Small cap power: CIMT

[tokyopua]

David, its taken me awhile, but I am starting to better understand your long term investment strategy.  Becuase finally as CIMT plummeted these last 2 days I had no negative emotions whatsoever.  And its so much less effort to just be holding a stock than always watching it looking for the next best thing.  Its a lot less overall effort, less mental stress, and also has the potential for much greater profit, not only from not missing the main move, but also from the possibility of selling with long term capital gains taxes instead of the much higher short term capital gains taxes.

The skill of course is in finding the right stocks, and you have done so repeatedly in the past (just that you didnt hold the stocks) even before you had your new quantatative model.

It has taken me awhile to see the light more clearly, but now that I have, hats off to you, and applauds!

I suppose I should post this elsewhere, but the fact is that CIMT is the stock that helped me see how what you are doing can work.

[tokyopua]

Interesting that today is the first really bearish candlestick pattern for CIMT since the first big breakout.  Can CIMT beat the Bearish Cloud Cover near term?  Who cares, like David says, this one is a buy and hold!  

Yes, a bit of a bearish candlestick, but volume was so low that I don't think it has much technical significance. Anyway, as you rightly wrote, fundamental trends say CIMT is worth $17.75 today (of course, if those trends continue, but that must be the natural assumption - that will be confirmed or not by the actual results), so I'll keep on holding CIMT.

Tokyopua, I'm still learning technical analysis so correct me if I'm wrong, my book says for a dark cloud cover to occur, the second (black) day had to close below the midpoint of the previous days white body which would be below $4.23. It says there are no exceptions  to the pattern. Still there is no denying it was a bearish candle and almost a dark cloud cover. Lets see what happens.

Given the volume and the fact it didnt close within 50% of the real body it probably doesnt have much bearish signifigance.  However, with this pattern (as with many candlestick patterns), Steve Nison suggests that it can be open to interpretation:

"The first day of this two-candle pattern is a strong white real body.  The second day's price opens above the prior session's high (that is, above the top of the upper shadow).  However, by the end of the second day's session, the market closes deeply within the prior day's white body.  The greater the degree of penetration into the white real body, the more likely this is a top.  Some Japanese technicians require more than a 50-percent penetration of the black session's close into the white real body.  If the black candle does not close below the halfway point of the white candlestick, it may be best to wait for more bearish confirmation following the dark cloud-cover.  In some circumstances I will also view it as a dark-cloud cover even if the open is over the prior session's close instead of the prior session's high."

I consider Nison to be the authority on candlesticks, so I go by his interpretations.  He has two scenarios where he will still call it dark cloud cover where others might not, but in my experience this flexibility has saved me some money by looking at the overall picture.  

So this is a dark cloud cover per his definition (you could his two variations Weak Dark Cloud Cover and Didn't-Open-Above-Prior-High Dark Cloud Cover, lol), but per his guidelines not one that you would necessarily act on or expect to follow through bearishly.  

Also, as David added, the low volume reduces the signifigance further.
[/quote

Tokyopua, looks like the dark cloud cover (or almost) did have ST bearish implications. Is there a 5 day day bearish candlestick pattern (the cloud cover day + next 3 rising short white days + next long red day in the chart? It looks to me like it would be a bearish pattern though I can't find any in the book. Just trying to learn. Thanks.

Hi BigSully,

To my knowledge there is not a specific pattern like you describe, but that is the power of looking at things Nison's way, you get to understand how candles just paint the push and pull of the bulls and bears in a general sense, and simply SEE the likely outcome based on interpretation and experience.  (Not to say it always works lol). 

However, that being said, another interesting thing that Nison does sometimes is to "combine candlesticks".  I think its as simple as taking the open of the first day and the close of the last days, and then adding shadows for the extremes of those days.  So if you did that with the 3 small white candles we had before yesterday, you would indeed see a real by-the-book dark cloud cover.  That would have told you that today was also likely to be down.  Of course, just seeing yesterday's candle engulf 3 prior real white bodies could also tell you things were bearish too!

And yet seeing all this, I still bought more today, because I really like the CIMT story and potential, I dont care if it goes down further as its long term potential is awesome!  Had this been another stock I was short term trading though, I would have been more likely to sell based on the candlesticks.

Of course,

[BigSully1]

Interesting that today is the first really bearish candlestick pattern for CIMT since the first big breakout.  Can CIMT beat the Bearish Cloud Cover near term?  Who cares, like David says, this one is a buy and hold!  

