"A Vital Source for the CANSLIM Investor" 

SPECIAL REPORT
Sunday,  August 22nd, 2004 | 9:43 PM
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In the case of both the Oct '02 and Mar '03 CANSLIM.net Special Reports, more convincing confirmed rallies had been under way.  Be it clearly noted that there is also no historic precedent for major market rallies beginning in the month of August. (OK, at least one CANSLIM.net member, Stan Radzewicz wins a Gold Star for pointing out that the biggest stock market rally ever in history started on August 12, 1982. With all of the talking heads on television saying that August and September are such "historically bad" months, that fact is an easy one to forget. Honestly, I didn't mean to put my foot in my mouth! :-) So, while this report calls attention to several of the most compelling CANSLIM-based buy candidates right now, let us be perfectly clear that there are some things you should be watching for as a reassurance before adopting a bias toward buying any new positions in the days and weeks immediately ahead.  Without the cooperation of the overall market direction, even with all other factors being fabulous, we know that most stocks have the odds stacked against them.

One obvious thing to be watching for is more improvement in the major indices.  So far, only the Nasdaq has a confirmed rally going - and even that is not a convincing rally yet!  Volume needs to rise to above average levels behind the gains to truly show investors the much-needed proof that institutional buying interest is driving the market higher. All bets are off if any of the major indices nosedive through their recent lows!  Hopefully, we shall see the indices work on establishing a series of higher lows as they climb back above their respective 50-day moving average and 200-day moving average lines.  Those critical points are not very far off, and a rise above them would be a technical improvement that could help the market build upward momentum quickly.  

The Dow & S&P are only about 1% below their 50 & 200-day moving averages, but Nasdaq has more work to do.  The case for a new Bull Market becomes much more compelling if we see improvements above these key technical marks for the major indices:  

Things change on a minute-by-minute basis when it comes to individual stocks, so it is important that you to take your clues from what you see happening in the broader market.  On a case-by-case basis you’ll find some stocks matching up favorably with the CANSLIM criteria, presenting you with technical buy signals.  Your odds of success are much greater when you choose a leading stock in a leading group of stocks, as O’Neil’s research shows that “most of the top-performing stocks are found in the top quartile of groups, and that group action determines at least half of a stock’s performance”.  That is a direct quote from the description accompanying IBD’s 197 Industry Group Rankings.  

The following list is a sampling of stocks that presently have many if not all of the right characteristics that CANSLIM fans are looking for.  You should still conduct the analysis necessary to make an informed buy and/or sell decision, and watch for the classic buy signals such as a break out on big volume through the pivot point we give for each stock. Always employ proper trading discipline including the use of stop losses! Selling whenever any stock you own drops more than 7-8% from your buy point can help you avoid more devastating losses.  

One company included in this report, Claire's Stores, Inc. (CLE), looks a lot like past big winner Coach (COH) did at the time of our Oct '02 Report, however, Hott Topic Inc (HOTT) may have also looked similar to investors back in January '04 - the latter company's chart rolled over and technically failed as its share price was cut in half in about 6-months and its fundamentals gradually showed evidence of a slowdown in sales revenue and earnings growth.  Coach's price tripled in 20 months!  The point of those comparisons is that you must have a sell strategy to limit losses!  Do not be too concerned if you need to the return the "merchandise" to the market where you picked it up, just be sure that you limit your losses per the usual guidelines.  Do not stay attached to the merchandise if it no longer fits!  Get the analogy? (Note: HOTT was not a featured stock at the time either...)

We hope that it is not necessary to say it, but this is not a recommendation to run out and immediately buy these stocks.  These are simply some of the better ideas that presently are among the most suitable purchase candidates under the guidelines, yet they may not be suitable choices for all investors.

