Healthy market leaders do not usually sputter along under their 50-day moving average (DMA) lines.  Part of any prudent investor's job is weeding out sub par candidates. Your odds are better that you will find big winners when you focus on chosing high-ranked leaders that are producing frequent gains backed by above average volume while trading above their 50 DMA lines.  

ITT Educational Services (ESI $3.48 or +3.43% to $105.08) posted a third consecutive gain on light volume.  Its action is distinctly different from the other high-ranked leaders appearing among CANSLIM.net's Featured Stocks. It is consolidating well below its 50 DMA line.  Technically, it would need to rally above that short-term average for its outlook to improve. It will be dropped from the Featured Stocks list tonight. Important long-term chart support to watch for those with an open interest on the long side is at prior lows and its 200 DMA line. Its gap down on 4/01/09 triggered a technical sell signal. As previously noted, "all of its gains in March had well below average volume." 

Its last appearance in this Featured Stock Update section on April 13th (read here) which showed it falling for a 4th consecutive session and closing at its lowest level since January 14th. A gap down on 4/01/09 triggered a technical sell signal as it violated its 50-day moving average (DMA) line. As previously noted, "all of its gains in March had well below average volume."  It has not built a new sound base, and it faces some resistance due to overhead supply up through the $133 level. 

The stock stalled in early February following gains that just barely lifted it above its 2007 high. Recent chart lows and its 200 DMA line are now an important technical support level to watch, where violations would raise more serious concerns and trigger worrisome sell signals.  Its breakout gain on 1/15/09 was backed by 5 times average volume, indicative of heavy institutional buying demand as it rallied above its 1/09/09 high as a pivot point. It was mentioned by CANSLIM.net's founder in a 12/15/08 interview on WBBM 780AM (listen by clicking here).  ESI performed impressively, trading up as much as +48.48% since featured in the December 2008 CANSLIM.net News (read here).

View all notes | Alert me of new notes | CANSLIM.net Company Profile

ITT Educational Services (ESI -$0.97 or -0.96% to $99.91) was down today on light volume, falling for a 4th consecutive session and closing at its lowest level since January 14th. A gap down on 4/01/09 triggered a technical sell signal as it violated its 50-day moving average (DMA) line. As previously noted, "all of its gains in March had well below average volume."  It has not built a new sound base, and it faces some resistance due to overhead supply up through the $133 level. 

The stock stalled in early February following gains that just barely lifted it above its 2007 high. Recent chart lows and its 200 DMA line are now an important technical support level to watch, where violations would raise more serious concerns and trigger worrisome sell signals.  Its breakout gain on 1/15/09 was backed by 5 times average volume, indicative of heavy institutional buying demand as it rallied above its 1/09/09 high as a pivot point. It was mentioned by CANSLIM.net's founder in a 12/15/08 interview on WBBM 780AM (listen by clicking here).  ESI performed impressively, trading up as much as +48.48% since featured in the December 2008 CANSLIM.net News (read here).

ITT Educational Services (ESI +$1.43 or +1.34% to $107.49) has been lingering below its 50-day moving average (DMA) line for the past couple of weeks. It stalled in early February following gains that just barely lifted it above its 2007 high, and its 50 DMA violation was later noted as it triggered a technical sell signal. Now, a rally above its 50 DMA line is needed for its outlook to improve. Recent gains have been on light volume, yet it is above prior chart highs and well above its 200 DMA. Deterioration below its recent lows and its 200 DMA line would raise more serious concerns and trigger additional sell signals.

Its breakout gain on 1/15/09 was backed by 5 times average volume, indicative of heavy institutional buying demand as it rallied above its 1/09/09 high as a pivot point. It was mentioned by CANSLIM.net's founder in a 12/15/08 interview on WBBM 780AM (listen by clicking here).  ESI performed impressively, trading up as much as +48.48% since featured in the December 2008 CANSLIM.net News (read here). 

C A N S L I M | StockTalk | News | Chart | SEC | Zacks Reports |  

View all notes | Alert me of new notes | CANSLIM.net Company Profile

Typically, stocks begin forming an uptrend after rising above their pivot point.  In the event the upward trend is violated, the stock may be expected to continue falling until it can retest support.  Initial support is often the 50 DMA, or its prior chart highs (which are associated with a recent pivot point).  Deterioration into a stock's prior base can be a worrisome sign, so it is important to watch a stock closely while it is testing support near prior chart highs. 