Yes, a bit of a bearish candlestick, but volume was so low that I don't think it has much technical significance. Anyway, as you rightly wrote, fundamental trends say CIMT is worth $17.75 today (of course, if those trends continue, but that must be the natural assumption - that will be confirmed or not by the actual results), so I'll keep on holding CIMT.

Tokyopua, I'm still learning technical analysis so correct me if I'm wrong, my book says for a dark cloud cover to occur, the second (black) day had to close below the midpoint of the previous days white body which would be below $4.23. It says there are no exceptions  to the pattern. Still there is no denying it was a bearish candle and almost a dark cloud cover. Lets see what happens.

Given the volume and the fact it didnt close within 50% of the real body it probably doesnt have much bearish signifigance.  However, with this pattern (as with many candlestick patterns), Steve Nison suggests that it can be open to interpretation:

"The first day of this two-candle pattern is a strong white real body.  The second day's price opens above the prior session's high (that is, above the top of the upper shadow).  However, by the end of the second day's session, the market closes deeply within the prior day's white body.  The greater the degree of penetration into the white real body, the more likely this is a top.  Some Japanese technicians require more than a 50-percent penetration of the black session's close into the white real body.  If the black candle does not close below the halfway point of the white candlestick, it may be best to wait for more bearish confirmation following the dark cloud-cover.  In some circumstances I will also view it as a dark-cloud cover even if the open is over the prior session's close instead of the prior session's high."

I consider Nison to be the authority on candlesticks, so I go by his interpretations.  He has two scenarios where he will still call it dark cloud cover where others might not, but in my experience this flexibility has saved me some money by looking at the overall picture.  

So this is a dark cloud cover per his definition (you could his two variations Weak Dark Cloud Cover and Didn't-Open-Above-Prior-High Dark Cloud Cover, lol), but per his guidelines not one that you would necessarily act on or expect to follow through bearishly.  

Also, as David added, the low volume reduces the signifigance further.
[/quote

Tokyopua, looks like the dark cloud cover (or almost) did have ST bearish implications. Is there a 5 day day bearish candlestick pattern (the cloud cover day + next 3 rising short white days + next long red day in the chart? It looks to me like it would be a bearish pattern though I can't find any in the book. Just trying to learn. Thanks.

Hi BigSully,

To my knowledge there is not a specific pattern like you describe, but that is the power of looking at things Nison's way, you get to understand how candles just paint the push and pull of the bulls and bears in a general sense, and simply SEE the likely outcome based on interpretation and experience.  (Not to say it always works lol). 

However, that being said, another interesting thing that Nison does sometimes is to "combine candlesticks".  I think its as simple as taking the open of the first day and the close of the last days, and then adding shadows for the extremes of those days.  So if you did that with the 3 small white candles we had before yesterday, you would indeed see a real by-the-book dark cloud cover.  That would have told you that today was also likely to be down.  Of course, just seeing yesterday's candle engulf 3 prior real white bodies could also tell you things were bearish too!

And yet seeing all this, I still bought more today, because I really like the CIMT story and potential, I dont care if it goes down further as its long term potential is awesome!  Had this been another stock I was short term trading though, I would have been more likely to sell based on the candlesticks.

Of course,

Thanks much for the help Tokyo. That makes alot sense to me.

It's kind of funny to me that I've mostly always been a fundamental investor and am now trying to learn to become more of a trader, while David has been convincing many ST traders that the way to go is to buy the best fundamentally strong prospects, know what you hold,  ignore the very ST noise,  and try not to  let emotions take over. I didn't really need convincing of that, but I still definitely feel the need to learn tech analysis. I am in awe of the sophistication of the many tech analysts here and hope to someday measure up to some small degree. So much of it is still way beyond my scope of understanding. Kudos to David also for his ever expanding, in depth, and excellent fundamental analysis with a lesser emphasis on ST technicals. 3SoF has been combining  the best of both worlds (fundamental/technical) and that's why I really dig this site.

[buddjas1]

"I am in awe of the sophistication of the many tech analysts here and hope to someday measure up to some small degree."

Remember, the less people that "see" a chart in a particular way, the less reliable the chart is as a short term indicator.  A high number of people must "analyze" the chart the exact same way, in order for the chart to move the stock in any given direction.  The greater the "sophistication" required to interpret the chart, the less likely it is other people will interpret the chart in the same way and, thus, the less likely the chart is to predict (rather, cause) movement in the stock. 

