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Education Stocks on the Rebound
Posted: Jul 01, 2009 15:23 PM
by
Joey Fundora
Education stocks were one of the strongest sectors following last year's presidential elections. As a group, they rallied sharply following President Obama's victory in November, all the way through February of 2009. However, after peaking in February, many underwent a correction over the past few months, running counter to the rally in the general markets. Recently, the group was on the brink of breaking some important support levels, and it appears that they were able to avert disaster by respecting these levels.
Apollo Group, Inc. (Nasdaq:APOL) may be giving this group a nice shot in the arm after yesterday's favorable earnings report. As a result of the report, APOL gapped over a large channel that framed the recent correction on high volume. This move also helped it distance itself from a three month base it had been building, and this breakout may have ended the correction. APOL still needs to deal with an open gap in the mid-$70s and would need to clear $81.20 in order to clear the most recent pivot high. (Read The Anatomy of Trading Breakouts to learn more about this trading strategy.)
Devry, Inc. (NYSE:DV) is another stock that may have provided a boost to the group with a news event. DV was added to the S&P500 in June, replacing General Motors, and while this addition doesn't really change the outlook for the sector, it does coincide with a move higher. In June, DV has held well above the May lows, and it cleared a small base it was building over the past few months. It is still in a precarious position, with plenty of overhead supply above, but the short-term picture remains vastly improved.
Career Education Corporation (Nasdaq:CECO) is an example of an education stock that has very good strength relative to its peers. CECO threatened to breakdown from a several month base in May, twice dipping under its 200-day moving average. However, both times that it began to fall under support, buyers stepped in to overwhelm the sellers. CECO recently cleared the descending trendline that was framing the consolidation pattern, and has had a sharp move over the past few sessions. While CECO already extended, it is a great candidate for finding support on pullbacks. (Read more about consolidation patterns in our related article Consolidation - Trading The Calm, Profit From The Storm.)
Capella Education Company (Nasdaq:CPLA) is another example of an education stock that threatened to breakdown only to find buying support and then rebound. CPLA had broken under a small base in March, and failed to reclaim its 200-day moving average and move back into the prior range on several occasions from March through May. It ended up forming a new base using the $55 level on the top and $45-46 on the bottom. It cleared the base in mid June, and CPLA is actually close to testing its post-election highs. It's quite possible that CPLA could force a short squeeze if it can clear this area.
While the majority of these stocks are not at low-risk buying areas, they do appear to have staved off a full breakdown. In fact, most of them look like they are on the rebound, and could find support on their next pullback. Other stocks in this sector include Strayer Education Inc. (Nasdaq:STRA), and ITT Educational Services, Inc. (NYSE:ESI). It will be interesting to see if they can maintain this momentum moving forward. Join me in the Investopedia Community as we watch this and other developments.
Charts courtesy of www.stockcharts.com
At the time of writing Joey Fundora did not own shares in any of the companies mentioned in this article.
By
Joey Fundora
Joey Fundora is an independent trader located in South Florida. Joey focuses on using technical analysis techniques to uncover supply and demand imbalances in equities. To see more of his work, visit his site on Stock Chart Analysis.
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