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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 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.
Omnicell Inc. (OMCL +$0.22 or +0.82% to $26.77) continued advancing after recently triggering a fresh technical buy signal. Earlier this week, on Monday September 10, 2007, OMCL appeared in yellow in the CANSLIM.net Mid Day Breakouts Report (read here) with a $25.82 pivot point and a $27.14 maximum buy price, just before it triggered a technical buy signal! It is the best ranked issue overall hailing from the Medical-Systems/Equip Group, which is currently ranked 10th on the 197 industry Groups list, which is definitely within the top quartile and satisfies the "L" criteria. The very next day OMCL surged above its pivot point on the necessary volume to trigger a fresh technical buy signal. The healthy action helped the stock appear in the Tuesday September 11, 2007 CANSLIM.net Mid Day Breakouts Report (read here) with the following note: "Y - Continuing higher with gains on above average volume. Broke out and closed above the pivot point with considerable gains backed by volume that was three times its average daily volume total on Monday, prompting its appearance in yellow with an annotated graph (read here). It formed an orderly flat base since a huge 7/20/07 gap up gain on high volume. As noted when featured in today"s earlier report, "a close above its best ever close of $25.50 on 7/23/07 with considerable gains backed by above average volume would be a bullish signal." Number of top rated funds owning it rose from 62 in Sept "06 to 94 in June "07, which is encouraging news concerning the I criteria." This stock still remains buyable as long as it trades below its maximum buy price.
OMCL was first featured on Thursday, February 01, 2007 in the CANSLIM.net Mid Day Breakouts Report (read here) as it had just blasted above its $20.67 pivot point with gains on the necessary volume to trigger a technical buy signal. But a few short weeks later, as the major averages faced the start of a steep sell-off on February 27th, OMCL gapped lower and fell toward its 50 DMA line. That negated that earlier breakout attempt and traded low enough that any disciplined investors would have been prompted to follow the sell rules that require losses to be limited at 7-8%. As we all know, the major averages ran into trouble during that time, spending the first three weeks of March in a rather steep correction. OMCL avoided any further distribution though, and it quietly consolidated relatively near its 52-week highs. It was also encouraging to see volume dry up as it continued basing.
A few months later, this stock vaulted out of a new base and triggered a fresh technical buy signal. The compelling action prompted coverage in an April 20, 2007 CANSLIM.net Stock Bulletin (read here) with a new $21.78 pivot point and new $22.87 "maximum buy" price. Within a week the stock jumped +14.6%, but it quickly ran out of gas, falling back and ultimately sliced below its 50 DMA and upward trendline before repairing the damage and building a new base.
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Longstanding readers of this section in the CANSLIM.net After Market Report are well versed on the importance of upward trendlines. It is also important to note how stocks behave after an upward trendline is violated. By definition, an upward trendline develops when a stock has steadily appreciated for an extended period of time. During that period the stock vacillates between the lower and upper boundary of the trendline. However, once the bears show up and the lower trendline is violated then odds start favoring the possibility of further downside testing.
Omnicell Inc. (OMCL -$1.36 or -6.16% to $20.73) triggered definitive sell signals when it negated its latest breakout, slicing below its 50-day moving average (DMA) line today. It also fell below the lower boundary of its 7 month upward trendline and violated prior lows which had been another chart support level. Normally leading stocks tend to find support near prior chart highs, and fight to stay trading above their 50 DMA lines and above upward trendlines. Unfortunately, for OMCL, each of these important inflection points was breached. To further compound the negative action, add in the fact that volume today surged to three times its average daily trading total. The considerable loss on heavy volume suggests that institutional investors ("I" criteria) were aggressively selling the stock.
OMCL was first featured on Thursday, February 01, 2007 in the CANSLIM.net Mid Day Breakouts Report (read here) as it had just blasted above its $20.67 pivot point with gains on the necessary volume to trigger a technical buy signal. But a few short weeks later, as the major averages faced the start of a steep sell-off on February 27th, OMCL gapped lower and fell toward its 50 DMA line. That negated that earlier breakout attempt and traded low enough that any disciplined investors would have been prompted to follow the sell rules that require losses to be limited at 7-8%. As we all know, the major averages ran into trouble during that time, spending the first three weeks of March in a rather steep correction. OMCL avoided any further distribution though, and it quietly consolidated relatively near its 52-week highs. It was also encouraging to see volume dry up as it continued basing.
A few months later, this stock vaulted out of a new base and triggered a fresh technical buy signal. The compelling action prompted coverage in an April 20, 2007 CANSLIM.net Stock Bulletin (read here) with a new $21.78 pivot point and new $22.87 "maximum buy" price. Within a week the stock jumped +14.6%, but it quickly ran out of gas, falling back to retest support near its pivot point and 50 DMA line. The latest action was discussed in the May 7, 2007 CANSLIM.net After Market Report (read here) under the headline "Light Volume Retracing Toward Pivot Point". One week later, on May 14, 2007, negated its breakout and closed below its pivot point. It lingered above its 50 DMA line until its considerable loss on heavy volume led to a violation and triggered its latest technical sell signal. Only a prompt repair of the 50 DMA breach would improve its odds of receovering and pressing on to new highs, however any further weakness should probably not be tolerated, especially if a stock ever falls more than 7-8% from you buy point.
