After enjoying a sizeable gain, it is normal for leading stocks to spend some time building a new base. During that time, some leaders violate the 7-8% guideline and shake investors out before launching to new highs. Prudent investors have learned that if, after a shakeout, the stock sets up and continues to sport robust fundamentals, then there is nothing wrong with re-entering their long positions if a new techncial buy signal is triggered.

Cascade Corp. (CAE $0.4 or 0.76% to $52.50) closed higher on above average volume on Friday. This stock was featured on Wednesday, December 07, 2005 in the CANSLIM.net Mid Day Breakouts Report (read here) as it was perched near its previous high and was trading in the upper half of its base.  A few days after being featured this stock triggered a technical buy signal as it blasted trough its $50.99 pivot point. However, to the bulls dismay, shortly thereafter, CAE rolled over and negated its recent breakout. Not only was the recent breakout negated but this issue traded more than 7-8% below its pivot point, triggering a technical sell stop

For the next several weeks/months this issue traced out a new base and now looks like a solid candidate.  During this pullback the stocks fundamentals remained strong and if this stock manages to trade above its new pivot point of $53.69 on above average volume, then a new technical buy signal will be triggered.  

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.  

Cascade Corp. (CAE -$2.67 or -5.30% to $47.72) has been a steadily rising over many months.  Last week, on December 7th, 2005 it was featured in the CANSLIM.net Mid-Day Breakouts Report (read here).  However, this stock has failed to make major headway since its appearance, and now it has fallen back into its prior base.  Concern increases due to the recent high volume distribution over the past two days, a bearish sign as volume swelled and it sliced under its 50 DMA line.  Whenever a stock pierces its 50 DMA on massive volume the stage is usually set for further downside testing.  Only a prompt rebound could help it save face, however it is usually best for investors to take action when a stock they own starts to technically fail - Remember to limit losses and always cut your losses at 7-8% maximum!