The bulls flexed their muscles today and sent the major averages higher even as the US dollar rallied! Volume, a critical component of institutional demand, was lower than Monday's levels which indicated a lack of buying from the institutional crowd. However, the fact that the major averages were down for most of the session and closed near their intra day highs helps offset that concern. Advancers narrowly trailed decliners on both the NYSE and on the Nasdaq exchange. There were 40 high-ranked companies from the CANSLIM.net Leaders List making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, down from the 61 issues that appeared on the prior session. In terms of new leadership, it was encouraging to see new 52-week highs outnumber new 52-week lows on the NYSE and Nasdaq exchange.

The Internet Index ($IIX +0.50%), Networking Index ($NWX +0.53%), and Gold & Silver Index ($XAU +0.61%) posted modest gains which helped the major market averages stay in positive territory for the close.  Financial shares were mixed as the Bank Index ($BKX +1.05%) rose, the Broker/Dealer Index ($XBD -0.91%) fell.  Weakness in the Retail Index ($RLX -1.38%) weighed on the major market averages.  The Biotechnology Index ($BTK -0.67%) and Oil Services Index ($OSX -0.65%) also closed modestly lower, meanwhile there was little change from the Healthcare Index ($HMO -0.14%), Integrated Oil Index ($XOI -0.00%), and Semiconductor Index ($SOX +0.15%). 

Charts courtesy www.stockcharts.com

PICTURED: The Broker/Dealer Index ($XBD -0.91%) is consolidating near its 50-day moving average line.

Smartheat Inc (HEAT + 1.50 or +13.65% to $12.49) matched its best ever close to the penny, and volume was almost 4 times average behind its big gain. It ended near the middle of its intra-day range after reaching a new all-time high, closing the session just under its pivot point.  In today's mid-day report it was highlighted in yellow and noted when technically rising from a "double bottom" base pattern (read here). The second consecutive big gain on heavy volume helped it blast further above its 50-day moving average line.  The action could be a sign it is encountering resistance as it tries to move into new high ground. To convincingly clinch a technical buy signal one would like to see more definitive proof of institutional buying demand.  Pyramiding into the stock might allow careful investors to accumulate shares methodically without paying more than the $13.24 "max buy" price, which is 5% above its $12.61 pivot point.

As is proper for a double bottom base, the consolidation took place over a period of at least an 8 week span, and the second low undercut the first low.  The lower low is the crucial "shakeout" during which weaker hands decide to unload their shares, helping exhaust selling pressure.  That kind of price action makes it an ideal set-up for a more powerful breakout, but a buy signal should be confirmed by a gain with at least +50% above average volume and a solid close above a stock's pivot point. Note that on 9/18/09 it completed an additional share offering. There is limited history for this small Chinese firm in the Pollution Control - Equipment group, however its reported annual earnings (A criteria) history has been strong. The 3 latest quarters show sales revenues and earnings increases well above the +25% guideline, satisfying the C criteria.

Color Codes Explained :
Y - Better candidates highlighted by our staff of experts.
G - Previously featured in past reports as yellow but may no longer be buyable under the guidelines.