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.

Huron Consulting Group Inc. (HURN +$4.05 or +5.30% to $72.36) rallied back above its 50 DMA line with a gain on above average volume, closing -7.1% below its 52-week high of $77.72. The stock was first featured on Thursday, May 31, 2007 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $70.22 pivot point and a $73.73 maximum buy price. The stock made modest progress in the following weeks, but as the major averages entered a steep correction this high-ranked leader also turned tail. Losses backed by above average volume on July 25th and 26th negated its breakout and led to a violation of its 50 DMA line, triggering technical sell signals. HURN continues to sport a very healthy Earnings Per Share (EPS) rating of 99 and a healthy Relative Strength (RS) rating of 94.  The company has managed to increase its earnings at a healthy clip in each of the past four quarters, and well above the +25% guideline needed to satisfy the "C" criteria. HURN resides in the Commercial Services group which is currently ranked 22nd of out the 197 Industry Groups covered in the paper, placing it in the much preferred top quartile and satisfying the "L" criteria. Before returning to this high-ranked stock, prudent investors would wait for the major market averages to produce a follow-through-day of gains and meanwhile be watching for this stock build a new base and subsequently trigger a new technical buy signal . As always, it is of the utmost importance to sell a stock if it drops 7-8% below your purchase price. 

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Group action plays a very important role, and experienced investors learn that they can increase their odds of picking a great winner by always focusing their buying efforts in the market's leading groups.  The "L" criteria in CAN SLIM(R) tells us to choose leading companies in leading industry groups, thus it is suggested that investors choose from the top quartile of the 197 Industry Groups (listed in the paper most days on page B4). A classic example of the success enjoyed by many CANSLIM.net readers usually starts when an investor reads a CANSLIM.net report and buys a featured stock before it has risen above the pivot point by greater than 5%.  After a stock breaks out above its pivot point, there is only a +5% window that investors have to purchase the stock under the proper guidelines. Once a stock rises above the "maximum buy price" the risk of a shake out balloons, meaning that even a normal retracement in the stock might force you to employ the 7-8% loss cutting rule.  Much can be told by the stock's daily action in the weeks and months that follow a breakout. Typically, a light volume and orderly pullback suggests that the bulls remain in control.  However, high volume pullbacks that violate support paint a totally different picture. 

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