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. Healthy stocks sometimes trade under their 50 DMA lines briefly, but usually a strong candidate will promptly bounce and repair a 50 DMA violation. When a stock has violated its 50 DMA line and then lingers beneath it, the stock's outlook gets worse and worse as it spends a greater period of time trading under that important short-term average line. Once the 50 DMA line starts sloping downward it should also be acknowledged that the stock has been struggling for a while, and it might be time to reduce exposure and look for places to put that money to work in stronger buy candidates.
Wipro Ltd. (WIT -$0.47 or -2.61% to $17.51) pulled back and remained above support at its 50 DMA line on Friday. This stock was first featured on Wednesday, November 1, 2006 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $15.34 pivot point. After its appearance the stock enjoyed a modest gain, then it pulled back and found support right at its 50 DMA line, a very healthy sign. On December 13, 2006, then again on January 10, 2007, this stock tested its 50 DMA, overcame earlier weakness, and closed in the upper half of its intra-day range. Since then the stock has quietly climbed into new all-time high territory on only average volume, not the high volume that would be indicative of great institutional buying demand (the "I" criteria). Wipro resides in the Computer -tech Services industry group which is currently ranked 63 out of the 197 Industry Groups covered in the paper, placing a bit outside of the much coveted top quartile. Deterioration under the 50 DMA line (now $16.77) or under its prior chart lows ($16.80 on 2/13/07, or $16.57 on 1/19/07) may trigger technical sell signals. Meanwhile, as long as WIT continues trading above its 50 DMA, the bulls remain in control and odds still favor even greater gains.
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Group action plays a very important role, and experienced investors learn that they can increase their odds of picking a great winner by always focusing their buying efforts in the market's leading groups. The "L" criteria in CAN SLIM(TM) tells us to choose leading companies in leading industry groups, thus it is suggested that investors choose from the top quartile of the 197 Industry Groups (listed in the paper most days on page B4). 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.
Wipro Ltd. (WIT -$0.08 or -0.49% to $16.15) closed slightly lower on below average volume. This stock was first featured on Wednesday, November 01, 2006 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $15.34 pivot point. After its appearance the stock enjoyed a modest gain, then pulled back and found support right at its 50 day moving average, a very healthy sign. On December 13, 2006 this stock tested its 50 DMA, overcame earlier weakness, and ended the session with a modest gain. Since then the stock has quietly climbed into new all-time high territory on only average volume, not the high volume that would be indicative of institutional buying demand (the "I" criteria). Wipro resides in the Computer -tech Services industry group which is currently ranked 31 out of the 197 groups covered in the paper, placing it in the much coveted top quartile and satisfying the "L" criteria. As long as WIT continues trading above its 50 DMA, the bulls remain in control and odds favor even greater gains.
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Group action plays a very important role, and experienced investors learn that they can increase their odds of picking a great winner by always focusing their buying efforts in the market's leading groups. The "L" criteria in CAN SLIM(TM) tells us to choose leading companies in leading industry groups, thus it is suggested that investors choose from the top quartile of the 197 Industry Groups (listed in the paper most days on page B4). 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.
Wipro Ltd. (WIT +$0.76 or +4.61% to $15.74) vaulted to a new all-time high on over 2.5 times its average daily volume today, triggering a new technical buy signal. This stock was recently featured in the November 2006 edition of the monthly newsletter, CANSLIM.net News (read here), as it was setting up. Two weeks later, on November 15, 2006, it rose above its recent (10/16/06) chart high of $15.24, but on that session the stock negatively reversed from formidable resistance and closed with a loss on heavy volume. On three separate occasions, WIT had encountered resistance at $15.50 (January 30, April 19 and November 15). Finally, after those unsuccessful attempts and months of consolidation, in the last hour of trading today it cleared that stubborn chart resistance level with big volume showing that there was institutional buying conviction behind the day's gains, a very healthy sign helping it meet the "I"criteria.
This stock is a high-ranked leader that resides in a strong group. The Computer - Tech Services group is currently ranked 30th out of 197 covered in the paper, placing it in the top quartile of groups and helping satisfy the "L" criteria. It was very encouraging to see WIT literally close at the absolute high tick of the session. Additional gains backed by solid volume in the coming sessions would be a reassuring confirmation of this fresh breakout. Conversely, if the bears quell the bullish demand and this stock falls back into its prior base, the breakout would be negated and that would raise concerns. Remember to always follow the 7-8% sell rule to limit losses whenever a stock falls that amount from your purchase price.
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Wipro LTD Adr. |
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Ticker Symbol: WIT (NYSE) |
Industry Group: Computer- Tech Services |
Shares Outstanding: 1,432,000,000 |
Price: $14.56 |
Day's Volume: 462,300 |
Shares in Float: 214,800,000 |
52 Week High: $15.50 4/19/2006 |
50-Day Average Volume: 263,000 |
Up/Down Volume Ratio: 1.4 |
Pivot Point: $15.34 10/16/2006 high plus .10 |
Pivot Point +5% = Max Buy Price: $16.11 |
Web Address: http://www.wipro.com |
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CANSLIM.net Profile: Wipro Limited provides information technology services and products worldwide. It offers software solutions, IT services, IT consulting, business process outsourcing services, and research and development services in the areas of hardware and software design. The company operates in three segments: Global IT Services and Products,
What to Look For and What to Look Out For: WIT is currently below its $15.34 pivot point and continuing to trace out a 9-month long base during which it has been confined to a $15.50-10.18 trading range. Look for this strong leader to eventually break out of its current base on above average volume and rise clearing all remaining overhead supply. If a breakout occurs with at least +50% above average volume, a new technical buy signal would be triggered. It is essential to see volume swell meaningfully when any issue blasts into new high territory, as price progress without high volume otherwise leaves it questionable with respect to meeting the "I" criteria. Proper trading discipline demands patience before a position is initiated, so avoid any temptation to buy "early" without volume driven gains to confirm a true buy signal. As always, stop losses should be placed 7-8% below your entry point to preserve capital.
Technical Analysis: WIT has spent the past 9 months building a base pattern. This stock is $0.71 below its April 18, 2006 all time high close of $15.27. Ideally, once this stock triggers a technical buy signal it will manage to close above that level and be on its way to further new high closes. This stock’s fundamentals remain strong and it is also encouraging to see its 50 DMA rise above its 200 DMA in recent sessions.