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Fallen Leader Pierces Its 200 DMA - Wednesday, November 15, 2006
A very important technical tool that savvy investors have learned to incorporate in their technical analysis is the 200-day moving average (DMA) line. The 200 DMA line plays a pivotal role relative to a stock's price. If the price of a stock is above its 200 DMA then odds are that its 200 DMA will act as longer term support. Conversely, if the price is below its 200 DMA then the moving average acts as resistance. Obviously, if a technical breakdown or violation takes place on heavy volume it is a more serious concern. Sometimes quiet violations are repaired quickly, without a lot of additional losses. However, the key moving averages are always an important line to watch.
VCA Antech Inc. (WOOF -$0.09 or -0.29% to $31.25) has been struggling. More than a year ago, this stock was featured on Monday, October 31, 2005 in the CANSLIM.net Mid Day Breakouts Report (read here) with a $26.04 pivot point as it was triggering a technical buy signal. More recently, on October 9th, 2006 (read here), and again on October 16, 2006 it was featured in the CANSLIM.net After Market Report (read here) as it was triggering its first technical sell signals. On October 9, 2006 WOOF gapped down on and violated its 50 DMA on heavy volume. The October 16, 2006 report included the remarks, "as long as WOOF continues trading below its 50 DMA, and under its upward trendline, the odds are favoring that lower prices will follow. Also, consider the potential benefit from the past 5 trading sessions (since that clear sell signal) and the possible gains that could have been generated by promptly purchasing a fresh breakout or leading candidate with the freed up funds."
This is a great example of how important it is to recognize sell signals and closely adhere to a strict sell discipline. On October 26, 2006 it experienced another massive gap down, yet another technicl sell signal. Its Relative Strength (RS) rating has meanwhile deteriorated to a mere 35, much lower than the +80 guideline. WOOF's inability to rally while the major averages are rallying is another bearish trait worth recognizing. Today the bulls could not defend the 200 DMA line and it closed below that long term average for the first time in over a year! The weakness and low ranks are enough to prompt WOOF to be dropped from the CANSLIM.net Featured Stocks list.
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Residing Below 50 DMA & Upward Trendline - Monday, October 16, 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. 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.
VCA Antech Inc. (WOOF -$0.03 or -0.09% to $33.11) closed lower on above average volume and below an important upward trendline. This stock was first featured on Monday, October 31, 2005 in the CANSLIM.net Mid Day Breakouts Report (read here) at $25.45 as it was triggering a technical buy signal. More recently, just a couple of weeks after its bullish July 27th, 2006 gap up and breakout on high volume, this stock was featured on Thursday August 10th, 2006 in the CANSLIM.net After-Market Report (read here) as it was pulling back towards its prior highs, consolidating quietly.
On October 09, 2006 this stock gapped down on more than two times normal trade and closed below its 50 DMA. It appeared in that evening's CANSLIM.net After-Market Report with the note - "Considerable declines today and a close at the day's lows on well above average volume is never a good sign" (read here). This was the first clear technical sell signal in a few months. It also closed below its upward trendline last week. In the interim, this stock's Relative Strength (RS) rating has fallen to 72. Old May-July highs in the $33 area are offering some remaining chart support, however, as long as WOOF continues trading below its 50 DMA, and under its upward trendline, the odds are favoring that lower prices will follow. Also, consider the potential benefit from the past 5 trading sessions (since that clear sell signal) and the possible gains that could have been generated by promptly purchasing a fresh breakout or leading candidate with the freed up funds.
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Light Volume Pullback Is Healthy - Thursday, September 07, 2006
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.
VCA Antech Inc. (WOOF -$0.21 or -0.60% to $34.98) closed with a small loss on below average volume as this stock continued to linger near all-time highs. WOOF was first featured on Monday, October 31st, 2005 in the CANSLIM.net Mid Day Breakouts Report (read here) at $25.45 as it was triggering a technical buy signal. More recently, just a couple of weeks after its bullish July 27th, 2006 gap up and breakout on high volume, this stock was featured on Thursday August 10th, 2006 in the CANSLIM.net After-Market Report (read here) as it was pulling back towards its prior highs, consolidating quietly.
After finding support near its prior chart highs in the $33 area, the bulls reasserted control and sent this stock to fresh 52-week highs on expanding turnover. Its 50-day moving average (DMA) line is an additional suppport level to keep an eye on now, which coincides nicely with the other chart support. Stepping back and looking at this stock on a weekly or monthly chart allows you to see a very well-defined four year upward trendline (not shown). As long as its outlook remains healthy, this stock would also find support above the lower boundary of its multi-year trendline. As long as that lower boundary is not breached ($32 area) then odds favor that higher prices may likely follow. Until then, low volume pullbacks are "healthy" and should be expected.
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Pulling Back Toward Support At Prior Highs - Thursday, August 10, 2006
Another important factor is the relationship between an uptrend and a stock's pivot point. Typically, stocks begin forming an uptrend after rising above their pivot point. In the event the upward trend is violated, the stock will generally be expected to continue falling until it can retest support. Initial support is often the 50 DMA, or its pivot point, whichever is higher.
