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INM Feb '06 - My Thoughts on Some Recent High-Ranked Favorites
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
CANSLIM.net


The recent market action has sparked a lot of new discussion among many of my clients.  Let me take this as an opportunity to chime in with some of my brief thoughts concerning of few issues I have recently been asked about.  

 

Tradestation Group (TRAD) tallied gains of greater than +20% within the first 2-3 weeks of its most recent breakout.  This strong action gives us reason to consider a CAN SLIM(TM) rule that says investors should hold the winner for 8 weeks in hopes of larger gains unless it climaxes or breaks down.  With a generally strong market featuring very few bad failures to spook investors, the outlook still seems superb. However, it bears mentioning also that the stock has rallied up and now sits within the range of 70%-100% above its 200-day moving average (DMA) line. That can sometimes be considered a "sell signal", but at the minimum it means the stock is getting pretty extended from a reasonable base of support.  For those with big profits it is tempting to consider nailing down gains and watching for a chance to buy on a light volume dip back toward chart support at prior highs and its 50 DMA line (now near $14).  Nothing about the day-to-day action thus far has provided any technical sell signals otherwise.

 

Techne Corp (TECH) rang up good gains to new high closes on above average volume in early January, but it simply failed to follow through.  It bounced off its 50 DMA on January 23rd, but then sliced under it with a loss on almost six times its average daily volume on January 31st immediately after it announced its latest quarterly financials.  While it ended the latest session well above the day’s lows, concern is prompted by the fact that its earnings increase versus the year earlier was under the +25% guideline.  The company has an excellent annual earnings history, however Street estimates are not hinting at stellar growth ahead.  Better candidates are out there, so why settle?

 

Websense Inc. (WBSN) has mostly struggled since the start of the new year, while many stocks have performed exceptionally well.  Its Relative Strength rank has fallen to 72, under the usual 80-minimum guideline.  Technically, however, there are several things that I see as bullish indications on this stock’s chart.  Yes, it dipped under its 50 DMA again in late-January, but none of the losses occurred on above average volume.  It also found support above its longer-term chart highs and never closed under its old high close of $61.52 which occurred on March 7th, 2005.  That is considered a very telling sign that it was finding great support.  The improved volume (+87% above its average daily volume) as it vaulted back above its 50 DMA line shows more evidence of institutional buying demand.  While this stock lingers in striking range of new highs, it reported Q4 (Dec) earnings after Tuesday’s close that were better than the Reuters Estimates consensus while revenues rose +26.5%. Sequentially, sales revenue growth is showing signs of deceleration, however the company issued upside guidance for Q1 and it also announced a 2-for-1 split.  Google’s (GOOG) disappointment could weigh on issues in the Internet group, so caution is warranted.

 

Valueclick Inc (VCLK) has seen its EPS rank fall off to a mediocre 65, even though recent earnings increases have been above the +25% guideline.  The stock recently struggled after Yahoo (YHOO) reported disappointing results, and again we might expect collateral damage in internet related names due to Google’s latest report.  Technically, VCLK was looking great after a January 6th gap up to new highs, however its January 18th gap down completed a worrisome “island reversal” pattern while it also fell back into its prior base.  Analysts’ estimates for the company are not very strong either.

 

Viasys Healthcare (VAS) had a chance to close above its pivot point with gains on good volume, however it was turned back.  It may eventually attract sufficient buying demand and blast off to new highs, but for now it seems a bit premature for buying.  When investors are doing it right, they wait and see proof of institutional buying demand - which normally comes in the form of huge volume and convincing gains to new highs.  For a good example of a compelling technical breakout, take a peek at Vital Images Inc (VTAL), which blasted out of a very orderly base on January 30th with gains on more than 5 times its average volume.  Of course, it bears mentioning that VTAL’s annual earnings history has been a bit erratic, thus its EPS of 76 falls under the guideline. Analysts’ estimates for the company are very strong.

 

Portec Rail Products Inc (PRPX) recently strung together a series of many up days on above average volume, and last Friday’s action quickly drove it more than 5% above prior chart highs.  While it cools off and drifts back toward prior chart highs it starts to look more tempting.  Numerous railroad related issues have been showing up on the new highs list, which is a sign of leadership (the “L” criteria) in the group.

About Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net :
Kenneth J. Gruneisen has successfully completed the CAN SLIM® Certification Program.  Mr. Gruneisen became a Registered Representative in 1987 and his career includes experience offering personalized assistance to investors with more than a decade of experience as a Registered Principal managing a branch office.

The recommendations made by CAN SLIM® certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil & Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil & Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.


Comments contained in the body of this report are technical opinions only and are not necessarily those of Gruneisen Growth Corp. The material herein has been obtained from sources believed to be reliable and accurate, however, its accuracy and completeness cannot be guaranteed. Our firm, employees, and customers may effect transactions, including transactions contrary to any recommendation herein, or have positions in the securities mentioned herein or options with respect thereto. Any recommendation contained in this report may not be suitable for all investors and it is not to be deemed an offer or solicitation on our part with respect to the purchase or sale of any securities.

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The recommendations made by CAN SLIM® Certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil + Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil + Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.

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