USG Corp. (USG +1.96 or +3.04% to $62.47) closed above its 50-day moving average on above average volume after finding support near $60 on Friday. This issue has managed to outperform its peers recently. This is best indicated by its strong 98 Relative Strength rating. It was first featured on 8/4/2005 in the CANSLIM.net Mid Day Breakouts Report and has rallied over +35% in the ensuing time frame. After reaching a high of $71.25 on 9/30/05 it then pulled back towards support. It closed below its 50 DMA on Thursday but then promptly repaired the violation on Friday with gains on higher volume, and it closed in the upper portion of its trading range. It may test investors' patience, and overall market conditions will obviously have a great deal of influence. However, as long as support at the recent lows continues to hold up, odds would favor that higher prices will eventually follow.
It is very important to continually update one's portfolio and watch list(s) whenever possible. When doing this, one should generally look to decrease exposure to weaker holdings and increase exposure (when appropriate) to winners. USG corp (-$4.32 or -6.61% to $61.03) sliced through its rather steep near-term upward trendline today on 3 times its average trading volume. It had traded up as much as +33.80% from when it was featured at $51.27 in the Thursday, August 4th, 2005 CANSLIM.net Mid-Day BreakOuts Report (read here).
A stock that slices through an upward trendline (i.e. support) is showing early signs of technical deterioration, and when losses are clearly on above average volume, such deterioration can be cause for some concern. Violations of the 50 DMA would be a more serious concern or technical failure, but already this stock is flashing warning signals that are often a clue for investors to lock in profits.
USG Corp (USG +$3.23 or +5.61% to $60.85) blasted to a new 52-week high close while trading more than three and a half times its average daily volume today, a ninth consecutive up session. It has traded up since featured in yellow and marked as noteworthy at $51.27 in the August 4th, 2005 CANSLIM.net Mid-day Breakouts Report (see here). The stock has closed with gains on 22 of the past 26 sessions, and it traded lighter than average volume in the four losing sessions since July 15th. It is now extended above the $50.10 pivot point identified, and proper investing discipline dictates that investors should not buy stocks that are up beyond their pivot point by greater than the +5% maximum guideline. At some point or another, any stock will consolidate, and whenever you chase a stock too far above its proper buy point it increases the chances you will be forced to sell it for a 7-8% loss on a normal consolidation.
