Flaws Call For Extra Caution Without Powerful Burst Of Buying - Monday, October 17, 2011

Flaws Call For Extra Caution Without Powerful Burst Of Buying - Monday, October 17, 2011
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.

Multi Color Corp (LABL +$0.35 or +1.29% to $27.57) is perched near its 52-week high today after a choppy 10-week consolidation during which its 200-day moving average (DMA) line acted as support. No overhead supply remains to act as resistance. In the mid-day report earlier today (read here) its color code was changed to yellow with pivot point cited based on its 52-week high plus 10 cents.

Subsequent volume-driven gains into new high ground may trigger a technical buy signal. It reported earnings +65% on +36% sales revenues for the quarter ended June 30, 2011. Annual earnings (A criteria) history included a slight dip in FY '09 earnings, a fundamental flaw. The lack of leadership (L criteria) in the Commercial Services - Document Management group is also a concern. Those noted shortcomings call for caution, especially after its rally stright up from the bottom of its choppy base. A powerful volume-driven breakout could signal that institutional (I criteria) buyers are accumulating shares, but without that fresh proof disciplined investors know to wait and watch. Pyramiding can also be a helpful tactic to let the subsequent market action dictate how heavily invested one may get.