ITT Educational Services (ESI -$4.21 or -4.09% to $107.15) fell on higher volume today, violating its 50-day moving average (DMA) line, triggering a technical sell signal while deteriorating below that important short-term average. Distributional pressure in recent weeks has raised concerns, and it is trading near prior chart highs which are its next nearest support level.  It stalled in recent weeks after rallying just barely above its 2007 high. Its breakout gain on 1/15/09 was backed by 5 times average volume, indicative of heavy institutional buying demand as it rallied above its 1/09/09 high as a new pivot point. Mentioned by CANSLIM.net's founder in a 12/15/08 interview on WBBM 780AM - listen by clicking here. It has performed impressively, trading up as much as +48.48% since featured in the December 2008 CANSLIM.net News (read here).

View all notes | Alert me of new notes | CANSLIM.net Company Profile

ITT Educational Services (ESI -$3.09 or -2.66% to $112.92) negatively reversed today. It bounced impressively on 2/20/09 as it found prompt support near its short-term average and prior chart highs near its pivot point. That rebound repaired a large part of the considerable 2/19/09 loss with volume more than 3 times average as it plunged to its 50 DMA line (the red line). ESI stalled in recent weeks after rallying just barely above its 2007 high. It traded up as much as +48.48% since first featured in the December 2008 CANSLIM.net News (read here). Ongoing notes in CANSLIM.net reports mentioned its 01/09/09 high as later pivot point, after it was initially featured with a pivot point of $90.09, and then it blasted above that ideal entry point with gains backed by heavy volume.

Market conditions have not been considered cooperative with respect to the M criteria, so great caution has been suggested.  Most prudent investors have probably kept their cash on the sidelines, while few if any other breakouts have worked as well as today's example.  It broke out with a considerable gain backed by 5 times average volume, indicative of heavy institutional (the I criteria) buying demand as it rallied above its 1/09/09 high as a new pivot point. Mentioned in a 12/15/08 interview on WBBM 780AM - listen by clicking here. In a better market environment, CANSLIM.net members should eventually find their fair share of strong performers like ESI has been.  Patience and discipline remain paramount!

View all notes | Alert me of new notes | CANSLIM.net Company Profile

One of the advanced technical chart patterns investors might want to be familiar with is called an "island reversal" pattern.  An island reversal can be either a bearish or bullish pattern depending on the circumstances.  A bullish island reversal might occur when a stock first gaps down, but then subsequently gaps back up again several days or weeks later - leaving an "island" of trading activity away from an otherwise continuous stretch of trading in a mostly orderly price range. In today's example below, we are taking a look at a bearish island reversal which recently raised a caution flag for investors.

ITT Educational Services (ESI +$2.34 or +2.00% to $119.36) has been a strong leader that managed to make impressive progress above its latest pivot point and max buy levels, getting extended from a sound price base.  However, its recent action has been indicative of distributional pressure, as it gapped down on 1/26/09, completing a small "island reversal" pattern.  In this case, the gap down negated its prior 1/22/09 gap up, which may be more easily spotted by looking at an hourly chart as compared to the annotated daily graph below.  Chart readers with an eye for details may consider it more than a coincidental circumstance that it happened to stall within one dollar of its 2007 all-time high of $131 per share. This stock was first featured in the December 2008 CANSLIM.net News (read here).  Prior chart highs near its latest pivot point are now an important level to watch for support, while deterioration into its prior base would raise more serious concerns.

View all notes | Alert me of new notes | CANSLIM.net Company Profile 

Volume is a vital component of technical analysis.  Prudent investors that incorporate volume into their stock analysis have often benefited several fold. Ideally, healthy stocks will more often tend to rise on higher volume and pullback on lighter volume.  Volume is a great proxy for institutional sponsorship.  Conversely, high volume declines can be ominous, as this usually signals distribution and further price deterioration are more likely to follow.

ITT Educational Services (ESI +$1.26 or +1.30% to $98.13) gapped up today.  Early in the session it traded considerably higher, exceeding its September 19, 2008 intra-day high before reversing most of its gain and closing near the session low.  The "reversal" did not take it into negative territory at the close, but the high volume total and weak finish near its session lows was a pretty clear sign that the stock was encountering distributional pressure near earlier chart highs.  It was noted on 1/08/09 for its highest close since July 2008, but it had already rallied above its max buy level while unimpressive volume behind its gains had failed meet guidelines for a proper technical buy signal.  Its last appearance in this section came on 12/11/08 under the headline "Education In Patience And Discipline" (read here). 