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Profile: Investors Financial Services Corp. provides asset administration services for the financial services industry through its wholly owned subsidiary, Investors Bank & Trust Company. It provides core services and value-added services to a variety of financial asset managers, including mutual fund complexes, investment advisors, family offices, banks and insurance companies. Core services include global custody, multicurrency accounting and mutual fund administration. Value-added services include securities lending, foreign exchange, cash management, performance measurement, institutional transfer agency, investment advisory services, lines of credit, middle-office outsourcing and brokerage and transition management services. Investors Financial has offices located in the United States, Ireland, Canada and the Cayman Islands, with a sub-custodian global network established to accommodate the international needs of its clients.  Strength from other issues in the Financial Services -Misc group and the fact the group presently ranks in the top 30% of IBD's 197 Industry Groups is a nice reassurance it is a leader in a leading group of stocks.  It has a well-established annual earnings growth record and stellar quarterly financial reports that earn it the highest EPS rank possible. 

What to Look For and Look Out For: What makes this an especially interesting set-up is that its 2000-2001 highs in the $47-48 range are also being challenged. The possibility of a breakout to new all-time highs is great (see 5-year chart). The latest close left it in striking range.  Be sure to see that the breakout volume criteria is met - at least 50%+ above average to be considered a sign of serious institutional buying demand.  Its upward trend line and/or 50 DMA are important support points, and technically violations of them on high volume would be failure signs - and more serious sell signals.

Technical Analysis: On July 15th it gapped up from its 50 DMA while trading very heavy volume. In August it retested its 50 DMA and bounced nicely on just above average volume. Some may be concerned about the apparent "V" shaped pattern or say the action of the past year seems a bit choppy. However the action has actually been reasonably orderly. Companies with top-tier fundamentals an the resilience to be lingering near historic highs in such a volatile market are definitely ones to be watched closely

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Profile: The Corporate Executive Board Company provides best practices research, decision support tools and executive education focusing on corporate strategy, operations and general management issues. Best practices research supports senior executive decision making by identifying and analyzing specific management initiatives, processes and strategies that have been determined to produce the best results in solving common business problems or challenges. The Company provides research and analysis to a membership of over 2,100 corporations. For a fixed annual fee, members of each research program have access to an integrated set of services, typically including best practices research studies, executive education seminars, customized research briefs, Web-based access to the program's digital content database and decision support tools. The Commercial Services - Market Research group of stocks ranks toward the middle of the pack at an 81 on IBD 197 group list.  It has a well-established annual earnings growth record and has consistently shown impressive sales revenues and earnings increases ranging from +25% to +45% in the past 8 quarterly financial reports.

What to Look For and Look Out For: The price has already cleared its pivot point and threatens to get too extended from safe purchase guidelines.  It may be smart to purchase on normal consolidation back toward prior resistance in the $57-58 range where it should have a fair amount of support built over the past 3 months.   Violation of its prior high close ($57.06 on 8/02  would be cause for concern, as technically a breakout failure would have the stock reverse its breakout and dive on higher than normal volume back into its prior base.  Its upward trendline (connecting lows from 3/24 and 7/27 - not shown) or its 50-DMA of $22.48 (the green line on the above graph) would be more important points to watch, and violations considered more serious sell signals.

Technical Analysis: In July it sank under its 50 DMA while the broader market averages were also breaking down on high volume.  It repaired the violation with several gains on above average volume.  With the overall market then not yet in a confirmed rally, the stock again slipped under its 50 DMA. Note the light volume during that second dip.  August 16th it climbed back above its 50 DMA while volume started to improve.  On the 17th volume was double its average as it cleared a prior chart high, then it took one day to rest up before breaking out to new all-time high ground on even heavier volume.  Study a 1-year chart and notice how its July lows (under the 50 DMA but well above the 200 DMA) happen to coincide very nicely with much prior chart resistance (Oct '03, Feb '04 and Apr '04 peaks). Stocks often retrace after advancing, and when they drop under their 50 DMA they may be expected to drop until chart support is found - often a prior resistance level becomes key chart support.

