Healthy stocks that are within close striking distance of new highs are often great buy candidates for investors to keep on their watch lists, especially when the companies match favorably with all of the investment system's criteria.  When a stock is more than -10% off its 52-week high, and if it has violated its 50-day moving average (DMA) line, then the outlook only gets worse and worse as it spends a greater period of time trading deeper under that important short-term average line. By the time a stock's 50 DMA line starts sloping downward it should also be acknowledged that the stock has been struggling for a long while, in which case it might be time to reduce exposure and look for places to put that money to work in stronger buy candidates.

Agrium (AGU  +$0.79 or +0.76% to $107.54) closed higher on below average volume as the second quarter officially ended. Agrium resides in the Chemicals-Fertilizers group which is presently ranked 8th out of the 197 groups covered in the paper. The Chemical-Fertilizers groups is one of the strongest industry groups over the past few years. Therefore, as long as this trend continues AGU remains a prime candidate for an active watchlist. This stock was first featured on Wednesday, June 11, 2008 in the CANSLIM.net Mid Day Breakouts Report with a $95.57 pivot point and $100.35 max buy level (read here) and the following note: "Y - High-ranked leader in the Chemicals-fertilizers group gapped up today for new all-time highs after raising guidance. Volume had dried up while basing for 7 weeks above support at prior chart highs in the $76 area and its 50 DMA line. Up and down annual earnings history (questionable A criteria) is a concern, but it showed strong increases the last 3 quarters." Since then, AGU has traded nearly +14% higher while the market averages have tanked. The stock is currently too extended from a sound base to be considered buyable under the proper guidelines. 

AGU may make a better buy candidate in the future if it offers investors another sound opportunity to purchase the stock. Additional opportunities occur when a stock pulls back to its 50 DMA line, prior chart highs, an upward trendline, or any other important technical support area. However, it is of the utmost importance for market conditions (the M criteria) to improve by at least one of the major averages producing a sound follow through day before taking new long positions. Normally, 3 out of 4 growth stock follow the direction of the major market averages, and with the major averages presently in a correction, investors are up against some very bad odds.

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