CIR

Below this post you will find two charts, first is a standard Open, Low, High, Close (OLHC) or bar chart that many people are used to looking at. The second chart is the less commonly used, but I think at least as important, Point and Figure Chart. Point and Figure charts take into account only price, and it is plotted against certain points of movement. They can be excellent tools to shut out the noise and focus only on the trends and important breakouts.

First I will go over the charts, then the fundamentals of the stock. Lets look first at the chart directly below this post, title: CIR OLHC chart. The first point to notice is the obvious uptrend the stock has it place, that is a series of higher highs and lows. An uptrending stock is showing itself to be strong and capable of doing what buyers want it to do. The second important point is the two large gaps we see on the chart. Unfilled large gaps very often are seen in the markets very strongest names (www.brandonfredrickson.com/gaps.html). that go on to produce large gains. After the most recent gap Circor has traded in a sideways, basing manner for the past several days. This is also an idea pattern, not only after a gap, but also in light of recent market action. When a stock has a large gap up its a little bit like running a race, if you run the Boston Marathon today you are not likely to place well in another one you race in the next day. Likewise, stocks will do better if they have a slight period of sideways movement after the large gap.

The second chart, Circor P&F Chart shows a point a figure chart of Circor. As I stated earlier P&F charts are great for showing very clearly price movement only and taking a lot of noise out of the picture. We can see that CIR is a strong uptrending stock, one that has been moving up, basing, and then moving up again. It has recently cleared a long base with a powerful move to the upside and stands a decent chance of keeping its momentum.

When I look at stocks I start by looking at relative strenght, that is to say how is a given stock or group of stocks holding up versus the overall market. Thats why periods of significant weakness such as we have been seeing are often for me the most exciting times in the market, they give me a chance to see where the real leadership is at. Circor is a leading memeber of one of the markets strongest groups (Industrial Machinery). The company manufactures valves and control products. It has a superior track record of EPS growth, showing a 58% increase last quarter.

There are many good qualities to CIR, and I plan to purchase shares should it close at a new 52 week high, however there are some points of caution. First of all the stock has a large percentage of its outstanding shares owned by Banks and Funds. These groups tend to use the same risk managment parameters and often act as a herd, that means if bad news does hit CIR they will all hit the exits at the same time, potentially resulting in the stock losing value rapidly and blowing out stops. The next point of caution is that although EPS growth has been strong Sales growth has not been nearly in line with ESP growth, and EPS growth without sales growth tends to not be EPS growth that can continue.

That all said given the recent strength of this stock in the face of a terrible market it is one that is worth looking at, and as I said I will be taking a position in it upon a strong close at new 52 week highs.