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Transportation - Equipment Firm Extended From Buy Point After Big Gains - Wednesday, July 23, 2008
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.
Wabtec (WAB DOWN ($1.52) or -2.76% to $56.66) closed lower on above average volume after hitting a fresh all-time high on Tuesday. Wabtec recently reported their latest quarterly results and said that earnings rose +21% while sales increased +20% versus the same versus the same period in the previous year. It should be noted that this is slightly below the +25% guideline. However, WAB sports strong ranks; an Earnings Per Share (EPS) rating of 93, and a Relative Strength (RS) rating of 98. The number of top-rated funds owning an interest rose from 140 in Sep '07 to 150 in Jun '08, which shows increasing institutional demand (the I criteria). Keep in mind that, while the latest earnings and sales increases were a little sub-par, it is best to sell based upon technical action. Concerns would be raised by any weakness leading to a close under its recent chart highs near $51 area, where deterioration might prompt investors to lock in profits.
This stock was first featured on Tuesday, January 24, 2006 in the CANSLIM.net Mid Day Breakouts Report (read here)
with a $28.56 pivot point and a $29.99 maximum buy price. Initially, the stock rallied over +100% since being featured. Of course the stock triggered some technical sell signals along the way which caused the stock to be dropped from the CANSLIM.net Featured Stocks Page on July 27, 2006. More recently, the stock built a new base, and was featured in the April 24, 2008 CANSLIM.net MidDay Breakouts Report (read here) with a new $42.09 pivot point and a $44.19 maximum buy price and the following note: "Y - Considerable gains after gapping up today with heavy volume helping it hit a new all-time high after reporting good earnings and better guidance. Good annual earnings history and steady quarterly increases above the +25% guideline satisfy the C and A criteria." Since then, the stock has traded +38.3% above its pivot point and found support near its 50 DMA line during its advance. At this point, WAB would need to build a better base before it might offer another sound buy point.C A N S L I M | StockTalk | News | Chart | SEC | Zacks Reports | 
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Transporation Company Hits New Highs - Wednesday, April 30, 2008
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.
Wabtec (WAB UP $0.30 or 0.70% to $42.88) hit a multi year high on Wednesday after recently reporting their latest quarterly results. Earnings rose +27% while sales increased +22% vs the same vs the same period in the previous year. WAB sports strong ranks; an Earnings Per Share (EPS) rating of 94, and a Relative Strength (RS) rating of 91. The number of top-rated funds owning an interest rose from 139 in Jun '07 to 143 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 $40-41 area which would have the effect of technically negating its latest breakout and closing its latest gap.
This stock was first featured on Tuesday, January 24, 2006 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $28.56 pivot point and a $29.99 maximum buy price. Initially, the stock rallied nearly +40% before encountering some resistance and then pulling back and triggering technical sell signals. The weak action caused the stock to be dropped from the CANSLIM.net Featured Stocks Page on July 27, 2006. More recently, the stock built a new base, and was featured in the April 24, 2008 CANSLIM.net MidDay Breakouts Report (read here) with a new $42.09 pivot point and a $44.19 maximum buy price and the following note: "Y - Considerable gains after gapping up today with heavy volume helping it hit a new all-time high after reporting good earnings and better guidance. Good annual earnings history and steady quarterly increases above the +25% guideline satisfy the C and A criteria." Since then, the stock has steadily edged higher and closed below its current maximum buy price. 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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50 DMA Now Acting As Resistance - Monday, June 26, 2006
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.
Wabtec (WAB +$0.27 or +0.77% to $34.85), formerly known as Westinghouse Air Brake Technologies Corp, continued edging higher on light volume on Monday, but for the past three weeks it has been trading under its 50 DMA line. This stock was first featured at $29.38 on Tuesday, January 24th, 2006 in the CANSLIM.net Mid Day Breakouts Report (read here) and it surged +36.42% over the next four months. However, as the market averages turned downward in mid-May, things became difficult for most stocks, as 3 out of 4 stocks tend to follow the general market direction (the "M" criteria). Detailed analysis including a DailyGraph(R) was provided on May 19th, 2006 (read here), right as WAB sliced under its 50 DMA, as the Featured Stock Update section of CANSLIM.net's After Market Report mentioned, "...today's action was a bit worrisome. WAB violated its well defined upward trendline and sliced through its 50 day moving average. This issue had fared rather well in the recent two week sell off. However, its good fortune ended on Friday when the bears took control and sent this issue lower on a day when the major averages ended higher. Knowing when to lock in gains is just as important as knowing when to limit losses. Friday's action triggered a technical sell signal and any further losses should not be tolerated." Since that critical violation occured, its 50 DMA has acted as formidable resistance. The recent advance on declining volume adds to concerns, and for anyone still owning an interest, a breach of the 200 DMA line and a close under recent chart lows would both be technical sell signals to watch out for. Further deterioration should not be tolerated.
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Importance of Playing Defense - Friday, May 19, 2006
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. Additionally an upward trendline, by definition, develops as a stock steadily appreciates over an extended period of time. During that period, the stock vacillates between the lower and upper boundaries of trendlines which can be drawn connecting a series of recent highs or lows. 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 trend is deteriorating and bears are gaining control, making the odds start to favor the possibility of further downside testing.
Westinghouse Air Brake Technologies Corp. (WAB -0.76 or -2.15% to $34.57) ended lower today on nearly twice normal turnover. This stock was featured on Tuesday, January 24, 2006 in the CANSLIM.net Mid Day Breakouts Report (read here) at $29.38. Over the past four months, this issue has jumped nearly +37% and built a rather well defined upward trendline. However, today's action was a bit worrisome. WAB violated its well defined upward trendline and sliced through its 50 day moving average. This issue had fared rather well in the recent two week sell off. However, its good fortune ended on Friday when the bears took control and sent this issue lower on a day when the major averages ended higher. Knowing when to lock in gains is just as important as knowing when to limit losses. Friday's action triggered a technical sell signal and any further losses should not be tolerated.
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