An upward trendline, by definition, develops as a stock steadily appreciates over an extended period of time. During that period the stock vacillates between the lower and upper boundaries of trendlines which can be drawn connecting a series of recent highs or lows. In order to ensure the overall health of the stock, the lower boundary should not be violated. Technically, if the lower boundary is violated, this signals that the trend is deteriorating and bears are gaining control, making the odds start to favor the possibility of further downside testing.

Covance Inc. (CVD -$1.62 or -2.41% to $65.73) fell on above average volume on Tuesday, nearing its 50 DMA line and upward trendline. This stock was first featured on Friday, September 08, 2006 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $64.65 pivot point. It also appeared that evening featured in the CANSLIM.net After Market Report (read here) with a closer analysis of the recent action. The report discussed several disconcerting factors that should be noted, such as: lackluster revenue growth, a lethargic relative strength line and a lack of institutional sponsorship (the "I" criteria in the CAN SLIM(R) investment system. This stock has had a difficult time advancing and is currently testing its 50 day moving average and its upward trendline. As long as these two important levels of support are not breached, odds favor that there may be further progress made. However, losses leading to technical damage including support violations would signal that further deterioration is likely to follow.

Often, when a leading stock is setting up to breakout of a solid base it is highlighted in CANSLIM.net's Mid-Day Breakouts Report. The most relevant factors are noted in the report which allows prudent CANSLIM oriented investors to place the issue in their watch list. After doing any necessary backup research, the investor is prepared to act if and when the stock triggers a technical buy signal (rises above its pivot point on more than the minimum guideline of +50% above average volume). In the event the stock fails to trigger a proper technical buy signal and its price declines then it will simply be removed from the watch list.

Covance Inc. (CVD $1.24 or 1.89% to $64.25) closed higher on just slightly above average (+27%) volume, ending at its best close ever. This stock was featured with an annotated DailyGraph(R) today in the CANSLIM.net Mid-Day BreakOuts Report with a $64.65 pivot point (read here). Covance recently found support above its 50 DMA line where it had quietly lingered for 6 weeks without a single above average volume session. It appeared to be setting up to potentially break out of a base-on-base type of chart pattern. It has maintained a reasonably steady uptrend since its May '03 lows, best viewed on a longer-term weekly or monthly chart (not shown). One concern is that its sales revenues in recent comparisons have not shown the +25% increases which are normally preferred, even while its earnings increases in the two latest reports were above that same threshold. Another concern is that this stock's Relative Strength line (as plotted on the chart below) is still below its July peak and it has not already risen to new high territory. It is normally very encouraging to see a stock's Relative Strength line rising to a new high before the stock's price actually breaks out. Regular readers of this report should know by now to avoid buying stocks before a proper technical buy signal is triggered. Do you really want to own a stock without it showing you a clear sign of heavy institutional buying demand? Keep in mind the importance of the "I" criteria in CAN SLIM(R) and have lots of patience!

FSU CHART CVD - DONE - Tuesday, October 17, 2006

Testing Support At 50 DMA & Upward Trendline - Tuesday, October 17, 2006

New High Close But Insufficient Volume Thus Far To Meet Guidelines - Friday, September 08, 2006