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.
Meridian Bioscience Inc. (VIVO +$0.69 or +2.11% to $33.43) gapped up slightly today and closed higher for a 4th consecutive session, but volume behind the recent gains has been average or lighter than average. This high-ranked leader was recently featured on Thursday, February 28, 2008 in a CANSLIM.net Stock Bulletin with a detailed analysis and an annotated graph (read here). The report identified a $36.09 pivot point and a $38.00 maximum buy price, however, it has not yet triggered a fresh technical buy signal since. If it is to eventually run up for great gains it must first clear all remaining resistance due to overhead supply. Disciplined investors avoid the temptation to get in "early" before a proper technical buy signal is triggered.
Decent earnings satisfy the C and A criteria for this high-ranked leader. Sales revenues increases have been improving, but below the +25% guidelines, which is of some concern. The number of top-rated funds owning an interest in its shares rose from 99 in Mar '07 to 138 in Dec '07, helping to satisfy the I criteria.
The small supply of only 37.9 million shares in its float could lead to dramatic price volatility, especially if the institutional crowd rushes in or out. Disciplined investors can consider accumulating this stock if it trades above its $36.09 pivot point on at least +50% above average volume to trigger a new technical buy signal. As always, disciplined investors know that is it is of the utmost importance to always sell a stock if it drops 7-8% below your purchase price. Until a new buy signal is triggered, this stock should remain on a active watchlist.C A N S L I M | StockTalk | News | Chart | SEC | Zacks Reports |
View all notes | Alert me of new notes | CANSLIM.net Company Profile
| Meridian Bioscience Inc. |
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Ticker Symbol: VIVO (NASDAQ) |
Industry Group: Medical- Products |
Shares Outstanding: 39,900,000 |
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Price: $34.95 2:00PM ET |
Day's Volume: 201,311 2/28/2008 2:00PM ET |
Shares in Float: 37,900,000 |
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52 Week High: $36.09 1/11/2008 |
50-Day Average Volume: 382,830 |
Up/Down Volume Ratio: 1.4 |
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Pivot Point: $36.19 1/11/2008 plus 10 cents |
Pivot Point +5% = Max Buy Price: $38.00 |
Web Address: http://www.meridianbioscience.com |
C A N S L I M | StockTalk | News | Chart | SEC | Zacks Reports |
View all notes | Alert me of new notes | CANSLIM.net Company Profile
CANSLIM.net Profile: Meridian Bioscience, Inc., a life science company, engages in the development, manufacture, sale, and distribution of diagnostic test kits primarily for respiratory, gastrointestinal, viral, and parasitic infectious diseases. The immunodiagnostic technologies used in its diagnostic test kits include enzyme immunoassay, immunofluorescence, particle agglutination/aggregation, immunodiffusion, complement fixation, and chemical stains used by reference laboratories, hospitals, and physicians' offices. The company was founded in 1976 and is based in Cincinnati, Ohio. VIVO hails from the Medical-products group which is presently ranked 24th on the 197 Industry Groups list, which easily satisfies the L criteria. There were 99 top-rated funds with an ownership interest in March '07, yet that number jumped to 136 as of December 07, offering a very strong sign of increasing institutional interest (I criteria). Also, the stock has less than 40 million shares in the float, and having a small supply of shares is a characteristic that most of the greatest stock market winners exhibited before they enjoyed explosive moves up. Its annual earnings growth history has been steady but not especially strong, and quarterly earnings increases in the 4 latest quarterly earnings comparisons were borderline with the +25% guideline. However, sales revenues increases have been a little shy of the guidelines, and stronger sales and earnings increases are always preferred. Return On Equity stands at +23%, which is above the +17% guideline.
What to Look For and What to Look Out For: Look for the stock to confirm a new technical buy signal by breaking out and closing above its $36.19 pivot point with gains on heavy volume in the coming days and weeks. Remember that buyable breakouts require three important components: the stock must clear its pivot point with considerable gains, those gains must be backed by at least +50% above average volume, and the overall market environment must improve and produce a new batch of leadership. As always, it is of the utmost importance to sell a stock if it drops 7-8% below your purchase price. The small supply of outstanding shares could lead to dramatic price volatility, especially if the institutional crowd rushes in or out. Also, the market conditions are still somewhat questionable, largely due to the lack of leadership, which suggests this is not an ideal environment conducive for accumulating shares. This high-ranked leader should remain on an active watchlist and could be considered as a new buy candidate in the event it closes above its pivot point on the necessary volume needed to trigger a technical buy signal.
Technical Analysis: VIVO is currently forming the right side of its base. The stock is now trading very near its pivot point on very healthy volume patterns. At this point, there has been virtually no sign of institutional selling (distribution) which is a healthy sign. Remember that it is imperative to see volume surpass the necessary threshold needed to trigger a technical buy signal as the stock trades and closes above its pivot point. Until then, this high ranked stock should remain on an active watchlist.