VCA Antech Inc. (WOOF +0.17 or +0.51% to $33.45) rallied on light volume on Thursday. This stock was first featured on Monday, October 31st, 2005 in the CANSLIM.net Mid Day Breakouts Report (read here) at $25.45 as it was triggering a technical buy signal. More recently, on Wednesday July 19th, 2006 this stock was featured in the CANSLIM.net's After-Market Report (read here) as it was rising toward a challenge of its May 10th, 2006 high of $33.34. But then a reversal and another test of its 50 DMA ensued. Not only did the stock find prompt support at its 50 DMA line on July 26th, it gapped up drastically on July 27th for gains on heavy volume to a fresh 52-week high. Since then, this stock has been pulling back toward where substantial chart support now exists in the $32-33 range near its prior highs and its 50 DMA. As long as this stock remains above its prior highs and above its 50 DMA line, odds favor that further gains are likely.
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Bullish Action Should Include High Volume - Wednesday, July 19, 2006
Once again, the "L" criteria in CAN SLIM(TM) tells investors to choose leading companies in leading industry groups, and when we have identified a high-ranked leader with the proper characteristics we should wait and watch for gains on at least +50% above average volume as a confirmation that a breakout is attracting meaningful institutional sponsorship. 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 triggers a technical buy signal and is purchased, it is always important to employ the 7-8% loss cutting rule in the event of a downturn.
VCA Antech Inc. (WOOF $1.09 or +3.20% to $33.00) soared to a new high close on about average volume on Wednesday. This stock was first featured on October 31st, 2005 in the CANSLIM.net Mid Day Breakouts Report (read here) at $25.45 as it was triggering a technical buy signal. Over the next few months this issue rose, then formed another 5-month base on top of the prior base. Then it gapped up from support near its 200-day moving average (DMA) line on April 27th, 2006 with considerable gains on huge volume. It continued advancing until it hit an interim high of $33.34 on May 10th, at that point up over +31% from the price when it was first featured. It literally made its near term high on the day the major averages began their steep 4-week sell off.
In the June 5, 2006 After Market Report (read here) WOOF appeared with the following headline, "Healthy Action Despite Unhealthy Market." At the time this leader had illustrated impressive relative strength and managed to move sideways while the major averages declined, as was described with these comments, "One major difference between the action in WOOF and that of the major averages was that WOOF managed to find support near its old highs, meanwhile the major averages failed to find support and sliced right through their 50 DMAs as they dropped." In the weeks that followed, this issue did briefly break below its prior highs and its 50 DMA line, yet it again stayed well above its 200 DMA line. While it went on a seven session winning streak, the 50 DMA breach was repaired. Today the stock surged to a fresh all-time high close and it clearly benefited from its recent impressive behavior. However, institutional buying demand is essential for us to believe any stock's advance is sustainable, so volume should swell significantly higher than average as a stock surges to new highs.
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Healthy Action Despite Unhealthy Market - Monday, June 05, 2006
Another important factor is the relationship between an uptrend and a stock's pivot point. Typically, stocks begin forming an uptrend after rising above their pivot point. In the event the upward trend is violated, the stock will generally be expected to continue falling until it can retest support. Initial support is often the 50 DMA, or its pivot point, whichever is higher.
VCA Antech Inc. (WOOF -$0.32 or -1.04% to $30.38) closed lower on very light volume on Monday. This stock was featured on Monday, October 31st, 2005 in the CANSLIM.net Mid Day Breakouts Report (read here) at $25.45 as it was triggering a technical buy signal. Over the next few months this issue rose, then formed another 5-month base on top of the prior base. Then it gapped up from support near its 200-day moving average (DMA) line on April 27th, 2006 with considerable gains on huge volume. It reached a new all-time high of $33.34 on May 10th, at that point up over +31% from the price when it was first featured. It literally made its near term high on the day the major averages began their steep 4-week sell off. One major difference between the action in WOOF and that of the major averages was that WOOF managed to find support near its old highs, meanwhile the major averages failed to find support and sliced right through their 50 DMAs as they dropped.
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Impressive Setup, But Not Quite a Breakout - Monday, October 31, 2005
VCA Antech Inc. (WOOF +$0.41 or +1.56% to $25.80) hails from the Medical/Dental-Services group which is now 16th on the 197 Industry Groups list. It rallied today on above average volume, and faces very little resistance from overhead supply. Technically, it is trading only -2.4% under its all-time high and $0.21 below its pivot point of $26.10 (+$0.10 above its September 29th high). It has refused to surrender the recent gains on heavy volume after a bullish gap up on October 26th. The path of least resistance would suggest that further gains will likely follow, especially if the bulls show up and manage to send this high-ranked stock above its pivot point on well above average volume. The requisite gains would help to confirm what already looks almost like a fairly good "breakout", however there is no telling whether the issue will continue basing under the $26 barrier. It closed off its intra-day highs in the past four sessions, so profit taking seems to be holding it back, at least temporarily.
This stock was first featured earlier today in the CANSLIM.net Mid Day Breakouts Report as it was attempting to emerge from a solid base. It has an impressive 32% Return on Equity, well above the +17% guideline. It has spent the past six months building a base, which is actually part of a flat 18-month long base-on-base type of pattern. This issue was highlighted in yellow in today's report because it is a solid setup and potential buy candidate. Disciplined readers may be prepared to take action if this issue manages to rise above its pivot point on better than +50% above its normal daily volume turnover.
