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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 +150% 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.
SEI Investments Co. (SEIC +$0.43 or +0.67% to $63.86) closed today only -1% below its 52-week high as this leader continued quietly building its latest base. This stock was first featured in the January 2007 edition of CANSLIM.net News (read here) with a $60.79 pivot point. Initially, the stock failed to make significant headway, but it steadily edged higher over the next few weeks. Six weeks later, SEIC hit a near term high of $64.52 before it began its recent consolidation. There are two types of consolidations: one that is healthy and orderly and the other that triggers technical sell signals and is more violent in nature. SEIC's pullback was of the latter, as this stock sliced through support, and rolled back into its prior base. An indepth analysis of the recent violation appeared in the March 15, 2007 CANSLIM.net After Market Report (read here).
SEIC has steadily rallied back and it is currently perched near chart resistance at the high end of its long 4-month base. The company has managed to increase its earnings by +29%, +33%,+ 25%, and +24% in the past four quarterly comparisons versus the year earlier, helping it earn an Earnings Per Share (EPS) rating of 85, fairly well satisfying the "C" criteria. However, SEIC's Relative Strength (RS) rating has slipped to a 77, which is just below the 80+ guideline. The stock's Relative Strength line is also lagging, whereas it would be more encouraging to see it (the jagged blue line) rise into new high territory as this stock advances.
SEIC presently resides in the Finance - investment Mgmt group which is ranked 94th out the 197 Industry Groups covered in the paper. That now places it outside of the preferred top quartile of industry groups, however leadership from others in the group helps provide reassurances concerning the "L" criteria. This candidate serves as a great example of how a stock can re-appear months after its first technical breakout was triggered. Before adding shares or making any initial purchases, it is of the utmost importance to see the stock breakout above its new pivot point of $64.52 on at least +50% above average volume sufficient to trigger a new technical buy signal. Without such a reassurance that the stock is being accumulated aggressively by institutional investors (the "I" criteria) its chances of making a sustained advance are looked at as questionable. As always, stocks should be sold if they ever drop 7-8% below your purchase price to prevent the possibility of greater losses which can be damaging both psychologically and financially.
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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. 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.
SEI Investments Co. (SEIC +0.23 or +0.39% to $58.64) rallied on exceptionally light volume today after positively reversing on Wednesday. This stock was first featured in the January 2007 edition of CANSLIM.net News (read here) with a $60.79 pivot point. Initially, the stock failed to make significant headway, but it steadily edged higher over the next few weeks. Six weeks later, SEIC hit a near term high of $64.52 before it began its recent consolidation.
Normally, when a stock consolidates, it finds support near its prior chart highs, 50 DMA line, upward trendline or some other important area on the chart. Unfortunately, this was not the case for SEIC. After a feeble rally attempt, the stock pulled back and sliced under its 50 DMA, old chart highs, and a well defined upward trendline (not shown below). Subsequently, its Relative Strength (RS) rank has fallen to a 79 and its recent breakout was negated. A technical sell signal was triggered as each event unfolded. Ignoring these signs, especially when the major averages are correcting, can greatly hinder your portfolio's progress. Instead, objectively taking action when sell signals are being triggered is a great way to protect your capital and raise cash during a market correction so you will be ready to get proactive on the buy side when the next follow-through day occurs and confirms the rally's strength.
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S E I Investments Co (SEIC) |
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Ticker Symbol: SEIC (NASDAQ) |
Industry Group: Finance- Investment Mgmt |
Shares Outstanding: 98,900,000 |
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Price: $59.56 |
Day's Volume: 249,100 12/29/2006 |
Shares in Float: 62,300,000 |
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52 Week High: $60.69 10/11/2006 |
50-Day Average Volume: 430,000 |
Up/Down Volume Ratio: 1.0 |
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Pivot Point: $60.79 10/11/2006 high plus .10 |
Pivot Point +5% = Max Buy Price: $63.83 |
Web Address: http://www.seic.com/ |
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CANSLIM.net Profile: SEI Investments Company provides outsourced asset management services and investment technology solutions to the financial services industry. The company operates in five segments: Private Banking and Trust, Investment Advisors, Enterprises, Money Managers, and Investments in New Businesses. The company, formerly known as Simulated Environments, Inc., was founded in 1968 and is headquartered in Oaks,
What to Look For and What to Look Out For: Look for SEIC to breakout of what is now nearly a 3-month base, but be sure to see that breakout occur on at least +50% above average volume before taking any action. The ideal time to purchase a stock is right when it blasts above its pivot point on above average volume, which successfully triggers a technical buy signal. Ideally, one would like to see the stock also follow through with additional confirming gains in the days immediately afterward. If a buy signal is triggered, but this stock then reverses back below its pivot point it would fully negate the breakout, severely hurting the odds that would otherwise favor it moving higher. The reason why it is imperative to wait for a fresh technical buy signal is because prior resistance can often and haunt a stock for a long time. Always limit losses per the 7-8% sell rule, and never hold a stock if it falls more than that much from your purchase price.
Technical Analysis: SEIC enjoyed very healthy gains in 2006. After an impressive sprint ($45-60) it ran into resistance near the $60 level. SEIC is currently trading just shy of its 52 week high ($60.69). History shows us that stocks that have cleared prior resistance run the greatest chance of advancing. Keep in mind that this stock has enjoyed a +50% rise from its May '06 breakout, so it may presently be considered a late-stage base. Breakouts from late stage bases can work out, but they do have a higher failure rate, so caution is advised.