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Pivot Point In This Case Should Be High Of Handle - Monday, September 18, 2006
A classic example of the success enjoyed by many CANSLIM.net readers usually starts when an investor reads a CANSLIM.net report and buys a featured stock before it has risen above the pivot point by greater than 5%. After a stock breaks out above its pivot point, there is only a +5% window that investors have to purchase the stock under the proper guidelines. Once a stock rises above the "maximum buy price" the risk of a shake out balloons, meaning that even a normal retracement in the stock might force you to employ the 7-8% loss cutting rule. Much can be told by the stock's daily action in the weeks and months that follow a breakout. Typically, a light volume and orderly pullback suggests that the bulls remain in control. However, high volume pullbacks that violate support paint a totally different picture.
Anaren Inc. (ANEN +$1.81 or +7.12% to $23.62) gapped higher for a considerable gain on more than four times its average daily volume on Monday. This stock was first featured in today's CANSLIM.net Mid Day Breakouts Report (read here) at $23.79. The stock was highlighted as a noteworthy stock and we published an incorrect pivot point of $24.41. The accompanying note read, "Y - Gap open and solid gains today. Cup with handle like pattern. More above average volume gains above the pivot point would trigger a technical buy signal up to the max buy price." The proper pivot point in a cup-with-handle is actually the high point of the handle, in which case the correct pivot point would be $22.74 (the high reached on September 1, 2006). The action in the past 4 months has been very choppy, not making ANEN a very good example of a typical cup-with-handle pattern. Nonetheless, the bullish action was considered a technical buy signal because the stock climbed above the high of the handle and cleared virtually all chart resistance with gains on huge volume. The company sports healthy fundamentals and very high ranks. Now that ANEN has broken out, a reversal and close back in the prior base (below its $22.56 high close on 8/31/06) would be cause for concern because it would negate the breakout.
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