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.

Gilead Sciences Inc. (GILD -$1.88 or -2.26% to $81.41) pulled back and closed 1 penny above its intra-day low today as it continued testing the low of its current base and its 50 DMA line, both important areas of support. On April 19, 2007 this stock jumped on heavy volume above $80, and it has spent the past the past few weeks consolidating its recent move above its 50 DMA line. This stock was featured on Thursday, March 16th, 2006 in the CANSLIM.net Mid Day Breakouts Report (read here) and has rallied smartly since then.  Along the way, it went through a couple of consolidations where it spent weeks trading under its 50 DMA line, but each time it found suport near its longer-term 200 DMA line and the rallied back with great conviction to ultimately press on to new highs.

Healthy action has led to a decent 6-week base building period above its 50 DMA line.  The stock was featured in today's CANSLIM.net Mid Day Breakouts Report (read here) with a $84.57 pivot point and a $88.80 "maximum buy" price.  It is perched near all-time highs after building a flat base, however it is important to note that a proper new technical buy signal has not been triggered yet!  Therefore, until this stock trades above its pivot point with considerable gains on at least +50% above average volume, patience is required. Without such a reassurance that the stock is being accumulated aggressively by institutional investors (the "I" criteria) its chances of making a sustained advance are looked at as questionable.  As always, stocks should be sold if they ever drop 7-8% below your purchase price to prevent the possibility of greater losses which can be damaging both psychologically and financially.

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 (breaks above its pivot point on more than +50% average turnover). 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.

Gilead Sciences Inc. (GILD -$0.85 or -1.33% to $62.89) recently pulled back and found support at its 50-day moving average (DMA) line. This stock was featured in today's (Thursday, March 16, 2006) CANSLIM.net Mid-Day Breakouts Report (read here).  Note that the typical length of a sound buyable base under the proper guidelines is a minimum of 6 weeks, or just 5 weeks for a “flat base”.  An ideal buy point was triggered when this issue broke out in January.  Since the, as this stock has found support near the 50 DMA, in the process it has traced out what may be considered a new ascending base.  However, the most ideal ascending bases come after a more meaningful rise in price (+70%) has already occurred after an earlier stage base, and then there should be 3 price corrections of 10-20%.  Also, it is still important to see meaningful volume confirm any breakout (as always).  Acceleration in the sales revenues and earnings growth rate is a nice sign of fundamental strength.