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.  Healthy stocks sometimes trade under their 50 DMA lines briefly, but usually a strong candidate will promptly bounce and repair a 50 DMA violation. When a stock has violated its 50 DMA line and then lingers beneath it, the stock's outlook gets worse and worse as it spends a greater period of time trading under that important short-term average line. Once the 50 DMA line starts sloping downward it should also be acknowledged that the stock has been struggling for a while, and it might be time to reduce exposure and look for places to put that money to work in stronger buy candidates.

Cynosure, Inc. (CYNO -$2.87 or -7.36% to $36.10) pulled back on above average volume, closing near its 50 DMA line on Friday. On Thursday, the stock reported its third quarter results and said that its earnings jumped up +150% as sales increased a very healthy +70%. However, concerns were raised as it recently sank under prior chart highs near $38-39 triggering technical sell signals. It has struggled to make significant progress since it was first featured in the June 2007 edition of CANSLIM.net News (read here) as it was triggering a technical buy signal with a $33.09 pivot point and $34.75 maximum buy price. The stock rallied approximately +14% before it pulled back to consolidate its recent move. Important support levels to watch are its 50-day moving average (DMA) line ($35.91), where a bounce could offer investors another opportunity to accumulate shares. As long as its 50 DMA line and prior chart highs (at $33-35) and are not breached, odds favor it making further gains.  However, losses leading to damaging violations would raise concerns and could trigger additional technical sell signals. Always limit losses per the 7-8% sell rule, and never hold a stock if it falls more than that much from your purchase price.  

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. 

Cynosure, Inc. (CYNO -$0.31 or -0.81% to $37.93) closed lower on below average volume Friday, but it remains in fine shape while perched near its all-time chart highs. This stock was first featured in the June 2007 edition of CANSLIM.net News (read here) as it was triggering a technical buy signal with a $33.09 pivot point and $34.75 maximum buy price. Since then the stock has rallied a healthy +14% and continues to find support every time it pulls back, staying above the lower boundary of its upward trendline (shown below). The stock continues to sport very high ranks - a very healthy 97 Earnings Per Share (EPS) rating and a 98 Relative Strength (RS) rating. Perhaps most impressive feat is the stock's 99 Composite Rating, an aggregate of all the other ratings found in the paper, which is pegged at the highest possible rating.