Hi Lostcowboy, I like your simplification. It is of course, the exact equivalent. I also agree that it could make people wary to invest in possible bubble stocks. Remember that Lichello uses a 10-4-10 cycle, and everyone seems to agree that this is outrageous. Whenever the Stock%=(Low/High) formula asks you to invest less than 40% (using yearly high/lows), you should ask yourself what you are doing. In your 5 year example, 20% looks OK as a danger signal.
Of course it is perfectly possible for stocks to sustain an extended climb. In your 5 year/400% gain example you are looking at an annualized return of just under 40%. Stocks like that might be in an extended growth phase and in that case are not be the best stocks to AIM. Just B&H or a Buy and Add scheme like Reverse Scale Investing might be better suited for those stocks (when they are looking OK fundamentally, of course). For AIM, I would like to see at least one cycle over at least half the High/Low range in those 5 years, or lots and lots of smaller cycles.
Regards,
Karel
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