One of the critical characteristics of successful investing is knowing when to sell. Investors are best served when they buy based on the combination of strong fundamentals and technicals, then sell based on the technicals. The reason is because fundamentals often tend to lag a stock's technical condition and come to light later to help explain the technical chart action after the fact.

Activision Blizzard, Inc. (ATVI -$1.65 or -14.73% to $12.85) fell hard today on above average volume, hitting a new 2008 low. This stock was first featured on Friday, May 09, 2008 in the CANSLIM.net Mid Day Breakouts Report as the high-ranked leader staged a "breakaway gap" to new all-time highs on heavy volume (read here). Its last appearance in the Featured Stock Update section was on Wednesday, August 13, 2008 under the headline, "Upward Trendline is Important Technical Support Level to Watch". Subsequent deterioration was noted in CANSLIM.net's ongoing coverage as concerns were raised while it fell under its upward trendline and longer-term 200-day moving average (DMA) line, triggering technical sell signals.  Based on its weakness, ATVI will be dropped from the Featured Stocks list tonight.

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An upward trendline, by definition, develops as a stock steadily appreciates over an extended period of time.  During that period the stock vacillates between the lower and upper boundaries of trendlines which can be drawn connecting a series of recent highs or lows.  In order to ensure the overall health of the stock, the lower boundary should not be violated.  Technically, if the lower boundary is violated this signals that the trend is deteriorating and bears are gaining control, making the odds start to favor the possibility of further downside testing. 

Activision Bizzard Inc (ATVI -$0.04 or -0.12% to $34.50) has rallied up to its 50-day moving average (DMA) line after recently encountering distributional pressure and violating that important short-term average. It may encounter some resistance up through the $37-38 area, but given time a proper new base could form, allowing for another sound entry point.  Its outlook would improve greatly with subsequent gains above its 50 DMA line, but in the meanwhile, a violation of the upward trendline connecting its prior chart lows would raise greater concerns and trigger additional technical sell signals. This stock was first featured on Friday, May 09, 2008 in the CANSLIM.net Mid Day Breakouts Report after a "breakaway gap" to new all-time highs (read here).  On May 30th, 2008 this company was discussed in my interview on WBBM 780 AM, Chicago, IL (listen via link here).

During the broader market's correction in July it encountered distributional pressure and fell under its 50 DMA, yet it found prompt support near its prior chart highs and pivot point before rallying again to higher highs.  This high-ranked leader is currently trading -10.5% off its all-time highs, and it should remain on an active watch list while consolidating.

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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.

Activision Inc. (ATVI -$0.03 or -0.09% to $32.91) is holding its recent gains, consolidating quietly after its recent breakout and gains for new highs on heavier volume. ATVI sports strong ranks; its Earnings Per Share (EPS) is 90 and its Relative Strength (RS) rating stands at a very firm 97, signallying strong technical action.  The number of top-rated funds owning an interest rose from 253 in Jun '07 to 298 in Mar '08, which shows increasing institutional demand (the I criteria).  Concerns would be raised by any weakness leading to a close under its old chart highs near $30 which would have the effect of technically negating its latest breakout to new all-time highs.

This stock was first featured on Friday, May 09, 2008 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $28.04 pivot point and a $29.44 maximum buy price. It was previously noted that the stock "quickly blasted more than +5% above its pivot point, however, in a bullish market environment, break-away gaps are one exception where it has been noted that a stock can be considered buyable as much as +10% above the pivot. Patience may allow for shares to be accumulated on light volume pullbacks toward prior chart highs.  The usual sell discipline applies, and investors should always limit losses per the 7-8% sell rule, and never hold a stock if it falls more than that much from the stock's purchase price. Note that the gains followed the company reporting another very healthy quarter of big sales revenues and earnings improvement.  Whenever a stock trades above its pivot point with a considerable gain on at least +50% above average volume a technical buy signal is triggered. Heavy volume behind a stock's advance provides the critical proof that institutional investors (the I criteria) are accumulating shares.  That increases the chances of a sustained advance and meaningful profits for disciplined investors." 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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Volume is a vital component of technical analysis.  Prudent investors that incorporate volume into their stock analysis have often benefited several fold. Ideally, healthy stocks will more often tend to rise on higher volume and pullback on lighter volume.  Volume is a great proxy for institutional sponsorship.  Conversely, high volume declines can be ominous, as this usually signals distribution and further price deterioration are more likely to follow.

Activision Inc. (ATVI +$3.94 or +14.22% to $31.64) experienced a break-away gap into new high territory today, triggering a technical buy signal with a considerable gain on more than 5 times its average volume. This stock was first featured in yellow in today's CANSLIM.net Mid Day Breakouts Report (read here) with a $28.04 pivot point and a $29.44 maximum buy price. It quickly blasted more than +5% above its pivot point, however, in a bullish market environment, break-away gaps are one exception where it has been noted that a stock can be considered buyable as much as +10% above the pivot. Patience may allow for shares to be accumulated on light volume pullbacks toward prior chart highs.  The usual sell discipline applies, and investors should always limit losses per the 7-8% sell rule, and never hold a stock if it falls more than that much from the stock's purchase price. Note that the gains followed the company reporting another very healthy quarter of big sales revenues and earnings improvement.  Whenever a stock trades above its pivot point with a considerable gain on at least +50% above average volume a technical buy signal is triggered. Heavy volume behind a stock's advance provides the critical proof that institutional investors (the I criteria) are accumulating shares.  That increases the chances of a sustained advance and meaningful profits for disciplined investors. 

ATVI sports a strong Earnings Per Share (EPS) of 83 and Relative Strength (RS) rating of 92. ATVI resides in the Computer - Software/entertainment group which is currently ranked 52nd out of the 197 Industry Groups covered in the paper, just outside the much preferred top quartile. Other high-ranked stocks in the group are providing leadership (confirming the L criteria) including: Renaissance Learning Inc. (RLRN -2.81%) and Take-Two Interactive Software Inc (TTWO -0.26%) . The number of top-rated funds owning an interest rose from 254 in Jun '07 to 301 in March '08, which shows that institutional demand has been improving (the I criteria).

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