In recent weeks we have taken the opportunity to use this section to revisit some of the previously featured stocks that were dropped some time ago based on technical weakness. Studying what happened afterwards should hopefully allow investors to get a better understanding of the importance of having a sell discipline. Limiting losses while they are small is critically important to your success, and this investment system's rule is to always sell a losing stock after it falls more than 7-8% from your buy price. These well-known, high-profile companies serve now as perfect examples that will hopefully allow investors in the future to recognize the warning signs and technical sell signals so they will know when it is time to lock in profits or minimize losses per the investment system's sell rules.

Int'l Business Machines (IBM +$5.01 or +6.69% to $79.89) bounced today, but it faces a tremendous amount of resistance due to overhead supply, which makes the stock unlikely to be a market leader in the near term. It was showing signs of deterioration, and a "double top" pattern had nearly been completed when it made its last appearance in this Featured Stock Update section on Tuesday, September 2, 2008 under the headline "Distributional Action Pressures Tech Giant". With an annotated graph it was shown that - "Technically, a violation of its July 1st, 2008 low ($116.60) might complete an ominously bearish 'double top' pattern. Its 200 DMA line is an important support level to watch now as well." Three days later, having triggered more worrisome technical sell signals, IBM was dropped from the Featured Stocks list. Prior coverage had already pointed out earlier 50 DMA line and upward trendline violations as cause for concern. IBM was first featured on Thursday, April 17, 2008 in the CANSLIM.net Mid Day Breakouts Report (read here).

Obviously, technical sell signals prompted investors to unload IBM shares long ago. Its "double top" pattern was marked by a slightly higher high in July, and the bearish pattern was completed when the stock's share price sliced below its prior chart low ($116.60) as described above. Since then, its earnings and sales revenues increase in the latest quarter were below the +25% guideline, adding fundamental concerns. The stock has traded as much as -39.21% lower since it was dropped from the Featured Stocks list.

Is there a previously featured stock you would like to see revisited in this section? Members are welcome and encouraged to write in and request that we take another detailed look at any of CANSLIM.net's previously featured stocks (click here).

Double top patterns have marked many important peaks in individual stocks throughout history. The second high is a little bit higher than the first peak in a proper double top, but the stock stalls when it gets to new high ground and fails to follow through with confirming gains to continues its advance. The double top pattern has bearish implications only after it is "completed" by a violation of the chart pattern's low point - deterioration under the low of what might be considered the middle of an "M" shaped pattern. Once a double top is completed, odds tend to favor that the stock will spend a lot greater period of time consolidating. Failure to recognize weakness and take action can lead to deeper losses for any undisciplined investors who do not recognize technical sell signals (or ignore them).

International Business Machines (IBM -$3.32 or -2.73% to $118.41) suffered a considerable loss today on above average volume. Distributional action recently led to its violation of its 50-day moving average (DMA) line, an important level where healthy stocks normally find support from existing institutional holders. Rather than finding support and promptly repairing that 50 DMA breach, however, IBM encountered stubborn resistance at that short-term average. An upward trendline connecting its January-July lows (not shown) was also violated while it struggled. Its Relative Strength rank (circled in red) is now reported below the 80+ guideline, giving investors yet another sign of its waning strength.

IBM made progress after it was first featured on Thursday, April 17, 2008 in the CANSLIM.net Mid Day Breakouts Report (read here). During June it sank below its 50 DMA line while the major averages' rally ended and a correction began. IBM rallied back with great volume behind its gains, but once getting to a new high, it stalled. Technically, a violation of its July 1st, 2008 low ($116.60) might complete an ominously bearish "double top" pattern. Its 200 DMA line is an important support level to watch now as well.

An area of prior support, or recent chart lows, can often be a very important level to watch when a stock is continuing to consolidate. 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 stock is deteriorating and bears are gaining control, making the odds start to favor the possibility of further downside testing.

Int'l Business Machines (IBM -$3.45 or -2.93% to $121.13) gapped down today and suffered a considerable loss with above average volume. It is testing support of its current base-on-base pattern. IBM violated its 50 DMA line ($124.85 now) on June 20th with a loss on above average volume and it has failed to repair the damage. Instead, the 50 DMA line has turned into resistance, and it is pulling back near prior highs that were once a stubborn resistance level in the $120 area. This stock was first featured on Thursday, April 17, 2008 in the CANSLIM.net Mid Day Breakouts Report with a $119.89 pivot point and $125.88 max buy level (read here). Over the past two months, IBM has built a base-on-base type pattern. As long as the lows of this new base ($120) are not breached then the stock should remain on an active watchlist. However, if the lows of the current base are breached (which overlap the highs of the prior base) then that weakness would trigger a technical sell signal and suggest that even further deterioration is likely. It would be encouraging to see the bulls defend the $120 area and quickly send this stock back above its 50 DMA line.

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International Business Machines (IBM)
Ticker Symbol: IBM (NYSE)	Industry Group: Computer- Tech Services	Shares Outstanding: 1,384,300,000
Price: $124.40 4/18/2008	Day's Volume: 12,493,000 4/18/2008	Shares in Float: 1,370,500,000
52 Week High: $125.00 4/18/2008	50-Day Average Volume: 9,109,800	Up/Down Volume Ratio: 1.7
Pivot Point: $119.89 3/24/2008 igh plus .10	Pivot Point +5% = Max Buy Price: $125.88	Web Address: http://www.ibm.com

Double Top Pattern's Completion Triggered Sell Signal - Monday, November 24, 2008

Distributional Action Pressures Tech Giant - Tuesday, September 02, 2008

Drop Tests Lows of Current Base on Base Type Pattern - Thursday, June 26, 2008

Accelerating Growth Helps Big Blue Breakout - Saturday, April 19, 2008