An essential skill to successful investing is knowing when and how to add to a winner.  The ideal time to purchase a stock is when it breaks out through its pivot point from a first stage base.  Ideally, the stock spends the next few weeks rising then begins building a base-on-base pattern.  A smart time to add to the position would often be when the stock breaks out of another new base.  When adding to a winner, buy a smaller amount of shares at the higher levels so as to not raise your average cost too much.  For example, if you initially bought 2,000 shares on the first breakout, you might buy only 1,000 shares on the add-on purchase. This pattern can be repeated after multiple breakouts, however at later stages stocks become more failure prone.   When the stock tops out and sell signals start to mount, ultimately one must be ready to sell their entire position when critical support is violated.

Natus Medical (BABY -$0.76 or -3.41% to $23.03) has recently been consolidating toward its 50 DMA line (now $22.43) and its prior chart highs which have been noted previously as important support to watch.  Disciplined investors who may currently be holding shares of BABY might watch for support to be found. Provided that the broader market produces healthier action as well, there could be future opportunities to buy additional shares at its 50 DMA line as an add-on point. They might also have patience to see if an adequate length base forms and a new breakout occurs, when new buying efforts might be considered appropriate yet again. This stock was first featured on Friday, December 21, 2007 in the CANSLIM.net Mid Day Breakouts Report (read here). 

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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.

Natus Medical Inc (BABY +$0.99 or 4.94% to $21.05) rallied above its 50-day moving average (DMA) line today with a considerable gain on near average volume.  It has been encouraging to see the stock find support near its 50 DMA while building on a base-on-base type pattern. The stock has had a choppy history since the company was first featured on Friday, December 21, 2007 in the CANSLIM.net Mid Day Breakouts Report with a $19.06 pivot point and $20.01 max buy level (read here). Along the way the company has completed a couple of additional share offerings, which can often have dillutive effects and hinder a stock's upward price progress.  Any subsequent deterioration under its 50 DMA would raise concerns, and a breach of its recent chart lows could trigger technical sell signals.  Meanwhile, if market conditions improve and the major averages produce a follow through day, odds will then favor it clearing recent highs and continuing higher.

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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.

Natus Medical Inc. (BABY DOWN ($0.33) or -1.69% to $19.21) ended lower on below average volume, dragged down by broader market weakness. This high-ranked leader has spent the past several months trading in the $16-20 range. It has shown solid earnings growth above the +25% guideline in the 3 latest quarterly earnings comparisons (good C criteria) versus the year earlier, but its decelerating sales revenues growth in recent quarterly comparisons raises some concerns.  Its Earnings Per Share (EPS) stands at a firm 95 and its Relative Strength (RS) rating is a solid 88.  The number of top-rated funds owning an interest in its shares has remained rather steady with 44 in Jun '07 and 48 in Mar '08.   

BABY was first featured on Friday, December 21, 2007 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $19.06 pivot point and a $20.01 maximum buy price.  The stock triggered a technical buy signal shortly after it was featured, but the broader market weakness in early January sent this stock sharply lower to its 200 DMA line.  It gapped up on 2/12/08 and made it back to new high territory once again, however, its breakout attempt also failed immediately.  The stock's steep pullback had it quickly retesting its 200 DMA line again.  Since then, the stock has gradually climbed back toward prior chart highs, and a small share offering was completed on 4/04/08. As always, proper discipline requires investors to sell if any stock falls 7-8% from their buy price, as that is the only way to eliminate the chance of even larger losses occurring. 

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A very important technical tool that savvy investors have learned to incorporate in their technical analysis is the 200-day moving average (DMA) line.  The 200 DMA line plays a pivotal role relative to a stock's price.  If the price of a stock is above its 200 DMA then odds are that its 200 DMA will act as longer term support.  Conversely, if the price is below its 200 DMA then the moving average acts as resistance.   Obviously, if a technical breakdown or violation takes place on heavy volume it is a more serious concern.  Sometimes, quiet violations are repaired quickly, without a lot of additional losses.  However, the key moving averages are always an important line to watch.

The stock hit a new 52-week high of $20.33 on March 6, 2008 before negatively reversing that day for a loss on heavy volume. Since then the stock has pull back and violated its 50 DMA and 200 DMA lines. BABY was first featured on Friday, December 21, 2007 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $19.06 pivot point and a $20.01 maximum buy price.  The stock triggered a technical buy signal shortly after it was featured, but the broader market weakness in early January sent this stock sharply lower. The bulls stepped up in late January and defended this stock's longer term 200 DMA line before sending it back into new high territory once again. However, its latest breakout attempt also failed immediately, and now the stock's steep pullback has it retesting its 200 DMA line again.   It must hold above that important longer-term average, or otherwise it may trigger more serious technical sell signals where greater losses will likely follow. Proper discipline requires investors to sell if any stock falls 7-8% from their buy price, as that is the only way to eliminate the chance of even larger losses occurring.

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Group action plays a very important role, and experienced investors learn that they can increase their odds of picking a great winner by always focusing their buying efforts in the market's leading groups.  The "L" criteria in tells us to choose leading companies in leading industry groups, thus it is suggested that investors choose from the top quartile of the 197 Industry Groups (listed in the paper most days on page B4). 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.

Natus Medical Inc. (BABY +$0.78 or +4.16% to $19.55) triggered a technical buy signal as it surged to new 8-month highs with a rally above its pivot point on a considerable gain backed by more than 2 times its average daily volume. It was featured earlier today, in the CANSLIM.net Mid Day Breakouts Report (read here) with a $19.06 pivot point and a $20.01 maximum buy price. Natus Medical sports a very healthy Earnings Per Share (EPS) rating of 97 and a Relative Strength (RS) rating of 87. The company resides in the Medical- systems equipment group which is currently ranked 4th out of the 197 Industry Groups list, placing in the much coveted top quartile of industry groups, helping satisfy the "L" criteria. Disciplined investors know to always limit losses if a stock falls more than 7-8% from their buy point. 

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