EWZuber
1,373 posts
msg #44481
- Ignore EWZuber |
6/1/2006 2:14:59 PM
as214 said,
"If the IBD system is so good how come the hedgefund that Oneill started based on IBD principles went bankrupt after three years? Value investors buy William Oneills darlings months before they are profiled on IBD."
Oneal scorns stochastics, that is his primary vulnerability. He had no way to know that when the market is in a distribution phase on Monthly Charts his breakouts almost always fail. I have found that when a stock or an index is in Monthly Chart distribution it should not be bought at all only shorted at cycle peaks if you want the odds in your favor. Buying would be going against the longer term trend.
He later learned that his breakouts fail in what he called bear markets but that is a rather nebulous delineation.
His system is based on the idea that stocks that break out (coupled with fundamental improvement) have no overhead supply and therefore can run relatively unimpeaded racking up big gains. That part of his system is valid, and if used with stochastics, works very well,IMO.
Value investors buy at long term cycle bottoms which is also a valid approach. However, they typically don't run as hard and as fast coming off a bottom as they do post breakout. His goal was to make as much money as quickly as possible and when the market is under long term accumulation I suspect his approach would realize a much higher percentage of gains during the same period of time than buying off the bottom. He has apparently done computer analysis that supports that assertion.
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