Ian Woodward's Investing Blog

Bottom Fishing using the Limbo Bar

fishing

  • Question in the E-mail bag: TKC was a momentum stock just 6 months ago that has broken down. Probably on the HGSI lists then.  I am interested in this one for I like to buy growth stocks whose growth story is still intact yet off 30-40% from the high.  Has anyone looked at this one technically to see if it is triggering a bottom here?  Any info appreciated.  SKI

  • Response: SKI:  You certainly know how to pick a broken down bottom fish “personified”!Your question was whether this stock had found the bottom, and it certainly has signaled “a” bottom:

  1. Two Bingo signals within three days, including yesterday

  2. All X Factor Bongos Daily, Weekly and whatever else showing red

  3. %A/D (Acc/Dist) at -16.3%, which is a C-, close to a D.

  4. Two negative Little Kahunas, two days in a row a week ago

  5. The 200-dma High Jump at -24.26% is lower than it was on 7/17/2006, when it was at -23.86 @ $9.72

  6. A Gap down this week, which says it could go lower, but today has perked up from bottom fishers

  7. However, it is giving up the 50c from the bottom today, so maybe it will disappoint even them

  8. All of that should be enough to stiffen your backbone that this may be just the type of stock to gamble on

Note I said “a bottom” and not “the bottom”, but you are a master at that, which is not our cup of tea.  However, that little example shows you that you can use HGSI for whatever style you want to use and just look for all the negative signals to look for candidates.  Good hunting, Ian. 

  • Follow-Up reply: As you correctly note this is A Bottom and maybe not THE Bottom. The whole group is looking bad here. However currently at these prices it is getting interesting.  And I think reading between your lines below it could very easily go lower here and looks it is going to the 15 support line which is a very near possibility.  I am waiting here for a better risk return at 15.  And yes the HGSI can help me here better with these beaten down stocks I like to buy. I guess a 180 degree reverse HGSI approach but none the less HGSI can also spot the downtrodden ones and I think the group is bottoming and time to get together my buy list on good divy ones like DT, NZT, FTE, PHI………Thanks for the great reply, Ian
  • Response: Ah SKI:  Your beady eyes spied my winky-winky that there may be more to go to the downside.  So let me show you how your suggestion that it could go down to $15 is in the ballpark by doing a test of reasonableness using the same tool…using the High Jump.  However, in this case we call it the Limbo Bar, since we are dealing with negative numbers below the 200-dma, the 50-dma or the 17-dma. 
  • If you have Ron’s standard files, go to your charting module and bring up the 7a High Jump Individual Lines into the View.  Now trot back to 5/22/06 and put your cursor on that date and open the Data Window.  It should show that the High Jump for the 50-dma for TKC was -24.9994 to be exact on that date…which means that it was -25% below the 50-dma for its lowest reading.  Now come back to yesterday’s date and you will see that the 50-dma is at 19.6476.  So 25% down from that gives us $14.74…a good test of reasonableness for the lowest bottom fish one can hope for if history repeats itself. 
  • So for all you bottom fishers, here’s a handy-dandy tool in the HGSI Software to confirm your T/A on where there is natural support at the low comparable to your 8/16/07 Base Low.  Now if you are really good at this, you might try the 17-dma, but be crafty enough to find three readings around the previous lowest level for it which occurred around 5/22/2006.  
  • Date           17-dma   Cur. 17-dma  Low Target
  • 5/19/2006   -16.4472     18.7288       $15.65
  • 5/22/2006   -22.3603     18.7288       $14.54
  • 5/23/2006   -12.5978     18.7288       $16.37

 Now you have it all…anywhere between $14.50 to $16.50 will be close enough for gov’t work.  Since it hit $16.87 two days ago for a low, the bottom fishers felt it was time to nibble.  If the market turns up and the gap today holds, they may be right.   Of course, most of us are lazy and just eyeball the previous low and make the call.  You are right to use the Wolf Pack concept so that you can see when they are coming out from the cold.  Ron will have an excellent Movie for the Newsletter on this subject of strong and weak Wolf Packs which will be out this weekend, so enjoy.   

Best regards, Ian.

P.S. I realize that for those who are not HGSI Software users some of the acronyms and “sayings” are not familiar to you, but I hope you get enough of a feel for the overall intent and value of notes like this that are specifically aimed at answering user questions.  If you like what you see why not try a free 60-day trial.  Just click on the link below and we will take care of the rest.  Ian.

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2 Responses to “Bottom Fishing using the Limbo Bar”

  1. Paul R Says:

    Excellent lesson once again Ian!

  2. Barry M Says:

    Thank you for a GREAT real world explanation of an indicator I had only heard of, never knew how to use.

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Disclaimer: Commentaries on this Blog are not to be construed as recommendations to buy or sell the market and/or specific securites. The consumer of the information is responsible for their own investment decisions.