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Strong Earnings and Perched in Tight Range Near All-Time High - Wednesday, April 18, 2012
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 alerts prudent CANSLIM oriented investors to place the issue in their watch list. After doing any necessary backup research, the investor is prepared to act after the stock triggers a technical buy signal (breaks above its pivot point on more than +50% average turnover) but before it gets too extended from a sound base. 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. Disciplined investors know to buy as near as possible to the pivot point and avoid chasing stocks after they have rallied more than +5% above their pivot point. It is crucial to always limit losses whenever any stock heads the wrong direction, and disciplined investors sell if a struggling stock ever falls more than -7% from their purchase price.
Vmware Inc (VMW +$0.80 or +0.72% to $111.29) posted a gain today with nearly twice its average volume. It was highlighted in yellow in the mid-day report earlier today (read here) with pivot point cited based on its 52-week high plus 10 cents after a few very tight closes on its weekly chart while also finding support at its 10-week moving average (WMA) line. It found support at its 50-day moving average (DMA) line last week while retreating from its 52 week high after recently wedging up without especially great volume conviction behind its gains. A volume-driven gain into new high territory would help it trigger a proper technical buy signal from an advanced "3-weeks tight" type base pattern.Volume and volatility often increase near earnings news. The 4/11/12 mid-day report noted - "Due to report earnings on Wednesday, April 18th. The past 8 quarterly comparisons through Dec '11 have shown strong earnings per share and sales revenues increases versus the year ago periods. A slight downturn in its FY '09 earnings is a small flaw with respect to the A criteria of the fact-based system." After today's close it reported stronger than consensus earnings and raised its yearly guidance. Still, disciplined investors would watch and wait for a convincing breakout before any new buying efforts are justifiable under the fact-based investment system. Without a fresh sign of heavy institutional accumulation there is not a strong argument that it is capable of making a sustained and meaningful advance.
The number of top-rated funds owning its shares rose from 711 in Jun '11 to 827 in Mar '12, a reassuring sign concerning the I criteria. Its current Up/Down Volume Ratio of 1.2 also offers an unbiased indication its shares have been under accumulation over the past 50 days.
