The Deipnosophist

Where the science of investing becomes an art of living

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Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

24 January 2007

Pictures hopefully worth 1000 words

Gosh, I had no idea a simple request -- or so I thought at the time -- would prove so confounding! :-) The opportunities that purportedly resemble "large cap value stocks trading in high level consolidations lasting for several years," are not each precisely that. Clearly the responsibility is mine for being unclear in my request, so...

1) "large cap value" has a specific denotation. Taken separately, large cap and value.
2) "high level consolidations" equal patterns that the lows typically range from 30-50% subsequent to its all time high. This definition excludes stocks down (much) more than 50%, and certainly those scraping along their all time lows.
3) "several years" is... well, precisely that.

As a reminder, below is the previously posted chart of Clorox/CLX...

Please note that, as deep as the initial decline from the all time high was, it was only ~50%. The base endures for several years (well, nigh on a decade now!).

Now compare CLX to Wachovia/WB...

The similarity between the two ended in October 2004, when WB emerged from its then 6 year base. It's subsequent up trend has run for ~2 1/4 years, although in terms of price movement the shares are only $8 higher from the breakout. So it is not extended, and is in fact a leader for this group (banking).

Now compare Avery Dennison/AVY to CLX...

Please note that similarities abound between the patterns of these two charts. Avery Dennison/AVY remains in a very tight high level consolidation that to date has continued for slightly more than 7 years. And now begins to emerge from this pattern; quite effectively, as well. All quite bullish, and exciting! (Thanks to the anonymous reader who contributed AVY.)

The market appears set to open higher today. Do not be gulled by these lurches, as it could easily reverse (from opening higher to closing lower, if not down) by the day's close. As always, invest with discipline. Do not chase price action. Master the details, master the risk.
-- David M Gordon / The Deipnosophist


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