Real examples:

Let’s dart a glance at how it works in real, using our valid transactions, since 1999.

Adobe (ADBE) has flied up to a new 52-week maximum in March 1999, and then has developed the accurate trading range from the end of March to the middle of April, having formed that type of a “flag” which we like to trace for an entrance signal. It showed powerful relative force, strong level EPS, good growth of quarter incomes, had very good estimations of growth of the income the next year, was the leader in the sector, and was bought by funds – means, corresponded to the majority of our criteria for the further course upwards.

When four-week consolidation has been punched upward in April (about level 30) we have started to buy ADBE for clients, it has appeared in our list of new maxima. The first trading channel after our input has happened in May when ADBE has decreased from 40.53 to 33 1/2, having fallen strongly enough. In June ADBE has escaped from this consolidation to new maxima, and we have applied our first rule of stop trailing, having put stop on 33, and have received, at last, possibility to fix profit, after all stop – above entry cost. The others 3-4-week consolidations, in July-August and in August-September, have allowed us to lift stop again.

Then, in October, ADBE has come off and has started to bargain above P/E 40. 40 – maximum P/E for last three years. It means that ADBE price explosion is potentially overestimated and possible. Thus, in October we have passed to more tightened trailing stops on ADBE. Each time when ADBE decreased two days running, and then left on a new maximum, we move stop under a minimum of this decrease.

On November, 1st and 2 ADBE has made two-day decrease successively. On November, 4th ADBE has shown a bottom on 67 1/8, and then has left above on 11/8. The action has continued lifting to 79 before recoil, and the position has been closed on 66 3/4 in the beginning of December as ADBE has begun decrease to 50. Though we have not caught exact top, all of us took the lion’s share of this course, thanks to stop trailing.

And also let’ mention NASDAQ auctions, Business Objects (BOBJ). In the middle of June BOBJ has broken through two-month’s consolidation upward at great volume. It showed strong RS, explosive growth of incomes, and other our criteria of growth. We have bought BOBJ about level 30. BOBJ has made a new maximum in July; it was corrected to 37 and then has entered into the channel for two months before creation of a new 52-week maximum – which our stop under 37 where we have already fixed profit allowed us to move at once.

BOBJ has left on an impetuous course upward and in November its relation P/E became above 90 (above historical maximum PE). Thus, in November we have passed to more tightened techniques of moving of stop. For June, 1st 2000 BOBJ our stop has worked on 115, below a minimum from December, 14th 1999, and we took very good profit.

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