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Ken's Mail Bag - Q&A 10/21/09 - 2nd Chance Buying Opportunities After Breakout
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
CANSLIM.net


 
Subscriber Questions:

October 20, 2009

Ken,

I was wondering if you would be so kind as to give me a clarification of your remark regarding Aeropostale Inc. (ARO) "permissible under the guidelines to accumulate shares from the first successful test of support at its short-term average line up to as much as 5% above its latest chart highs".  I looked at the chart, is the first test of support on August 17th at $34. and the latest chart high on Sept. 22 at $44.85?
 
I love the CANSLIM.net service and it has made me a wealthier person, thank you for your time.

Donald

 
Ken's Response:

 October 21, 2009

Donald,

Thanks for the positive feedback.  I appreciate the opportunity to clarify.

We are talking about its post-breakout action, not anything earlier. Since ARO’s bullish breakout on 8/21/09 triggered a buy signal, this (everything 10/09/09 to present) may be considered its “first” test of support at the 50-day moving average (DMA) line in my view.  However, one could also consider its 10/09/09 action the “first” test of the 50 DMA, while it closed near that session’s high, it suggests that support arrived to prop up the stock. A “positive reversal” would have been a more convincing indication of a change in direction (back up) to potentially challenge or exceed the highs.  Subsequent 50 DMA tests are considered in general to be more failure prone, so buying is mostly encouraged on the “first” test after a sound breakout.  So, if it survives its current test of the 50 DMA line and comes back to confront its 50 DMA again in November or December, new buying efforts would not be permitted under the same premise –as it would not be its first test following a sound breakout.  Of course, if it formed a new sound base of sufficient length, then a fresh breakout would be buyable too!   In the CANSLIM Certification they teach that if you missed a stock that breaks out, you can get a “2nd chance” to buy it anywhere from when it bounces off its 50 DMA (or 10-week average) all the way up to the recent highs plus 5%.  That would be its 9/22/09 high plus 5%.  Of course, ARO has already almost based long enough to be considered a new flat base on top of its prior base.

 

We do not have any ability to predict, but we know that in the past ARO has endured some heavy distribution and briefly traded under its 50 DMA line (See June 23rd through July 9th, and August 17) only to rally back with quiet volume (mid-July), or very heavy volume (see 8/21) indicative of great buying demand. If it does undercut its 50 DMA line, it is likely that such weakness would be directly linked to the overall market (the M criteria) direction.  Take a look at its weekly chart (shown above) to get a better feel for the significance of its multi-year highs in the $37-38 area, knowing that deterioration which negates that long-term breakout (marked by the high volume up week ending 8/21/09) would raise more serious concerns.

Sincerely,

Kenneth J. Gruneisen
Founder & Contributing Writer for CANSLIM.net
www.canslim.net

 

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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