A very important technical tool that savvy investors have learned to incorporate in their technical analysis is the 50-day moving average (DMA) line. The 50 DMA line plays a pivotal role relative to a stock's price. If the price of a stock is above its 50 DMA then odds are that its 50 DMA will act as formidable support. Conversely, if the price is below its 50 DMA then the moving average acts as resistance. Healthy stocks sometimes trade under their 50 DMA lines briefly, but usually a strong candidate will promptly bounce and repair a 50 DMA violation. When a stock has violated its 50 DMA line and then lingers beneath it, the stock's outlook gets worse and worse as it spends a greater period of time trading under that important short-term average line. Once the 50 DMA line starts sloping downward it should also be acknowledged that the stock has been struggling for a while, and it might be time to reduce exposure and look for places to put that money to work in stronger buy candidates.
Team Inc (TISI -$0.25 or -0.69% to $36.54) has been quietly consolidating in a tight trading range near its rising 50-day moving average (DMA) line in recent weeks. Gains on heavier volume were an indication that it was attracting support from institutional investors near that important short-term average, where prompt support has been found in recent months. Its color code is changed to yellow and new pivot point and max buy levels are noted. Recent chart lows and its 200 DMA line in the $33 area are support to watch. Its weekly chart is marked by several recent up weeks on above average volume and not as many down weeks on above average volume, which is a bullish indication. It rose above its pivot point on 8/14/08, triggering a technical buy signal as it broke out from an almost 8-month cup-with-handle type pattern. TISI was first featured on Tuesday, December 18, 2007 in the CANSLIM.net Mid Day Breakouts Report (read here). Note that its small supply of shares outstanding (the S criteria) can contribute to greater volatility.
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Healthy stocks that are within close striking distance of new highs are often great buy candidates for investors to keep on their watch lists, especially when the companies match favorably with all of the investment system's criteria. When a stock is more than -10% off its 52-week high, and if it has violated its 50-day moving average (DMA) line, then the outlook only gets worse and worse as it spends a greater period of time trading deeper under that important short-term average line. By the time a stock's 50 DMA line starts sloping downward it should also be acknowledged that the stock has been struggling for a long while, in which case it might be time to reduce exposure and look for places to put that money to work in stronger buy candidates.
Team Inc. (TISI -$0.60 or -1.65% to $37.05) ended lower on average volume today. Team Inc. has yet to trigger a new technical buy signal since its latest appearance in the Wednesday, July 30, 2008 CANSLIM.net Mid Day Breakouts Report (read here) with an updated $38.60 pivot point, $40.53 maximum buy price and the following note: "Y - Challenging all-time highs after a 7-month saucer shaped pattern. Gapped higher on 7/24/08 after reporting latest quarter results, then negatively reversed but found prompt support near its 50 & 200 DMA lines. Mostly strong quarterly sales revenues and earnings increases and good annual earnings growth history. Based on the small earnings increase reported for the period ended February 29, 2008 (+15%, under the +25% guideline) and erratic technical action it was dropped from the Featured Stocks list on 4/1/08. First featured in the 12/18/07 CANSLIM.net Mid-Day BreakOuts Report (read here)." Watch for confirming gains in the days and weeks ahead and remember that proper discipline requires investors to wait for a fresh technical buy signal to be triggered before initiating a new position. The stock should remain on an active watchlist in the event the market remains healthy, and this stock manages to get back towards new high territory on healthy volume.
Team Inc. has shown decent earnings growth and strong sales revenues growth in most of its recent quarterly comparisons, and it also has a attractive annual earnings growth history in the past few years to satisfy the C and A criteria. TISI sports very healthy ranks, and it now faces very little resistance due to overhead supply. Its Earnings Per Share (EPS) stands at a firm 92 and its Relative Strength (RS) rating is a solid 95. Furthermore, its Relative Strength line (the jagged blue line) has already hit new high territory which is a reassuring bullish sign. The number of top-rated funds owning an interest in its shares rose from 49 in Sep '07 to 69 in Jun '07, helping to satisfy the I criteria. This stock was first featured on Tuesday, December 18, 2007 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $34.83 pivot point and a $36.57 maximum buy price. At the time, the stock was triggering a technical buy signal as it closed above its pivot point on more than enough volume to trigger a technical buy signal. Since then, the stock ran into trouble as buying enthusiasm waned. Team Inc. has built a long base, and if it produces breakout gains on heavy volume then that would be a technial indication that higher prices will be more likely to follow. However, until then, patience is king.
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Volume is a vital component of technical analysis. Prudent investors that incorporate volume into their stock analysis have often benefited several fold. Ideally, healthy stocks will more often tend to rise on higher volume and pullback on lighter volume. Volume is a great proxy for institutional sponsorship. Conversely, high volume declines can be ominous, as this usually signals distribution and further price deterioration are more likely to follow.
Team Inc. (TISI +$2.73 or +8.59% to $34.52) rallied above the mid-point of its new "double bottom" type chart pattern today, however, volume, a critical component of a technical breakout, failed to surge above the +50% above average threshold needed to trigger a proper new technical buy signal. In addition, the market remains in a correction which means that the overall environment (the M criteria) is not yet conducive to buying stocks. Watch for confirming gains in the days and weeks ahead and remember that proper discipline requires investors to wait for a fresh technical buy signal to be triggered before initiating a new position. The stock should remain on an active watchlist in the event, the market remains healthy, and this stock manages to get back towards new high territory on healthy volume.