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Profile: CoBiz Inc. provides a range of banking products and services, including credit, treasury management, investment, deposit and trust products to its targeted customer base of small and medium-sized businesses and high-net-worth individuals. CoBiz's banking products are complimented by its fee-based business lines, which include employee benefits brokerage and consulting, insurance brokerage, wealth transfer planning, life insurance, investment banking and investment management services. The full-service business banking institution has 10 Colorado Business Bank locations and four Arizona Business Bank locations. Strength from other issues in the Banks-West/Southwest group and the fact the group presently ranks in the top 25% of IBD's 197 Industry Groups is a nice reassurance it is a leader in a leading group of stocks.  It has a well-established annual earnings growth record and respectable earnings increases in quarterly financial reports that earn it a top 10% EPS rank. 

What to Look For and Look Out For: Its low share price and low average trading volume would be considered elements that increase the risk associated with this issue.  Clearing its pivot point on at least 50%+ above average volume would be a clear technical buy signal.  Watch for a confirmation day of additional gains on high volume for a nice reassurance.  In an extremely bullish market environment and with strong leadership in the group continuing, it may be permissible to buy up to 10% above a pivot - but buying further above the pivot increases the chances you'll be stopped out on a normal 7-8% pull back that might not necessarily be a bad technical failure or sell signal. Prior chart lows offer important chart support, and its August 4th low of $13.35 just happens to be exactly 8% below the pivot.  The 200 DMA then starts to come into play as another important support level to see that it fight to stay above.  

Technical Analysis: Volume spiked 50% above average on Wednesday, August 18th as it rose more convincingly above its 50 DMA. Friday's closing price exactly matched its July 13th best-ever close.  It has traded for more than 7 months in a flat base - its Relative Strength rank is a hair below the usual 80+ guideline we follow.

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Profile: Intermagnetics General Corporation designs, develops, manufactures and sells products in three segments: Magnetic Resonance Imaging (MRI), Instrumentation and Energy Technology. The MRI segment consists primarily of the manufacture and sale of magnet systems by the IGC-Magnet Business Group and radio frequency coils by a wholly owned subsidiary, IGC-Medical Advances Inc. These products are used principally in the medical diagnostic imaging market. The Instrumentation segment consists of refrigeration equipment produced by a wholly owned subsidiary, IGC-Polycold Systems Inc. These systems are used primarily in ultra-high-vacuum applications, industrial coatings, analytical instrumentation, medical diagnostics and semiconductor processing and testing. The Energy Technology segment, operated through SuperPower, Inc., is developing second-generation, high-temperature superconducting materials.  Strength from other issues in the Medical-Systems/Equipment group and the fact the group presently ranks in the top 27% of IBD's 197 Industry Groups is a nice reassurance it is a leader in a leading group of stocks.  It has a good overall annual earnings growth record but recent years were not particularly large percentage increases.  It has shown an impressive turnaround and stronger results in the latest quarterly financial reports, and it earned a high EPS rank. 

What to Look For and Look Out For:   Tactically, one might consider initially buying a fractional position as it is near 50 DMA support with a plan to add to the position if the volume and price action turns favorably in the days ahead.  Expect that it may take time to consolidate and build a longer base before clearing its pivot point we've identified above. Watch for it to stay near support offered by its 50-DMA, whereas deterioration leading to a serious violation of it or (more importantly now) its August 16th low of $21.03 would be a much greater concern and technical sell signal.  Don't tolerate spiraling losses going beyond 7-8% because it could quickly retrace down to the chart support (see green line) near its April high of $18.67 or maybe worse.  A continuation of its recent earnings strength could coincide with a significant run up in price for a stock with such a small supply of shares available.

Technical Analysis: In late-May and early-June the stock went on a 16-session winning streak where volume spiked above average on many days.  Pictured above is a 4-year chart to help show the significance of the recent spike to new highs.  Distributional action in the stock recently led to a 50-day moving average violation that it has been repairing.  It resembles a massive cup-with-handle chart pattern that includes the downward sloping handle formed by the latest consolidation.

