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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. 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.

EnerSys (ENS -$1.22 or -4.06% to $31.27) violated and closed below its 50 DMA line on below average volume. Going forward, its prior chart highs in the $28 area will likely act as a chart support level. ENS sports strong ranks; an Earnings Per Share (EPS) and Relative Strength (RS) rating are both 98.  This stock first featured on Monday, May 12, 2008 in the CANSLIM.net Mid Day Breakouts Report (read here) a $28.35 pivot point and a $29.77 maximum buy price and the following note: "Y - High-ranked leader challenging prior chart highs in the $28 area with little resistance now remaining due to overhead supply. Earnings and sales improved nicely and showed good acceleration in the last 3 quarterly comparisons."  Market conditions (the M criteria) currently argue against any new buys, so if ENS manages to repair its 50 DMA line it could be considered a decent candidate that should remain on an active watch list until the market produces a new follow-through day and the stock triggers a fresh technical buy signal. Remember to always limit losses per the 7-8% sell rule, and never hold a stock if it falls more than that from your purchase price. 

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Healthy stocks that are within close striking distance of new highs are often great buy candidates for investors to keep on their watch lists, especially when the companies match favorably with all of the investment system's criteria.  When a stock is more than -10% off its 52-week high, and if it has violated its 50-day moving average (DMA) line, then the outlook only gets worse and worse as it spends a greater period of time trading deeper under that important short-term average line. By the time a stock's 50 DMA line starts sloping downward it should also be acknowledged that the stock has been struggling for a long while, in which case it might be time to reduce exposure and look for places to put that money to work in stronger buy candidates.

EnerSys (ENS -$0.09 or -0.29% to $30.91) continued consolidating above its prior chart highs, and since it is above its max buy level it is considered too "extended" from a proper buy point now. Going forward, its prior chart highs in the $28 area will likely act as a chart support level, with its 50 DMA line much lower as its next important support level. ENS sports strong ranks; an Earnings Per Share (EPS) and Relative Strength (RS) rating are both 97.  This stock first featured on Monday, May 12, 2008 in the CANSLIM.net Mid Day Breakouts Report (read here) a $28.35 pivot point and a $29.77 maximum buy price and the following note: "Y - High-ranked leader challenging prior chart highs in the $28 area with little resistance now remaining due to overhead supply. Earnings and sales improved nicely and showed good acceleration in the last 3 quarterly comparisons." Other strong leadership (the L criteria) in the group includes Jinpan International Ltd (JST) and Ametek Inc (AME), both of which are currently included on the CANSLIM.net Featured Stocks list.  Market conditions (the M criteria) currently argue against any new buys, so ENS is a strong candidate that should remain on an active watch list until the market produces a new follow-through day and the stock triggers a fresh technical buy signal. Remember to always limit losses per the 7-8% sell rule, and never hold a stock if it falls more than that from your purchase price.

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