[berloga]

  When I worked for Raytheon Company in Massachusetts (a large defense contractor) there was an old man (for as long I know him he looked old), originally from Israel. He was (and still is) a technical fellow. The stock charts were always on his screen. Once I asked him what his strategy was and he replied, "I look for stocks with sound fundamentals and low value. I buy them and hold until I squeeze them like a lemon for all the growth." One year, after financials of our small research division were revealed to us, he gave it a smirk and told me he made more money that year on his long-term investments than the entire division (it was $3M).

  I thought I was a hot shot and could not understand why he'd have the patience to sit and wait for such a long time. Now I know why, just like tokyopua has noted. Thanks to David.

[Garoh]

I think it's enough 

We could see a fast rebound for this stock when it starts its engine on 

I see only up direction from these levels ...

David this is the third time I mention KALG and it's up almost 20% since that time 

take a look at it

[gix330]

I think it's enough

We could see a fast rebound for this stock when it starts its engine ON

I see only up direction from these levels ...

David this is the third time I mention KALG and it's up almost 20% since that time

take a look at it

I agree. CIMT is one of the best picks out there, I just bought more shares around $3.65 and the normal pull back wont kill this stock. But I think people got nervous when they saw the 18% down from the new high in just 3 days. As David said, be calm! 

[David Randolph]

I think it's enough 

We could see a fast rebound for this stock when it starts its engine on 

I see only up direction from these levels ...

David this is the third time I mention KALG and it's up almost 20% since that time 

take a look at it

I couldn't find KALG on my database or in www.stockcharts.com, are you sure that's the ticker symbol?

Ok, got it my fundamental data service ... It shows zero revenues and as for business description: "The Company is currently seeking opportunities for profitable operations."

Why do you like it?

[Se7en]

Just bought 3600shares of CIMT, finally got in! 

[wxmang]

Now, that is a Great Deal!


Wxmang

[Garoh]

I think it's enough 

We could see a fast rebound for this stock when it starts its engine on 

I see only up direction from these levels ...

David this is the third time I mention KALG and it's up almost 20% since that time 

take a look at it

I couldn't find KALG on my database or in www.stockcharts.com, are you sure that's the ticker symbol?

Ok, got it my fundamental data service ... It shows zero revenues and as for business description: "The Company is currently seeking opportunities for profitable operations."

Why do you like it?

David the Coal industry is hot these days

[nullzero]

CIMT starting to show some reversal strength today 

[mbaugh]

Since I began trading several years ago, the one and only best thing I have ever learned is what David has been preaching all along....."Sit Tight and let the profits run!  My life has changed 10 fold!  I no longer sit and watch my trades all day, I spend more time with my 18 month old and even started some new home improvement projects! i still leave my screens on and check every so often.  I spend most of my time on this board learning from everyone and sharing whatever info I have.  David, you are "THE ONE"!!  Thanks!

Mbaugh

[BigSully1]

"I am in awe of the sophistication of the many tech analysts here and hope to someday measure up to some small degree."

Remember, the less people that "see" a chart in a particular way, the less reliable the chart is as a short term indicator.  A high number of people must "analyze" the chart the exact same way, in order for the chart to move the stock in any given direction.  The greater the "sophistication" required to interpret the chart, the less likely it is other people will interpret the chart in the same way and, thus, the less likely the chart is to predict (rather, cause) movement in the stock. 

Sure Buddjas, I can understand the subjectiveness in technical analysis and the effect on action. For me, it will always be fundamentals first, technicals second when making decisions. I don't intend to get overly involved with TA, and probably don't have the learning ability to do so anyway. But I do definitely need a much better awareness of it. Thanks for the comments.

[David Randolph]

David, its taken me awhile, but I am starting to better understand your long term investment strategy.  Becuase finally as CIMT plummeted these last 2 days I had no negative emotions whatsoever.  And its so much less effort to just be holding a stock than always watching it looking for the next best thing.  Its a lot less overall effort, less mental stress, and also has the potential for much greater profit, not only from not missing the main move, but also from the possibility of selling with long term capital gains taxes instead of the much higher short term capital gains taxes.

The skill of course is in finding the right stocks, and you have done so repeatedly in the past (just that you didnt hold the stocks) even before you had your new quantatative model.

It has taken me awhile to see the light more clearly, but now that I have, hats off to you, and applauds!

I suppose I should post this elsewhere, but the fact is that CIMT is the stock that helped me see how what you are doing can work.

It took you just a few weeks, it took me several years

I'm glad you're joining the more fundamental, more longer term approach. The more eyes and minds we have thinking about long term factors moving stocks, the better.

As for CIMT, you have its valuation model on the Main Portfolio page, let me just say the stock had an initial reaction to support, I expect it to make new highs soon.