DGO | SEC | Zacks Reports
A very important technical tool that savvy investors have learned to incorporate in their technical analysis is the 50-day moving average (DMA) line. The 50 DMA line plays a pivotal role relative to a stock's price. If the price of a stock is above its 50 DMA then odds are that its 50 DMA will act as formidable support. Conversely, if the price is below its 50 DMA then the moving average acts as resistance. Healthy stocks sometimes trade under their 50 DMA lines briefly, but usually a strong candidate will promptly bounce and repair a 50 DMA violation. When a stock has violated its 50 DMA line and then lingers beneath it, the stock's outlook gets worse and worse as it spends a greater period of time trading under that important short-term average line. Once the 50 DMA line starts sloping downward it should also be acknowledged that the stock has been struggling for a while, and it might be time to reduce exposure and look for places to put that money to work in stronger buy candidates.
Anixter International Inc. (AXE -$0.05 or -0.09% to $57.62) closed in the upper half of its intra-day trading range and above its 50 DMA line. It was first featured on Wednesday, July 26, 2006 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $52.72 pivot point. Since then it has been acting well. AXE more recently appeared in the September 22, 2006 CANSLIM.net After Market Report (read here) as it was building its new base-on-base pattern. In the weeks that followed, during its consolidation in early-October, it violated its 50 DMA line, yet it managed to find prompt support near its August-Septermber chart lows and above its April-May highs (near $52.50) which were a previous resistance level also expected to be a level of solid support. The fact that AXE has managed to stay above its old pivot point is also impressive, and its outlook remains bullish unless it is pressured to a close below its recent (10/30/06) low of $53.30, where a violation would prompt concern. While it has spent many weeks moving sideways its Relative Strength (RS) rank has fallen off toward the minimum guideline of 80 though. After another week or more of additional consolidation, a new buy signal to be watching for would be a technical breakout with heavy volume leading to gains lifting it above its $61.45 chart high from October 24th.
C A N S L I M | StockTalk | News | Chart | DGO | SEC | Zacks Reports
View all notes | Alert me of new notes | CANSLIM.net Company Profile
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 | Add a note
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.
Anixter International Inc. (AXE -0.85 or -1.47% to $57.05) was first featured on Wednesday, July 26, 2006 in the CANSLIM.net Mid Day Breakouts Report (read here) at $55.27 as it was approaching its maximum buy price. The very next day it pulled back and successfully tested its pivot point before moving higher. Statistically, about 40% of winning stocks will pull back after breaking out. In other words, it is not uncommon for stocks to pullback and retest support near their pivot point after breaking out. It is important to see the bulls show up and offer support at or above the pivot point. This may offer investors a chance to increase their exposure before the stock continues advancing.
The bulls promptly offered support and AXE rallied to $57.97 before reversing on August 4th. After an impressive rally, it is healthy for this stock to pause and consolidate its recent gain. However, it was hit with a string of 5 more consecutive losses on above average volume, yet the price action was far from damaging during that period. The stock held up well above support at its prior chart highs in the $52 range while volume generally cooled down and it spent the last 7 weeks in a tight trading range, building a base-on-base pattern. Reversals from intra-day highs on 9/15 and 9/21 are signs it has been encountering some near-term resistance, however having no overhead supply is a positive factor in this case. One would expect this stock to find support above the recent chart lows and its 50-day moving average (DMA) line (the red line), where failure would trigger technical sell signals. As long as this stock trades above those support levels, odds favor that it will trend higher.
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 | Add a note
Anixter International Inc. (AXE +$0.19 or +0.33% to $57.04) rallied for a fourth consecutive day on Thursday and ended at a new all-time high close with volume just slightly above average. This stock was first featured on Wednesday, July 26th, 2006 in the CANSLIM.net Mid Day Breakouts Report (read here) at $55.27 as it was approaching its maximum buy price. The very next day, this issue pulled back and retested its pivot point. After that brief pullback, this stock continued advancing on less impressive volume. Then it flashed a negative reversal on August 8th, starting that day rising into new high ground only to reverse and close for a loss. That was followed by 5 more consecutive down days with above average volume, which is definitely bad enough to raise concerns. However, during that pullback it should be noted that the stock stayed well above technical support which would be expected at prior chart highs in the $51-52 area. As long as this stock remains above that suppport level then odds still favor even further gains. However, if the bulls fail to quell the bearish pressure it recently encountered and this stock closes below its recent chart low of $53.36 hit on August 11th, 2006, or if it falls below its pivot point, then the recent technical breakout and subsequent healthy action would be completely negated. As always, sell any stock that falls more than 7-8% from your purchase price to limit losses within the CAN SLIM(R) guidelines.
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
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 an ominous, as this usually signals distribution and further price deterioration are more likely to follow.
Anixter International Inc. (AXE +2.15 or +3.91% to $52.90) rallied smartly today on nearly three times normal turnover and for the first time featured with an annotated DailyGraph(R) in the Wednesday, July 26th, 2006 CANSLIM.net Mid Day Breakouts Report as it was breaking out of its multi month base (read here). This high-ranked candidate sports impressive ratings and has technically broken out to new all-time highs. It is obviously asserting itself as one of the leaders in the Elec-Parts Disistributors group which is now ranked 53rd on the 197 Industry Groups list. However, proper trading discipline suggests that investors should exercise patience for now. History shows us that the greatest chances of success are found when the broad market is in a confirmed rally as determined by the major averages. In order for the market to return to a confirmed rally it must first produce a successful follow-through day. Bullish action also needs to be evidenced by an increase in the number of stocks making new highs. Until then, patience is key.
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