Chart Chat: ABMD

In addition to buying this company for the usual “Saul” reason, it is in the crosshairs of growth investors who rely on charts to implement buys on fundamentally sound stocks. ABMD has been building a 5 week cup base as a rest from its nice run from around $75 to $100. It is creeping back to the highs with a increasing volume on the right side of the base. One thing that can happen in a base like this is to add a handle, which is the holy grail of growth/charty people (e.g. IBDers). The ideal handle will fade down in price on light/decreasing volume. This is said to indicated the weak holders are selling now that they are near old highs. This is the psychological need to “break even” after buying “too high” or missing profits at the last peak. This is exactly the wrong time to sell. But, once the weak of heart and mind sell, they are gone and there are no more sellers. This is when a stock can shoot up, usually on some news (like the stellar earnings reports we usually see from ABMD - next due Oct 28). If the market keeps acting sickly for that long, ABMD could really wind up the spring and be ready to go. Market psychology often turns by the end of Oct, as Nov-May is the historically best investing period. (So the psychology is there for a move).

For Saulites, we love this stock and I predict Saul will reveal an increased position at the end of the month. If you have conviction, start adding. I would be prepared to add a lot should the expected breakout occur. (= Big move past a pivot point on strong volume). Also notice how this stock has performed over the last two days, strong up volume while the market tanked today. That is not a random accident, that is people accumulating on the upticks.

IBD has them with top ratings:
Composite 99
Relative Strength is 99.
EPS 99
Sales+ProfitMargin+ROE(SMR)= A
Accumulation =B+
they don’t get much better than that.

We love it for the 1YPEG, but this Sundae comes with free cherries and whipped cream, so dig in. (if your due diligence gives you faith, I should have not any sway on your decision, I hope I am just presenting another set of data for your consideration).