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Concern Increases When an Upward Trendline is Broken - Monday, December 12, 2005
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.
Coach Inc. (COH -$0.41 or -1.17% to $34.70) was featured on March 3, 2005 in the CANSLIM.net Mid-Day Breakouts Report (read here) as it was "blasting out of a three month base" at $29.40 (split adjusted). Since then, however, this stock has been on a rather interesting journey, not always making it easy for CAN SLIM(TM) devotees. In mid-April it broke under important chart support and fell all the way to its 200-day moving average line (DMA) before bouncing. Weeks later, it had finally repaired the technial damage, and on June 1st, 2005 it was again featured in yellow at $30.29 in the CANSLIM.net Mid-Day BreakOuts Report (read here). It appreciated +20% before heavy distributional action marked the start of yet another deep consolidation. During its July-October slide it first violated an upward trendline, then broke down under its 50 DMA, and then later it briefly violated its 200 DMA and traded under important chart support near $28-29.
Note that its downward trend was coming to an end right as the broader market averages signaled the start of a new confirmed rally. A new upward trend was formed from the middle of October through late November. On November 30th, 2005 this upward trend line was violated with a considerable loss occurring on very heavy volume (twice its average daily volume total). Since that violation, volume has been light and its pullback rather orderly. However, additional concern is raised by the fact that its November peak only exceeded its August 1st high ($36.42) by pennies before the stock encountered heavy distribution. This gives its chart the look of a great big "double top" pattern that may also be considered as a bearish sign. The next important level of support is the 50 DMA ($33.15). The stock appears likely to spend more time consolidating, and only a new breakout above the pivot point of $36.94 (its November 28th high plus $0.10) with heavy volume would trigger a new technical buy signal.
Reversal and Upward Trendline Violation Prompting Concern - Wednesday, November 30, 2005
This company is an old and familiar name for long-time members and regular readers of CANSLIM.net reports. It was last highlighted with an annotated DailyGraph(R) in the Featured Stocks Update section on August 2nd, 2005 as it bounced off its 50-day moving average following earnings news (read here). Later, it failed to find support at the 50 DMA line and consolidated all the way back down to even briefly trade under its 200 DMA before bouncing near old chart highs that had been a resistance level in the $28-29 range.
Coach Inc. (COH -$1.34 or -3.75% to $34.43) recently met with resistance at prior chart highs, and today it negatively reversed to fall considerably on above average volume, closing in the lower half of its daily range. Some concern has been prompted by the fact that today's loss breached support at the lower boundary of its upward trendline. Meanwhile, COH still has formidable support at its 50-day moving average (DMA) line and 200 DMA line. The loss on high volume and fact that it was an ugly reversal from earlier gains today are two critical technical factors that suggest that further downside testing is likely. Losses on well above average volume are a key indicator of institutional selling pressure, and today this stock traded 5.6 million shares as opposed to its 2.8 million shares traded on average per day over the past 50 days.
Dip on Earnings News and Improved Forecast - Tuesday, August 02, 2005
Coach Inc (COH -$0.80 or -2.25% to $34.75) posted a +47% jump in quarterly earnings per share and raised its fiscal 2006 profit forecast, but concerns that growth may be nearing a peak sent its stock price lower today.This high-ranked leader was first featured by CANSLIM.net in October 2002. It has been one of the best performing featured stocks in the past few years. Most recently, Coach was featured in CANSLIM.net's Mid-Day BreakOuts report on June 01, 2005 (here). At that time it was breaking out of a well-defined six month base. Since then Coach had rallied over +15% without pulling back towards its 50-day moving average (DMA). A stock's 50 DMA is a critical technical level that is used by institutional investors to define support. During a stock's ascent it is healthy to see a pullback towards its 50 DMA, preferably on lighter than average volume.
Indeed, Coach pulled back and found prompt support at its 50 DMA today. Volume was more than four times its average trading total, with the earnings news adding to its volume and volatility. Buyers showed up as the stock tested its 50 DMA, and the trading price improved from its intra-day lows to close the session in the upper half of its trading range.
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