Shortly after this report was published the bulls returned and promptly repaired the negative damage. Not only did CME trade back above its 50 DMA, but it also managed to hit new all-time high territory. On Wednesday, CME broke above its prior high of $504.00 but it failed to hold on to those impressive gains yet it still did manage its best-ever close.  However, volume, another critical component, was lacking today. It may form a handle now, which could serve to set up and eventually provide a more reliable technical breakout. If one uses the April 24th high plus ten cents as the new pivot point ($504.10), you might figure a "max buy" price of $529.30 which is +5% above that pivot point.  Usually you are going to be better off buying a stock near its pivot point rather than chasing it. It is important to note that CME has enjoyed an impressive run and is currently tracing out a late stage base. As long as price and volume remain bullish odds may favor further gains, however late stage bases are considered to be more failure prone. Proper selling discipline should always be applied whenever any stock falls more than 7-8% from your purchase price.

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 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.  Further, longstanding readers of this section in the CANSLIM.net After Market Report are well versed on the importance of upward trendlines.  It is also important to note how stocks behave after an upward trendline is violated.  By definition, an upward trendline develops when a stock has steadily appreciated for an extended period of time.  During that period the stock vacillates between the lower and upper boundary of the trendline.  However, once the bears show up and the lower trendline is violated then odds start favoring the possibility of further downside testing. 

Chicago Mercantile Exchange Holdings Inc. (CME -$0.47 or -0.11% to $440.65) ended lower today on above average volume as it continues trading below its 50 DMA. The company was featured on June 2nd, 2005 at $227.08 in that day's CANSLIM.net Mid-Day Breakouts Report (read here) right as this high-ranked leader was breaking out of a sound base on huge volume. That turned out to be the begining of another substantial leg up for this very strong performer.  It immediately traded higher with volume conviction, allowing traders to realize short term profits. Another big volume breakout and a more explosive gap up to all-time highs on June 29th, 2005 quickly added to worry-free gains. This issue was among the market's high-ranked leaders throughout much of 2005, and it helped set an upward pace after the major indices flashed a follow-through day in October 2005. Long-time members may have noticed this stock's earlier Mid-Day BreakOuts Report appearances such as May 19th, 2004 when it was only $123.58. It also made appearances in Mid-Day BreakOuts Reports in June, July, and Sept-Dec '04.

As the stock consolidated in the November 2005 - January 2006 period, the CANSLIM.net After-Market Update on January 12th, 2006 called attention to some concerns during its late-stage base (read here).  However, the stock held up well and on January 24th, 2006 it again blasted to another new high on very heavy volume, which was noted in that day's CANSLIM.net After Market Update. The all-time high of $504.00 was reached on April 24th, 2006, capping a +307.83% rise in a period of just under 2 years!  More recently, the gap down and loss on heavy volume on April 25th, 2006 was noted in the CANSLIM.net After-market Update as a sell signal.  The "island reversal" is a worrisome technical sell signal that was covered in detail in the Featured Stock Update section of the May 1st, 2006 CANSLIM.net After Market Update with an annotated DailyGraph(R) (read here)."  Shortly thereafter this issue sliced through an intermediate term upward trendline as the major averages continued declining. Additionally CME broke below its 50 DMA, prompting investors to lock in profits, and it has been unable to trade above that level since. The longer it remains trading under its 50 DMA the worse its outlook becomes.  Investors who are successful normally heed multiple sell signals and reduce their exposure when the market turns down.  Only a rebound above the 50 DMA would improve its odds of challenging the all-time highs again.  This has been an excellent winning example demonstrating the value of CANSLIM.net's timely reports and expert analysis.  

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Chicago Mercantile Exchange Holdings (CME - NYSE) - The company was featured on June 2nd, 2005 at $227.08 in that day's CANSLIM.net Mid-Day Breakouts Report (read here) right as this high-ranked leader was breaking out of a sound base on huge volume. That turned out to be the begining of another substantial leg up for this very strong performer.  It immediately traded higher with volume conviction, allowing traders to realize short term profits. Another big volume breakout and a more explosive gap up to all-time highs on June 29th, 2005 quickly added to worry-free gains. This issue was among the market's high-ranked leaders throughout much of 2005, and it helped set an upward pace after the major indices flashed a follow-through day in October 2005. Long-time members may have noticed this stock's earlier Mid-Day BreakOuts Report appearances such as May 19th, 2004 when it was only $123.58. It also made appearances in Mid-Day BreakOuts Reports in June, July, and Sept-Dec '04.

As the stock consolidated in the Novermber 2005 - January 2006 period, the CANSLIM.net After-Market Update on January 12th, 2006 called attention to some concerns during its late-stage base (read here).  However, the stock held up well, and on January 24th, 2006 it again blasted to another new high on very heavy volume and was noted in the CANSLIM.net After Market Update. The all-time high of $504.00 was reached on April 24th, 2006, capping a +307.83% rise in a period of just under 2 years!  More recently, the gap down and loss on heavy volume on April 25th, 2006 was noted in the CANSLIM.net After-market Update as a sell signal.  The "island reversal" is a worrisome technical sell signal that was covered in detail in the Featured Stock Update section of the May 1st, 2006 CANSLIM.net After Market Update with an annotated DailyGraph(R) (read here).  This has been an excellent winning example demonstrating the value of CANSLIM.net's timely reports and expert analysis.

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Chicago Mercantile Exchange Holdings Inc. (CME -$1.20 or -0.32% to $370.10) ended slightly lower on above average volume, reversing from earlier lows as momentum had carried it lower after Monday's $25 point drop.  CME has been one of the greatest market winners of the past several years.  CME was recently featured at $227.08 in the June 2, 2005 CANSLIM.net Mid-Day Breakouts Report (read here) as it was emerging from a solid multi-month base.  Since its impressive breakout this stock shot up more than +74% to $396.90 before its most recent pullback.

There are two important lessons one can learn from this leader.  First, since its December 2002 IPO this leader has advanced in an orderly fashion (advancing on high volume and declining on low volume).  Second, as is the case with all leaders, this issue rallied and then consolidated (built a base), and then rallied again.  That said, CME recently broke out of a short base on October 21, 2005, two days after the October 19, 2005 follow through day of gains for the major averages, and the stock has vaulted nearly +20% in that time frame.  Following such gains, any stock would be considered overdue for a pullback. 

The Chicago Mercantile Exchange (CME -$18.96 or -6.47% to $274.20) violated support offered by its lows of its most recent base and its 50-day moving average line, closing near its session lows today with a considerable loss on volume that was more than twice its average daily trading total. After a very impressive rally this stock appeared to be building a new base for the past six weeks between $281-315.  During that time, its 50 day moving average (50 DMA) was steadily catching up to its price. Typically, a healthy stock finds support at its 50 DMA, however, this was not the case with CME.  Prices were up solidly in the morning, then it reversed and closed below its 50 DMA. That left material damage to this issue, definitely giving investors cause for concern. The negative reversal day coupled with its inability to find support at its 50 DMA would generally suggest negative ramifications looking forward.  Only a prompt recovery in the next day or two with gains on heavy volume might help it to avoid a more serious correction toward its 200-day moving average.

Disiplined investors may view the action today as a technical sell signal and a reason to lock in the profits that may have been gained since this issue was featured on June 2, 2005 at $228.37 in CANSLIM.net's Mid-Day Report (read here) - as it was racing towards its pivot point. 

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