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Profile: Claire's Stores, Inc. is a specialty retailer of value-priced fashion accessories for pre-teens and teenagers, as well as young adults, primarily through its two store concepts, Claire's Accessories and Icing by Claire's. The Company is organized based on its geographic markets, which include its North American operations and its International operations. At March 31, 2004, Claire's Stores operated a total of 2,953 stores in all 50 states of the United States, Puerto Rico, Canada, the Virgin Islands, the United Kingdom, Switzerland, Austria, Germany, France, Ireland and Japan. The stores are operated mainly under the trade names Claire's Boutiques, Claire's Accessories, Icing by Claire's, Afterthoughts and The Icing.  Strength from other issues in the Retail-Clothing/Shoe group and the fact the group presently ranks in the top 25% of IBD's 197 Industry Groups is a nice reassurance it is a leader in a leading group of stocks.  It has a well-established annual earnings growth record and strong earnings increases of +85%, +32%, +75%, and +43% in the Oct '03 and Jan, Apr, Jul '04 quarterly financial reports earn it a high EPS rank. 

What to Look For and Look Out For: The price has already cleared its pivot point and threatens to get too extended from safe guidelines.  In an extremely bullish market environment it may be permissible to buy up to 10% above a pivot, however the "Max Buy Price" the above table offers is a conservative guideline you should normally try to adhere to. Patient investors willing to watch for confirming action in the days ahead could possibly try to make a more advantageous purchase on normal consolidation back toward prior resistance.  Violations of prior high closes ($23.52 on 7/12 and $23.33 on 8/02) would be cause for concern, as technically a breakout failure would have the stock reverse its breakout and dive on higher than normal volume back into its prior base. Its upward trendline (connecting lows from 5/17 and 8/13) or its 50-DMA of $22.48 (the green line on the above graph) would be more important points to watch, and violations considered more serious sell signals.

Technical Analysis: On August 19th it gapped up, clearing an 11-month flat base.  Volume spiked to near 4 times its average volume as it decisively gapped above its pivot point - a technical buy signal. That impressive action was inspired by the latest earnings news.  Do not discount the importance of such a clear, long-term chart breakout.  The price scale may make the stock action of the past year seem a bit choppy, however this stock has actually remained in a very tight trading range throughout a very volatile market period.

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Profile: Fossil, Inc. designs, develops, markets and distributes contemporary, fashion watches and accessories. The Company's brands in its line of fashion watches include Fossil (which it developed), Relic and Zodiac, and, pursuant to license agreements, other brands including Burberry, Diesel, DKNY and Emporio Armani. It offers a range of accessories including small leather goods, belts, handbags and sunglasses under the Fossil and Relic brands, jewelry under the Fossil and Emporio Armani brands and Fossil brand apparel.  Strength from other issues in the Apparel -Clothing/Manufacturing group and the fact the group presently ranks in the top 28% of IBD's 197 Industry Groups is a nice reassurance it is a leader in a leading group of stocks.  It has high ranks and has shown several years of increasing annual earnings.  The most current quarterly financial report showed the largest percentage increases in both sales revenues and earnings, and it has earned a top 10% EPS rank. 

What to Look For and Look Out For: Caution is especially warranted because it has made a very steep advance in a very short period of time, making its base rather choppy and making it seem short-term extended.  But while it could be prone to profit-taking the price has also cleared its pivot point and could quickly get too extended from safe buying guidelines. Patient investors could try to make a more advantageous purchase on normal consolidation back toward prior highs in the $26-27 range. Violation of the 50 DMA (now $25.51) would be cause for concern. Technically such a bad breakdown would be considered a sell signal.

Technical Analysis: Up on 9 of the past 10 sessions, volume has been above average on several of its up days. Volume spiked notably on August 10th as it gapped up from support near its March and May '04 lows (and right at its 200 DMA).  It rose convincingly over its 50 DMA on at least 4 times its average volume.

