jump in when they hit new lows. =

<BR><BR>
        <DD>4. Most of my own short picks that I've made using the =
criteria I=20
        mentioned above have made money. Patience pays.&nbsp; Since I =
use=20
        options I limit my entire position to 2% of my account since =
with an=20
        option it's always a possibility something can go wrong before =
you can=20
        get out and you can end up with a 100% loss. Mark Boucher =
doesn't=20
        necessarily have % numbers he follows for getting out of a =
losing trade.=20
        He uses the low of whatever chart pattern he's in. For shorts =
that would=20
        be the top of a flag. And for C&amp;H, believe it or not, it =
could=20
        actually be all the way to the low (or peak) of the cup. But =
with=20
        options/puts I usually don't wait that long.I don't use =
technical=20
        indicators. Just price/volume action.<BR><BR>
        <DD>5. With my puts I take half profits at 50% then try to hold =
out for=20
        100% for the rest. That's the max.<BR><BR>
        <DD>Hope that helps.<BR><BR>
        <DD>Doug<BR><BR>
        <DD>At 08:31 AM 10/31/01 -0600, you wrote:<FONT face=3Darial =
size=3D2>
        <BLOCKQUOTE cite type=3D"cite">
          <DD>Wanted to followup on your comments in the TARO thread,=20
          DougC.</FONT>=20
          <DD><FONT face=3Darial size=3D2>=20
          <DD>I know WON isn't a great fan of shorting. He barely =
mentions it in=20
          HTMMIS and generally blows off any questions about it in his =
seminars.=20
          So that leaves me to my own vices! Frankly, I never shorted a =
stock in=20
          my life until March 2000 and then it was easy. Pick a stock, =
any=20
          stock, it'll go down. Well, at least until the first bounce. =
Point is,=20
          I've been working to perfect my shorting skills (sure as I do =
so, Mr.=20
          M will go right back up!).</FONT>=20
          <DD><FONT face=3Darial size=3D2>=20
          <DD>I've been accumulating notes from my experiences the last =
year and=20
          would like to get feedback from the members as to:</FONT>=20
          <DD><FONT face=3Darial size=3D2>=20
          <DD>(1) Under what market conditions will you short or not=20
          short?</FONT>=20
          <DD>(2) What is your best method for scanning for short =
candidates?=20
          <DD>(3) What patterns have created your best shorts?=20
          <DD>(4) What techniques do you use for managing your short =
positions?=20
          For example, setting stops for profits, setting stops for =
stop-loss=20
          (i.e, what signals do you use to know the position is moving =
against=20
          you and what limit do you place), mental or open protective =
stops,=20
          etc.=20
          <DD>(5) What do you use to determine if you've been in the =
short long=20
          enough? For example, is it based on time, % profit, change in =
pattern,=20
          etc.=20
          <DD><FONT face=3Darial size=3D2>=20
          <DD>I found Stan Weinstein's book to be incredibly helpful, =
but it=20
          doesn't really get to the nitty-gritty of these finer points. =
Would=20
          sure appreciate any feedback.</FONT>=20
          <DD><FONT face=3Darial size=3D2>=20
          <DD>Katherine</FONT>=20
          <DD><A =
href=3D"mailto:kmalm@earthlink.net">kmalm@earthlink.net</A>=20
          <DD>=20
          <DD>=20
          =
<DD>&nbsp;</DD></BLOCKQUOTE></DD></DL><BR></BLOCKQUOTE></BLOCKQUOTE></BLO=
CKQUOTE></BODY></HTML>

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