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Education Stocks Continue To Rebound

Posted: Sep 30, 2009 14:21 PM by Joey Fundora

Tickers in this Article: CPLA, CECO, DV, APOL

Back in June, we took a look at stocks that trade in the education sector. At the time, we noted how the group had managed to avert a breakdown and appeared to be on the rebound. The group had been in a correction for several months, and had continued to weaken even as the markets bottomed during the spring. But after a brief move lower, education stocks found support, and were able rally enough to change their trend into a sideways consolidation. Now, the group has been building a nice base for several months, and could be close to clearing these levels to the upside.

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Apollo Group (Nasdaq:APOL) for instance, attempted to move above its base in early September before quickly falling back into the established trading range. It was in the process of forming a flag near this level, until a sharp move higher during the Tuesday session. APOL has managed to hold above its 200-day moving average for a couple of weeks, and could be close to attempting a resumption of the breakout. The level to watch here is the September high, which, if cleared again, would signal a breakout. (For further reading, check out The Anatomy Of Trading Breakouts.)

Source: StockCharts.com

Devry (NYSE:DV) appears to have already cleared the base it was building. Notice how DV was able to climb above the $50 level, which had previously been holding it back. Once it cleared this level, it used it as support through August and September before attempting another breakout. DV appears to have found support above the small trading range it cleared in September, and could be resuming the breakout.

Source: StockCharts.com

Career Education Corporation (Nasdaq:CECO) is an example of an education stock that remains well within an established trading range. CECO is a little different from its peers mentioned above, as it held above a prior base throughout the spring correction. CECO was very close to breaking down from its base in May and then June, but it managed to get back in the base and then attempt a few more breakouts. While CECO remains in the range, its 50- and 200-day moving averages are beginning to trend higher, revealing that near term, it has been trending higher. The level to watch for CECO is near $26, which has held several breakout attempts in check. A move above this level would represent a significant accomplishment for the bulls.

Source: StockCharts.com

Capella Education Company (Nasdaq:CPLA), on the other hand, is an education stock that has managed to clear its base and is at fresh 52-week highs. The near-term pattern for CPLA was very similar to DV. CPLA cleared a base late July, and consolidated above that base for several weeks. However, the company then broke under that base in September, and quickly reversed, trapping some short sellers. CPLA then surged to clear the recent trading range, hitting new highs. CPLA established an important low in September, which remains the key area to watch in the case of a breakout failure.

Source: StockCharts.com

Bottom Line
Lengthy consolidations are the equivalent of a full tank of fuel for a vehicle. They provide the energy needed for a sustained move. If these education stocks can follow through with a move above these bases, they could be in a good position for a trending move higher. For most of these stocks, the first step has already occurred with the initial move above the base.

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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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