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Profile: Jos. A. Bank Clothiers, Inc. is a designer, retailer and direct marketer, through stores, catalog and the Internet, of men's tailored and casual clothing and accessories. The Company sells substantially all of its products exclusively under the Jos. A. Bank label through its 214 retail stores, including seven outlet stores and 10 franchise stores, located throughout 35 states and the District of Columbia in the United States, as well as through the Company's nationwide catalog and Internet operations, www.josbank.com. Jos. A. Bank's products are targeted at the male career professional. The Company's products are offered at three Levels of Luxury, which include the opening Jos. A. Bank Collection, as well as the more luxurious Signature and Signature Gold Collections..  Strength from other issues in the Retail-Clothing/Shoe group and the fact the group presently ranks in the top 24% of IBD's 197 Industry Groups is a nice reassurance it is a leader in a leading group of stocks.  It has a well-established annual earnings growth record and stellar quarterly financial reports that earn it the highest EPS rank possible. 

What to Look For and Look Out For: The price still needs to clear its pivot point with higher volume sufficient to satisfy the guidelines for a buyable breakout.  Confirming action may come in the days ahead, however a reversal and close back under its July 13th prior high close of $26.58 would be cause for some concern.  Any high volume declines that negate the recent progress and start threatening to drop near or under the 50 DMA would make the issue less attractive as a buy candidate and would be considered sell signals.

Technical Analysis: On August 5th it gapped up back above its 200 DMA from critical chart lows in the $22 range, gaining on the highest volume since December.  On August 19th it initially traded up above the pivot point we've identified, however it promptly reversed to close flat, lacking the 50%+ higher than average volume needed for a good breakout.  Prior chart highs in March-April offer a bit of resistance that it still must work through before a clear, long-term chart breakout to new all-time highs.

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Profile: Georgia Gulf Corporation is a North American manufacturer and international marketer of two integrated product lines, chlorovinyls and aromatics. Its manufacturing processes also include the production of caustic soda, chlorine and acetone. The primary products the Company sells externally include vinyl resins, vinyl compounds and caustic soda in its chlorovinyls business and cumene, phenol and acetone in its aromatics business. These products are used globally in a wide variety of end-use applications, including construction and renovation, engineering plastics, pulp and paper production, chemical intermediates, pharmaceuticals and consumer products.  Strength from other issues in the Chemicals-Basic group and the fact the group presently ranks in the top 27% of IBD's 197 Industry Groups is a nice reassurance it is a leader in a leading group of stocks. The number of top-rated institutional firms with an ownership interest has increased from 131, to 136, to 149 over the Dec '3, Mar '04 and Jun '04 periods.  Acceleration in its sales revenue growth rate over the past several comparisons has led to a very impressive earnings turnaround, and the stock has an adequate EPS rank.   

What to Look For and Look Out For: It still needs to gains while above its pivot point with volume at least 50%+ above average to provide a more convincing technical buy signal.  Violation of its 50-DMA (now $34.89) would be cause for increased concern, and a violation of its 8/13 low ($34.25) on higher than average volume would be considered a more serious sell signal.

Technical Analysis: A seven session winning streak ended with high-volume gains on August 4th, but then two quick down sessions pressured it under its 50 DMA.  However, on 8/09 it promptly began repairing the violation of its important short-term average.  Continued strength on 8/16 put it in position to challenge prior highs.

