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The WBMF system shown here is a PCF version of the system being used by Antonio the original author. There has been some discussion of it on the Yahoo CANSLIM board and alos on the TC2000 board by several people. The PCFs have been added by Seller9 to try and implement the process into TC2000. This is not a finished TC2000 system yet, so use it as such. Please post any improvements to the system on the TC2000 Yahoo club site. You may want to go over to the CANSLIM board and check out some of the posts on it. They start around #635. Good Luck An Introduction to WBMF System I’m going to explain the WBMF system that I stumbled upon out of frustration with my own inability to distinguish "sound" bases from faulty ones. The setup and pre-requisites work extremely well with O’Neil’s way of buying stocks from "sound" bases. So, first let’s define what WBMF means. WBMF means Where the Big Money Flows and it was taken from IBD’s special section on stocks showing volume increases. This is the MAIN indicator in the system. It is described with the following criteria. 1) Today’s gain or loss is at least ½ a point. #1-WBMF: C >= C1 + .5 2) 50-day EXPONENTIAL volume average ( "Avg Vol" column) must be greater than 70,000 shares. We look for stocks with a constant flow of buyers/sellers. I prefer at least 100K. #2-WBMF: ((AVGV50.2 * .961) + (V1 * .0392)) > 1000 3) Today’s volume must be greater than YESTERDAY’s 50-day EXPONENTIAL volume average by at least 40% ("V v A" column.) I personally look for 100% and higher. Anything above 200% is excellent. #3-WBMF: (V * 1.4) > ((AVGV50.2 * .961) + (V1 * .0392)) So, now we have the main indicator that can be negative ("W-" column) or positive ("W+" column). This is a sign to hold above the stock that says "Hey, look at me today!" Obviously, when entering the trade we look for WBMF-Gainers (+1/2) but the WBMF Losers come in handy AFTER entering the trade. We’ll talk about WBMF Losers later on. Now, let’s explain the setup of the days prior to the "W+" column turning ON. I call this part "the tail." 1) The 10-day to 50-day volume oscillator ("VO" column) must be negative for the last 10 days. During this period one can have from one to three positive values but that’s it. Positive values in this column tend to turn the breakout into a mere top. Study the tables and you’ll see what I’m talking about. This is a look at the graph. 2) There cannot be a WBMF Loser ("W-" column) within the last 10 days. We are looking for the next leg UP not a recovery from a prior low. In other words, we’re not interested in "cratered" price patterns but in flat ones. #4-WBMF: ((C1 + .5) >= C2) AND ((C2 + .5) >= C3) AND ((C3 + .5) >= C4) AND ((C4 + .5) >= C5) AND ((C5 + .5) >= C6) AND ((C6 + .5) >= C7) AND ((C7 + .5) >= C8) AND ((C8 + .5) >= C9) AND ((C9 + .5) >= C10) AND ((C10 + .5) >= C11) 3) The 10-day EXPONENTIAL ATR ("ATR" column) cannot be greater than 3.00. This indicates the volatility of the stock for the last 10 days. Internet stocks are the exception to this rule. Sorry, but I haven’t studied the Internet stocks in my tables to determine an equivalent value. Good values are less than 2.00. The closer they get to three the riskier the entry is on the following day. Of the hundreds of entries that I’ve studied I have only seen two or three (non-internet) with ATRs greater than 3.0 that successfully climbed up the chart. #5-WBMF: (((AVGH10.1 * .818) + (H * .21)) - ((AVGL10.1 * .818) + (L * .21))) < 3 These three pre-requisites describe how calm the stock is prior to lift off. Inscribe them on your forehead because they form the base to a successful move up. We have described the "tail" now let’s discuss the "head". What happens on the breakout day. 1) The breakout day’s HIGH must be a 10-day high. #6-WBMF: H > MAXH10.1 2) Today’s gain (in dollars) must be 20% or greater than the 10-day EXPONENTIAL ATR ("ATR" column ). Now, this is critical. Don’t settle for less than 20%. The only exception to this rule is when the breakout day causes a gap up in the price pattern. I have seen winners that break this rule but ONLY on a gap. #7-WBMF: (((((C - C1) / (((AVGH10.1 * .818) + (H * .1818)) - ((AVGL10.1 * .818) + (L * .1818)))) - 1) * 100)) > 19 3) The volume on the breakout day must be at least 100% greater than the day before( "V v Y" column.) Moreover, this percentage must be greater than the value in the "V v A" column. If it’s not, the move may lack force to propel it to higher territory. #8-WBMF: V > 2 * V1 #9-WBMF: ((V - ((AVGV50.2 * .961) + (V1 * .0392))) / ((AVGV50.2 * .962) + (V1 * .0392))) < ((V - V1) / V1) 4) The 10-day volume oscillator must turn positive. This indicates a radical change in volume for the last ten days. Some moves become succesful even if this column is negative or zero. Failure to turn positive does not indicate that the breakout is not good. It just doesn’t have enough market confirmation. That’s all. #10-WBMF: (V - ((AVGV10.2 * .818) + (V1 * .1818)) > 0) AND ((V1 - ((AVGV10.3 * .818) + (V2 * .1818))) <= 0) Now that we have the defined the entire system, let’s talk about the stock’s graph. It needs to be flat for the last 10 days. This is all the charting knowledge that you need to know. I usually look at the Time Segmented Volume and the Money Stream (TC2000 stuff) to be above their averages AND above the zero line. That’s it. If you have other indicators that meet YOUR psychology of trading, please use them. If you use the oversold/overbought indicator to trade, you will not trade well with this system. Why? Because the entry points of the system coincide with this indicator being near or at overbought territory. #11-WBMF: (TSV > 0) AND TSV > (((AVG(TSV10,2)) * .818) + ((TSV10.1) * .1818)) One last thing to add. Don’t trade stocks with EPS rating less thant 80, accumulation/distribution rating less than "C", and Group strength rating less than 70. You may want to check IBD’s paper from the week before to make sure that the stock’s accumulation rating has not been downgraded.
ENTERING THE TRADE.- DO NOT enter trades on confirmed news that a takeover is in the horizon. You enter on the next day at the opening. You want to get on the train ASAP. Practice sound money management at this point. Now, the market has confirmed the direction of the movement. Put a stop at ¼ below the low of the breakout day. This is the base for the upcoming move. This stop gets you out ASAP if the stock retraces its steps back to the base. Some people like Ryan (O’Neil’s partner) sales half of its shares when the stock retraces back to the breakout day’s range. I suppose he dumps the rest when it breaks below the breakout day. Think of the breakout day as a healthy step up a ladder. If the stock retraces, the leg (breakout day) is not strong enough to support the next leg up. Move your stops following your own methods. I’ve only seen one stock that stopped me ¼ below the low and then immediately proceeded to move up. Some people have suggested to wait for a confirmation of the move by entering the trade in the afternoon rather than placing a market order at the opening. This is a good advice when you’re first learning the system. Look for the stock to be closing above the prior close AND its high to be a 10-day high before deciding to enter the trade. EXITING THE TRADE, abruptly.- If a WBMF Loser ("W+" column) shows up within five days of the breakout day, the move is going to retrace or is about to go sideways. I leave it to your discretion to exit or stay with the trade.
FORMULAS.- Exponential avg = (SIMPLE average from yesterday up to 9 days)*(1-weight)+today’s value*weight weight = 2/(days+1) CONCLUSION.- The system works well for stocks making new highs or about to make bold upward moves from sound bases. The system dumps the losers quickly, as adviced by O’Neil, and watches the winners closely. Please, I cannot emphasize /Antonio |