Team Inc. has shown solid earnings growth and strong sales revenues growth in recent quarterly comparisons, and it also has a attractive annual earnings growth history in the past few years that helps to satisfy the C and A criteria. TISI sports very healthy ranks, and faces very little resistance due to overhead supply now. Its Earnings Per Share (EPS) stands at a firm 94 and its Relative Strength (RS) rating is a solid 96. Furthermore, its Relative Strength line (the jagged blue line) has hit new high territory which is a bullish sign. The number of top-rated funds owning an interest in its shares rose from 44 in Mar '07 to 58 in Dec '07, helping to satisfy the I criteria. This stock was first featured on Tuesday, December 18, 2007 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $34.83 pivot point and a $36.57 maximum buy price. At the time, the stock was triggering a technical buy signal as it closed above its pivot point on more than enough volume to trigger a technical buy signal. Since then, the stock rallied +12% above its pivot point as it hit a fresh record high of $39.19 on December 27, 2007. But it began running into trouble as the buying enthusiasm waned, which coincided with a pullback in the major averages. Remember that 3 out of 4 growth stocks move in tandem with the major averages. Over the next three months the stock pulled back and negated its breakout, then violated its 50-day moving average (DMA) line and found support near its 200 DMA line. During that time, the stock traced out a bullish double bottom pattern which allows for a new $33.88 pivot point and $35.57 maximum buy price.
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One of the critical characteristics of successful investing is knowing when to sell. Investors are best served when they buy based on the combination of strong fundamentals and technicals, then sell based on the technicals. The reason is because fundamentals often tend to lag a stock's technical condition and come to light later to help explain the technical chart action after the fact.
Team Inc (TISI -$3.28 or -13.56% to $27.46) plunged below critical support of its prior chart lows, triggering technical sell signals as volume surged behind the damaging loss. CANSLIM.net's ongoing notes have repeatedly mentioned the fact that this high-ranked leader was threatening to trace out an ominous head-and-shoulders pattern. Remember that stocks should be sold based upon early signs of technical weakness, not necessarily on fundamental deterioration. TISI still sports a strong Earnings Per Share (EPS) rating of 94 after posting healthy increases in the earnings and sales department in recent quarters. However, history has many times proven that a company's fundamentals tend to very often be a lagging indicator, revealing disappointments weeks or months after the price and volume action has already turned negative. This stock was first featured on Tuesday, December 18, 2007 in the CANSLIM.net Mid-Day BreakOuts Report (read here) with a $34.83 pivot point and a $36.57 maximum buy price. Initially, the stock rallied nearly 13%, but then it started encountering heavy distributional action in January. After its 50-day moving average (DMA) violation on 1/17/08 it was noted as follows - "Its second consecutive loss on above average volume pressured it under its 50 DMA line today and further below its latest pivot point, raising more concerns." Then it encountered resistance when it rallied back up to that important short-term average. The stock is currently testing its longer-term 200 DMA line which is an area where institutional investors often tend to support a reasonably healthy stock. However, if this stock is unable to find support at its 200 DMA line and continues to fall, then this candidate will be dropped from the CANSLIM.net Featured Stocks list.
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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.
Team Inc. (TISI +$2.66 or +9.10% to $31.90) closed higher today after it was upgraded by BB&T Capital Markets, however it remains trading below its 50-day moving average (DMA) line ($32.92) which currently serves as a near term resistance level. The stock recently found support near its prior chart lows. TISI was first featured on Tuesday, December 18, 2007 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $34.83 pivot point and a $36.57 maximum buy price. The stock rallied +11% before tits first worrisome high volume down day on December 31st, 2007. When the market got whacked in January, dragging nearly every stock lower, TISI was no exception. However, the bulls showed up and defended the stock's recent lows. Any subsequent losses leading to a breach of the recent lows would raise concerns and trigger more worrisome technical sell signals. A rebound above its 50 DMA line would be necessary in order for its outlook to meaningfully improve, especially while market conditions (the M criteria) are so poor.
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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.
Team Inc. (TISI +$3.00 or +9.15% to $35.78) traded up today with volume running at an above average pace, and a strong rally in the session's final 30 minutes managed to trigger a technical buy signal. This high-ranked leader closed above its pivot point with a considerable gain backed by 2 times its average daily volume. It was featured earlier today, in the Tuesday, December 18, 2007 edition of the CANSLIM.net Mid-Day Breakouts Report (read here) with a $34.83 pivot point and a $36.57 maximum buy price. The report said, "Y - Recently found support near its 50 DMA line and rallied up to prior chart highs in the $34-35 area where it has encountered resistance. Its earnings history is pretty good, but had a shortcoming with flat 0% earnings growth in the Feb '07 quarter. Sales revenues and earnings growth rate accelerating in recent quarterly comparisons.'' Team Inc.
sports a very healthy Earnings Per Share (EPS) rating of 95 and an impressive Relative Strength (RS) rating of 98. TISI resides in the Pollution Control Services group which is currently ranked 61st of out the 197 Industry Groups list, placing it just outside the top quartile of industry groups. However there are other high-ranked stocks in the group providing leadership such as Stericycle (SRCL -1.01%) and American Ecology Corp (ECOL +3.09%), helping satisfy the "L" criteria. Disciplined investors know to always limit losses if a stock falls more than 7-8% from their buy point. C A N S L I M | StockTalk | News | Chart | SEC | Zacks Reports |
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