Another important factor is the relationship between an uptrend and a stock's pivot point. Typically, stocks begin forming an uptrend after rising above their pivot point. In the event the upward trend is violated, the stock will generally be expected to continue falling until it can retest support. Initial support is often the 50 DMA, or its pivot point, whichever is higher.
National Oilwell Varco (NOV DOWN ($1.32) or -1.64% to $81.96) pulled back and retested its prior chart highs under $80. NOV sports strong ranks; its Earnings Per Share (EPS) is 98 and its Relative Strength (RS) rating stands at a very firm 95, signaling strong technical action. The number of top-rated funds owning an interest rose from 427 in Jun '07 to 523 in Mar '08, which shows increasing institutional demand (the I criteria). Concerns would be raised by any weakness leading to a close under its old chart highs which would have the effect of technically negating its latest breakout to new all-time highs.
This stock was recently refeatured on Friday, May 09, 2008 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $82.10 pivot point and a $86.21 maximum buy price. With the following note "Y - Gapped up and hit a new all-time high with a considerable gain on above average volume helping it break away from a 7-month base. Patience may allow disciplined investors to accumulate share on light volume pullbacks toward prior chart highs in the $76-78 area. High-ranked firm in the strong Oil & Gas Machinery/Equipment group. Good annual and quarterly earnings growth history (good C & A criteria), however decelerating sales and earnings are a concern." It had previously been featured on July 25, 2005 (see here) with coverage being dropped on March 7, 2006 after dropping below its 200 DMA. It registered a maximum gain of almost 50% during that period. Always limit losses per the 7-8% sell rule, and never hold a stock if it falls more than that from your purchase price.
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This stock was recently featured on July 25th, 2005 in the CANSLIM.net Mid-Day Breakouts Report (read here) as it was emerging from solid 4-month base. Since then, this issue rallied a little over +33% before its recent pullback. It violated its 50-day moving average (DMA) line and chart support near $60 on October 6th, but now that this issue has spent the past several months declining, breakouts above prior chart resistance might set the stage for it to challenge all-time highs.
National Oilwell Varco, Inc (NOV +$1.77 or +2.76% to $62.39) moved higher on Thursday, rising above its 50 DMA line on just above average volume. However, today it ran into resistance and failed to rally above its downtrend line. It remains caught in the middle of its downward trend. A rally above the most recent chart highs at $63.41, reached on November 23rd, would help it to decisively break above that important chart resistance level. To have confidence in this selection as a buy candidate, meaningful gains should be accompanied by much heavier than normal volume. Volume is always considered a telltale sign of whether or not insitutional buying or selling demand is strong.