High-ranked leaders sometimes creep past ideal buy points without offering disciplined investors a good opportunity to take action on them within the investment system's guidelines. Don't worry about that!  In a truly healthy bull market environment (the M criteria), many fantastic opportunities to do so shall abound. Meanwhile, investors are not missing much by sitting on the sidelines during the latest half-hearted rally, still watching for stronger leadership to emerge.

This promising looking buy candidate was mentioned in a 12/15/08 interview on WBBM 780AM (to listen - click here) shortly after it was featured in the December 2008 CANSLIM.net News (read here). 

View all notes | Alert me of new notes | CANSLIM.net Company Profile

Often, when a leading stock is setting up to breakout of a solid base it is highlighted in CANSLIM.net reports including the monthly newsletter, CANSLIM.net News.  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 (breaks above its pivot point on more than +50% above its daily average volume). In the event the stock fails to trigger a technical buy signal and its price declines then it will simply be removed from the watch list.

ITT Educational Services (ESI -$4.17 or -5.20% to $84.35) fell today on lighter than average volume, and it has yet to trigger a technical buy signal since it was featured in the December 2008 issue of CANSLIM.net News under the headline "Education Firm Among Other Strong Commercial Services Group Leaders".  Remember that buyable breakouts must clear their pivot point with convincing gains backed by at least +50% above average volume. The stock recently rallied above that pivot point, but did so on lackluster volume and finished weak, so a convincing and proper technical buy signal has yet to be triggered. Disciplined investors would wait for a solid buy signal. A gain with heavy volume leading to a close above its high close on 9/16/08 of $95.28 would be a hard-to-ignore sign of strength, however the stock would then be getting a bit extended from the pivot point identified. Any deterioration under its 50 DMA line would hurt its outlook and raise concerns.  

The company's Return On Equity is reported at a very impressive +174%, which is sharply higher than the +17% guideline. Its strong quarterly and annual earnings history satisfies the C and A criteria of this prime candidate for an updated watch list. ESI now appears along with another high-ranked leader on the CANSLIM.net Featured Stocks list, Strayer Education Inc (STRA), both of which are included in the Comml Svcs-Schools group which is presently ranked 2nd on the 197 Industry Groups list.  Being in the top quartile of industry groups solidly satisfies the L criteria.

C A N S L I M | StockTalk | News | Chart | SEC | Zacks Reports |  

View all notes | Alert me of new notes | CANSLIM.net Company Profile

 

ITT Educational Services
Ticker Symbol: ESI (NYSE)	Industry Group: Comml Svcs-Schools	Shares Outstanding:  38,700,000
Price: $90.08 11/28/2008	Day's Volume: 293,200 11/28/2008	Shares in Float:  37,900,000
52 Week High: $117.08 12/07/2007	50-Day Average Volume: 1,420,400	Up/Down Volume Ratio: 1.3
Pivot Point: $90.09 11/04/2008 plus $0.10	Pivot Point +5% = Max Buy Price: $94.60	Web Address: http://www.ittesi.com/

    C A N S L I M | StockTalk | News | Chart | SEC | Zacks Reports     View all notes | Alert me of new notes | CANSLIM.net Company Profile

CANSLIM.net Company Profile: ITT Educational Services, Inc. provides postsecondary degree programs in the United States. The company offers diploma, associate, bachelor, and master degree programs in various fields of study, including information technology, electronics technology, drafting and design, business, criminal justice, and health sciences. As of March 31, 2008, it had 100 institutes and 9 learning sites located in 34 states that offered degree programs to approximately 54,000 students. The high-ranked company was founded in 1946 and is headquartered in Carmel, Indiana. The company hails from the Comml Svcs-Schools group which is presently ranked 2nd on the 197 Industry Groups list, which places it in the much coveted top quartile of industry groups, easily satisfying the L criteria. The company's Return On Equity is reported at a very impressive +174%, which is sharply higher than the +17% guideline. Its strong quarterly and annual earnings history satisfies the C and A criteria of this prime candidate for an updated watch list.