Thursday, December 18, 2008 - CANSLIM.net
In recent weeks we have taken the opportunity to use this section to revisit some of the previously featured stocks that were dropped some time ago based on technical weakness and fundamental concerns. Studying what happened afterwards should hopefully allow investors to get a better understanding of the importance of having a sell discipline. Limiting losses while they are small is critically important to your success, and this investment system's rule is to always sell a losing stock after it falls more than 7-8% from your buy price. These well-known, high-profile companies serve now as perfect examples that will hopefully allow investors in the future to recognize the warning signs and technical sell signals so they will know when it is time to lock in profits or minimize losses per the investment system's sell rules. Verifone Holdings Inc (PAY +$0.52 or +11.61% to $5.03) posted a big gain today, but it now faces a tremendous amount of resistance due to overhead supply, making it unlikely to be a market leader in the near term. Serious concerns were raised and noted in CANSLIM.net's 12/03/07 After Market Update (read here) as PAY was one of those unfortunate examples where investors are blindsided. It had gapped down for a considerable loss after the company said it would restate its earnings for the prior three quarters, with the added warning that revelations of deeper problems may follow. Based on the disappointing fundamental news and very weak technical action, it was noted while dropped from the Featured Stocks list. It has traded as much as -91.14% lower since its close on the day it was dropped from the Featured Stocks list. PAY was first featured at $24.89 on Friday, December 2, 2005 in the CANSLIM.net Mid Day Breakouts Report (read here). However, during 2005 it went through a tough correction below its 50 & 200 DMA lines. After a technical breakout late in the session on 9/25/07, it gapped up and extended its gains, and it was featured once again in yellow in the CANSLIM.net Mid Day Breakouts Report on 9/26/07 (read here). After the damaging gap down, those who may have decided to ride it out as "long term investors" made a huge mistake by ignoring the technical and fundamental warnings that were very clear.
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