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Metal Company Bounces After Finding Support Near Prior Chart Highs - Friday, May 02, 2008
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.Valmont Industries (VMI UP $2.75 or 2.75% to $102.57) rallied on above average volume after this high ranked stock recently found support near its prior chart highs. VMI sports strong ranks; an Earnings Per Share (EPS) rating of 95, and a Relative Strength (RS) rating of 94. The number of top-rated funds owning an interest rose from 89 in Jun '07 to 107 in Mar '08, which shows increasing institutional demand (the I criteria). Concerns would be raised by any weakness leading to a close under its old chart highs near $98-100 which would have the effect of technically negating its latest breakout.
This stock was first featured on Thursday, April 17, 2008 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $99.23 pivot point and a $104.19 maximum buy price and the following note: "Y - Posted early gains today for new all-time highs after its latest strong earnings news, but it has negatively reversed. Prior chart highs in the $99 area are a key support level now, and deterioration leading to a close back in its prior base would raise concerns by negating its breakout. Ahead of its latest earnings report it technically broke out 4/16/08 with a considerable gain on well above average volume. Strong earnings history satisfies the C and A criteria." Initially, the stock rallied a quick +11% before pulling back and finding support near its prior chart highs. Orderly pullbacks offer investors another chance to accumulate high ranked stocks within the proper guidelines. Always limit losses per the 7-8% sell rule, and never hold a stock if it falls more than that from your purchase price.
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