Volume totals Friday on the NYSE and the Nasdaq exchange were reported lighter than the prior session totals while advancers led decliners on the NYSE by almost 2-to-1 ratio but by a narrower 5-to-4 ratio on the Nasdaq exchange.  There were 28 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, down from the 58 issues that appeared on the prior session. On both exchanges new 52-week highs substantially outpaced new 52-week lows.  The past 2 weeks have brought a great improvement in the market environment (the M criteria), with very encouraging indication of heavier buying demand coming into stocks from institutional investors.

Stocks began the week carrying over their upward momentum from the prior week's big gains, rising across the board on Monday after a majority of the overseas markets posted strong gains.  Volume increased behind gains on Tuesday after Federal Reserve Chairman Ben S. Bernanke said the economy is showing "tentative signs of stabilization," and that "limited inflation pressures" will allow policy makers to keep interest rates near zero for an "extended period."  On Thursday new 52-week highs were in the triple digits while new 52-week lows were in the single digits on both exchanges, breadth was very positive, and volume surged to above average levels behind gains that were clearly indicative of institutional accumulation.  News on the merger and acquisition front sparked additional enthusiasm.

Microsoft Corp's (MSFT -8.26%) double-digit percentage decline in revenue put tech stocks under pressure for Friday's session and broke the Nasdaq Composite's remarkable 12 session winning streak.  The Dow and S&P 500 Index reversed early losses and finished the session with small gains.  Online retailer Amazon.com (AMZN -7.86%) pulled back after in-line earnings. Capital One (COF +8.05%) rose after the consumer finance firm reported a second quarter loss that was not as bad as expected.  Health care shares provided some leadership after a leader of House fiscal conservatives said health care reform talks fell apart and he sees no possibility of a deal.

New home sales data for June is due on Monday, along with another batch of quarterly announcements. Watching the market reaction to earnings reports and guidance is critical during earnings season, as always.

Charts courtesy www.stockcharts.com

PICTURED: The Bank Index ($BKX +0.00%) ended flat on Friday, and it has been encountering resistance near its 200-day moving average (DMA) line.

Reversal days are a great way to stay ahead of potential changes to a recent trend.  A positive reversal occurs when a stock opens the session heading lower, then reverses and ultimately closes the day higher. Positive reversals are often considered more severe if the stock's initial losses drive it to a new low, but it then reverses and closes the day higher on heavier than average volume and ends near the session's utmost highs. Reversals can occur on a daily, weekly or a monthly chart. In general, when a longer time frame is involved, greater implications may be given as to the severity or significance of the reversal. Volume is directly correlated with the severity of the action as well.  

HMS Holdings Corp (HMSY +$0.75 or +1.88% to $40.57) made a positive reversal today after a pullback below its "max buy" level. This high-ranked Commercial Services - Healthcare firm previously tested prior highs in the $38 area -a very important initial support level that also coincides with its 50-day moving average (DMA) line.  Deterioration into its prior base, or a violation of its 50 DMA line, would raise more serious concerns and trigger technical sell signals. It has shown healthy action since a gap up gain on 6/16/09 with heavy volume triggered a technical buy signal. The heavy volume and gap up provided a nice reassurance of institutional (the I criteria) buying demand.

Quarterly sales and earnings increases have been above the +25% guideline of the investment system, so it solidly satisfies the C criteria. A downturn in 2006 earnings (see red circle) is a fundamental flaw in HMS Holdings Corp's annual earnings history that raises some concerns with respect to the A criteria of the investment system.  Investors' odds are usually better with a company that has a steady 3-5 year earnings growth history.  That shortcoming could give investors one extra reason to be very careful about limiting losses.

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.