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Statistically, about 40% of winning stocks will pull back after breaking out. In other words, it is not uncommon for stocks to pullback and retest support near their pivot point after breaking out. It is important to see the bulls show up and offer support at or above the pivot point. This may offer investors a chance to increase their exposure before the stock continues advancing. However, an important caveat is that volume should contract as the stock pulls back towards its pivot point. Heavy volume behind losses can be cause for concern, especially if the stock does not find support at its pivot point. Whenever a recent breakout is completely negated by a loss that leads to a close back in the prior base, this is construed as a technical sell signal and a sign that the bears are regaining control.
Omnicell Inc. (OMCL -$0.39 or -1.67% to $23.00) continued pulling back on light volume, much as it did last week. On April 20, 2007, CANSLIM.net released a Stock Bulletin as OMCL triggered a technical buy signal and jumped to new highs. A new pivot point of $21.78 and new maximum buy price of $22.87 were identified in that report. Whenever a stock clears overhead supply or chart resistance, and jumps into new high territory, this typically bodes well for the stock's ability to add to its gains. It was encouraging to see OMCL spend the next few days rallying as volume expanded, and the stock jumped nearly +15% before it began to consolidate. Analyzing the stock's pullback, it has displayed healthy signs: volume receded as the stock declined, and support was not violated. A light volume pullback can offer investors a chance to buy shares below the "maximum buy" price. Disciplined investors do not buy stocks above the maximum buy price because doing so greatly hinders the investors chance of achieving above average results.
It was first featured on Thursday, February 01, 2007 in the CANSLIM.net Mid Day Breakouts Report (read here) as it had just blasted above its $20.67 pivot point with gains on the necessary volume to trigger a technical buy signal. But a few short weeks later the stock ran out of gas, negating its breakout, then slicing below its 50 DMA line. It traded low enough that any disciplined investors would have been prompted to follow the sell rules that require losses to be limited at 7-8%. As we all know, the major averages ran into trouble during that time, spending the first three weeks of March in a rather steep correction. During that time, OMCL avoided any further distribution and quietly consolidated near its 52-week high. It was also encouraging to see volume dry up as it continued basing. A detailed analysis of this stock recently appeared in March 2, 2007 edition of the CANSLIM.net After Market Report (read here).
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An upward trendline, by definition, develops as a stock steadily appreciates over an extended period of time. During that period the stock vacillates between the lower and upper boundaries of trendlines which can be drawn connecting a series of recent highs or lows. 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 trend is deteriorating and bears are gaining control, making the odds start to favor the possibility of further downside testing.
Omnicell Inc. (OMCL -$0.17 or -0.82% to $20.50) pulled back and tested support near its 50-day moving average (DMA) line on Thursday. This stock was first featured on Thursday, February 1, 2007 in the CANSLIM.net Mid Day Breakouts Report (read here) as it had just blasted above its $20.67 pivot point with gains on the necessary volume to trigger a technical buy signal. Later that day, a more detailed analysis of this stock appeared in the CANSLIM.net After Market Report (read here). A few short weeks later the stock ran out of gas, negated its breakout, then sliced below its 50 DMA line and traded low enough that any disciplined investors would have been prompted to follow the sell rules that require losses to be limited at 7-8%. As we all know, the major averages ran into trouble during that time and spent the first three weeks of March "correcting." During that time, OMCL avoided any further distribution and quietly consolidated near its 52-week high. It was also encouraging to see volume dry up as it continued basing. The stock still sports high ranks, which makes it a decent candidate for investors' watchlists until it might eventually trigger a new technical buy signal - gains sufficient to produce a new high close with at least +50% above average volume.
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Once again, the "L" criteria in CAN SLIM(TM) tells investors to choose leading companies in leading industry groups, and when we have identified a high-ranked leader with the proper characteristics we should wait and watch for gains on at least +50% above average volume as a confirmation that a breakout is attracting meaningful institutional sponsorship. 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 triggers a technical buy signal and is purchased, it is always important to employ the 7-8% loss cutting rule in the event of a downturn.
Omnicell Inc. (OMCL +0.22 or +1.04% to $20.95) jumped to a new high close on above average volume after Wednesday's explosive gap to the upside. This stock was first featured in today's CANSLIM.net Mid Day Breakouts Report (read here) with a $20.67 pivot point and a $21.70 maximum buy price. Omnicell Inc. sports a healthy Earnings Per Share (EPS) rating of 85. It is also encouraging to see the company earn a very healthy Relative Strength (RS) rating of 91. The company has managed to increase its earnings by above the +25% guideline in each of the past four quarterly comparisons versus the year earlier, satisfying the "C" criteria. OMCL resides in the Medical-systems/equip group which is currently ranked 25th of out the 197 Industry Groups covered in the paper, placing it in the much preferred top quartile and satisfying the "L" criteria. On Wednesday, OMCL jumped above its pivot point with gains and the necessary volume to trigger a proper technical buy signal. It was reassuring to see OMCL follow through on Thursday with another gain on higher volume. It is important to note, that this stock is quickly approaching its maximum buy price of $21.70 and should not be purchased above that level as it will be too extended to be considered buyable under the proper guidelines. 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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