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.
Ansys Inc. (ANSS -$0.43 or -1.00% to $43.42) remains trading below its 50 DMA line as it continues encountering resistance near that important level. Greater concerns would be raised by deterioration under its longer-term 200 DMA line which would trigger a definitive technical sell signal and have the effect of negating all gains since its May breakout. ANSS still sports strong ranks; an Earnings Per Share (EPS) rating of 97, and a Relative Strength (RS) rating of 94. Its Return on Equity stands at a respectable +19%, which is above the +17% guideline.
This stock was first featured in yellow in the February 7, 2005 CANSLIM.net Mid-Day BreakOuts Report (read here). However, based on weak technical action, it was later dropped from the Featured Stocks list. Better action prompted it to be featured again in yellow at $47.01 in the May 29, 2008 CANSLIM.net Mid-Day BreakOuts Report (read here). However, the ongoing analysis has noted concerns since it negatively reversed on June 20, 2008 and gapped down and violated its 50 DMA line, triggering sell signals with considerable losses on heavy volume July 1 & 2, 2008. Its chart pattern now resembles a bearish head-and-shoulders, and a breach of its recent chart lows would complete that pattern and trigger an ominous technical sell signal. Market conditions (the M criteria) currently argue against any new buys. If ANSS manages to repair its 50 DMA line violation it would be in better shape as a buy candidate, but for now it should remain on an active watch list until the market produces a new follow-through day and the stock triggers a fresh technical buy signal. Remember to always limit losses per the 7-8% sell rule, and never hold a stock if it falls more than that from your purchase price.
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Ansys Inc. |
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Ticker Symbol: ANSS (NASDAQ) |
Industry Group: Computer Sftwr-Design |
Shares Outstanding: 38,530,000 |
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Price: $47.30 5/30/2008 |
Day's Volume: 1,044,103 5/30/2008 |
Shares in Float: 77,230,000 |
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52 Week High: $47.64 6/1/2008 |
50-Day Average Volume: 922,354 |
Up/Down Volume Ratio: 1.6 |
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Pivot Point: $46.05 |
Pivot Point +5% = Max Buy Price: $48.35 |
Web Address: http://www.ansys.com/ |
C A N S L I M | StockTalk | News | Chart | SEC | Zacks Reports |
View all notes | Alert me of new notes | CANSLIM.net Company Profile
CANSLIM.net Company Profile: Ansys, Inc. and its subsidiaries engage in the development and marketing of engineering simulation software and services used by engineers and designers in aerospace, automotive, manufacturing, electronics, biomedical, and defense industries in the United States and internationally. The company distributes its products through a network of channel partners, as well as through its direct sales offices. ANSYS was founded in 1970 and is headquartered in Canonsburg, Pennsylvania. It hails from the Computer Software Enterprise group which is presently ranked 39th on the 197 Industry Groups list easily placing it in the top quartile needed to satisfy the L criteria. The number of top-rated funds with an ownership interest has grown from 181 funds in June '07 to 236 funds as of March '08, a sign of increasing institutional interest (the I criteria).
What to Look For and What to Look Out For: Look for the stock to continue advancing which reaffirms its recent technical buy signal. Remember that buyable breakouts must clear their pivot point with gains backed by at least +50% above average volume during a confirmed rally. Therefore, much of a stock's success depends on the broader market's ability to sustain a meaningful rally, otherwise 3 out of 4 stocks are likely to struggle in the event that the latest rally-attempt fails. Deterioration under $46 will technically negate the current breakout and raise concerns.
Technical Analysis: The stock blasted above its pivot point on very heavy volume and appeared featured in yellow in the May 29, 2008 CANSLIM.net Mid-Day BreakOuts Report (read here). The pattern could be considered a breakout from a cup with a high handle. It also cleared a long flat base pattern with its recent rally above the $42 level that had been a stubborn resistance area, however its gains into new high ground lacked great volume conviction, then followed by a light volume pullback and successful test of support near the prior highs. Now the stock has risen free of all resistance due to overhead supply, with healthy price and volume action that is a strong sign of institutional buying demand (satisfying the I criteria). However, the stock's latest technical buy signal may not deserve as much notice until a confirmed rally from the major averages is produced by a sound follow-through day. Until then, patience is paramount. Long time members may recall seeing ANSS first featured in yellow in the CANSLIM.net Mid-Day BreakOuts Report on February 7, 2005 (read here). It has rebounded impressively since weak technical action prompted it to be dropped from the Featured Stocks list 1/11/2008 after being featured in yellow again as recently as December 21, 2007 (read here).
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Ansys Inc. |
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Ticker Symbol: ANSS (NASDAQ) |
Industry Group: Computer Software- Design |
Shares Outstanding: 78,300,000 |
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Price: $41.46 12/31/2007 |
Day's Volume: 558,900 12/31/2007 |
Shares in Float: 75,200,000 |
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52 Week High: $42.63 12/21/2007 |
50-Day Average Volume: 722,300 |
Up/Down Volume Ratio: 0.7 |
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Pivot Point: $42.05 11/06/2007 high plus $0.10 |
Pivot Point +5% = Max Buy Price: $44.15 |
Web Address: www.ansys.com |
View all notes | Alert me of new notes | CANSLIM.net Company Profile
CANSLIM.net Company Profile: Ansys, Inc. and its subsidiaries engage in the development and marketing of engineering simulation software and services used by engineers and designers in aerospace, automotive, manufacturing, electronics, biomedical, and defense industries in the United States and internationally. The company distributes its products through a network of channel partners, as well as through its direct sales offices. ANSYS was founded in 1970 and is headquartered in Canonsburg, Pennsylvania. It hails from the Computer Software Enterprise group which is presently ranked 112th on the 197 Industry Groups list. However there are other high-ranked leaders such as Autodesk (ADSK) that help overcome this shortcoming and satisfy the L criteria. The number of top-rated funds with an ownership interest has grown from 153 funds in Dec ‘06 to 202 funds as of September '07, a sign of increasing institutional interest (the I criteria). Strong quarterly and annual earnings increases above the +25% guideline satisfy the C and A criteria.
What to Look For and What to Look Out For: Look for the stock to confirm a new technical buy signal by breaking out above its $42.05 pivot point with gains on heavy volume in the coming days and weeks. Remember that buyable breakouts must clear their pivot point with gains backed by at least +50% above average volume to meet the guidelines. Much of its success will depend on the broader market's ability to sustain a meaningful rally, otherwise 3 out of 4 stocks are likely to struggle in the event that the latest confirmed rally fails. Deterioration under its 50 DMA line would raise concerns and trigger technical sell signals.
Technical Analysis: The stock is building its latest base after finding support near its 50 DMA line. With no new news headlines, ANSS gapped up on 12/21/2007, a sign of institutional buying demand (satisfying the I criteria). On that session it traded above its pivot point, then pulled back and closed below that important threshold, a sign it was encountering some resistance as it tried to make progress above prior highs. Therefore, a proper technical buy signal will be confirmed if ANSS manages to post additional gains on meaningful volume and close above its current pivot point . Note that its Relative Strength line has helped to confirm its advance into new high territory, a very good reassurance of technical strength.