After the 50-day moving average (DMA) line and prior chart lows have been violated, usually it is fair to admit that you have missed a couple of earlier sell signals.  Eventually a struggling stock might come around, however, it is never adviseable to hold any stock after it falls more than 7-8% from your purchase price. 

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. 

Canadian National Railway Co. (CNI +$0.24 or +0.50% to $47.40) has recently repaired a 50 DMA violation after finding support near prior chart lows in the $44 range, and it has been closing near the upper limits of its more than 3-month flat base.  This stock was featured on Monday, January 23rd, 2006 in the CANSLIM.net Mid Day Breakouts Report (read here) at $40.63 (split adjusted). Since then this issue has rallied nearly 20% and traced out a fresh base-on-base pattern. Prudent CANSLIM investors may be able to buy an initial stake, or add to their current holdings with confidence, only if CNI breaks out to a new high close with gains occurring on at least +50% above average volume through the new Pivot Point of $48.67.  Technically, that action would be considered a new buy signal.  It is imperative to wait for a fresh, legitimate buy signal to be triggered before initiating any new positions under proper guidelines.

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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, and usually are considered a signal to reduce exposure.  Additionally, it is worth noting that when there is weakness in the broader market averages, failure rates increase in individual equities. 

Canadian National Railway Co. (CNI -$0.10 or -0.22% to $45.40) closed lower today on very light turnover as it continued to trace out its base-on-base pattern. CNI was featured on Monday, January 23rd, 2006 in the CANSLIM.net Mid-Day Breakouts Report (read here) as it blasted through its $41.48 pivot point (split adjusted) on above average volume.  In almost textbook perfection, the very next day this stock continued rising on above average trade and closed in the upper half of its daily and weekly range.  On the next day, January 25th, 2006, it gapped up and closed 1 penny off its all time high for explosive gains on volume higher than any single trading day in years!  This stock continued rising for the next few sessions, then "turned right' as it began building its current base-on-base pattern, consolidating after its recent move up.  Another bullish note is that volume has contracted in recent weeks as this issue continues moving "sideways" and lingering within close striking range of new highs. As long as this issue continues trading above support offered by its 50-day moving average (DMA) line and recent lows of $44.08, the bulls technically remain in control.  Violations of those key support levels would be considered sell signals.