   
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Profile: Jupitermedia Corporation is a global provider of original online information, images, research and events for information technology (IT), business and creative professionals operating four interrelated and complementary businesses. JupiterWeb, its online media business, operates four distinct online networks: internet.com and EarthWeb.com for IT and business professionals, DevX.com for software and Web developers and ClickZ.com for interactive marketers. JupiterImages, its online images business, is a paid subscription resource on the Web serving creative professionals with products like Photos.com and ClipArt.com. JupiterResearch, the Company's market research and consulting business, is an international market research and advisory business specializing in business and technology market research. JupiterEvents, its offline conference and trade show business, is a producer of conferences and trade shows focused on IT and business-specific topics.  Strength from other issues in the Internet-Content group and the fact the group presently ranks in the top 18% of IBD's 197 Industry Groups is a nice reassurance it is a leader in a leading group of stocks.  A public offering of additional shares on May 25, 2004 has helped it attract more institutional interest, as the number of quality funds with ownership interest rose from 19, to 25, to 44 over the Dec '03, Mar '04 and Jun '04 periods.  Its annual history leaves much to be desired, but it still has earned an adequate EPS rank.  Management owns a 57% stake, keeping them very motivated to look after shareholder value.

What to Look For and Look Out For:  It would be a nice reassurance to see a follow-through day soon on additional high-volume gains as a continuation and confirmation of the latest breakout.  Violation of prior high close ($13.69 on 8/11) would be cause for some concern, as technically a breakout failure would have the stock reverse its breakout and dive on higher than normal volume back into its prior base.  A break under its 50-DMA of $12.36 would be a much greater concern, and a break of its upward trendline (connecting lows from 5/18 and 7/26) an even more serious technical sell signal.

Technical Analysis: The price cleared its pivot point on approximately 4 times its average volume on Thursday, then consolidated a fair amount on Friday.  Do not overlook the fact that this stock traded in the $70 range in the internet heyday, whereas more often we would chose a stock clear of all historic highs.

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Profile: Coldwater Creek Inc. is a multi-channel, specialty retailer of women's apparel, accessories, jewelry and gift items. The Company offers its customers colorful, proprietary designs and novelty items that reflect different aspects of their lifestyles, including casual weekend wear, soft career and special occasion. Its merchandise assortment is designed to appeal to women between the ages of 30 and 60, with household incomes in excess of $75,000. The Company reaches its customers through its direct segment, which consists of the catalog and e-commerce businesses, and its base of retail stores. As of January 31, 2004, Coldwater Creek operated 66 full-line retail stores, as well as two resort stores and 16 merchandise clearance outlet stores in 51 markets.  Management's 51% ownership keeps them motivated to watch after shareholder value.  Strength from other issues in the Retail-Mail Order&Direct group and the fact the group presently ranks in the top 17% of IBD's 197 Industry Groups is a nice reassurance it is a leader in a leading group of stocks.  It has put together a couple of strong annual earnings increases and is showing accelerating earnings growth in recent quarterly financial reports, however its EPS rank is a hair under the normal 80+ guideline.

What to Look For and Look Out For: The price has been rising near its pivot point, yet it still needs gains to drive it above its pivot point with volume at least 50%+ above average to provide a more convincing technical buy signal within the guidelines.  Violation of its 50-DMA (now $17.95) would be cause for increased concern, especially if volume spiked above average.  Prior chart lows near $16 would be the next important support point to watch, and violations considered a much more serious technical sell signal.

Technical Analysis: Days after completing a 5/20/04 public offering of additional shares this stock broke out to new highs on persistent, heavy volume (see circled area). It has since built a better than 12-week flat base.  While it did briefly tread below its 50 DMA volume was light on the losses and it stayed above support at prior chart highs (see 1-year chart).

Kenneth J. Gruneisen - A Registered Principal, Ken manages a Source Capital Group (Member NASD,SIPC) branch office and offers personalized assistance. Investors with a significant financial interest in equities may inquire about opening an account by calling the office locally at (954) 785-1990 or 1-888-237-8399 or emailing to kgruneisen@sourcegrp.com  Further information is always available upon request. Contact us if you know anyone that may have an interest in receiving this or any of our other reports.

Comments contained in the body of this report are technical opinions only and are not necessarily those of Source Capital Group, Inc. 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. Source Capital Group, Inc. is a NASD/SIPC member firm.

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