This example demonstrates two important aspects of CAN SLIM® investing:
1. The increased profits achieved by concentrating our money in stocks that are in our portfolios and that are performing the best by making rule based follow-on buys.
2. The leverage that can be achieve by using margin only for add-on (follow-on) buys so that margin is used only if a stock is going up and performing well.
In this example six add-on buys are made after the initial positions is taken in a double-bottom base established using the shakeout plus three dollar (Jesse Livermore) entry. The initial position is made with cash. All add-on buy points can subsequently be made with margin. In this way margin is used only initially only for small buys and only if the stock has advanced and is presenting valid add-on buy setups. The concentrations achieved with follow-on (add-on) buying in a successful stock, combined with conservative and judicious margin use, yields a huge 390% gain in 32 weeks, for whopping 1,200% annualized rate of return.
This is a model done entirely by the rules that generally conform to those taught by IBD and described by William J. O’Neil in his books. It that way it is very realistic. However it cannot reflect the mistakes we make in real time or the fact that investor emotions sometimes cause people to deviate from their rules. In this regard these results are ideal, not real, but this example demonstrated how to apply the real rules and what is possible if we properly manage a tip, top stock position.
The links below are to
1. The narrated video presentation. This is in two parts for easier recording and viewing.
2. The slide show in pdf format.
3. The Excel file for the demonstration model with all the details transaction by transaction and week by week. This was done very accurately by the standard rules.
Screencast-O-Matic Recordings:
1. LULU Example Double-Bottom Part 1 of 2: http://screencast-o-matic.com/watch/cIfDquV3Po
2. LULU Example Double-bottom Part 2 of 2: http://screencast-o-matic.com/watch/cIfbq4V0ip
Presentation File: https://www.dropbox.com/s/zpeuywgpg62foql/Double-Bottom%20Example%20LULU%20%20SPLIT%2003%2013%202013.pdf
Excel Workbook with All Details: https://www.dropbox.com/s/1uijc1ltl1pij5h/LULU%20Model%20Stock%20Worksheet.xlsx
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This material is to be used only for IBD Meetups and by people who are registered members of IBD Meetups.