One of the most encouraging signs I see in the market is the action of many potential leading stocks. There are more than a handful that are hanging in there despite the market’s woes. And there are a few that have actually broken out on the upside!
A group that has broken free is one that I pointed out to you in my last Cabot Wealth Advisory (dated January 5)–education stocks. Back then I wrote:
“While December was a quiet time for most indexes and stocks, it allowed many groups to build basing structures–I’m talking about multi-week bases, where stock gets transferred from weak hands to strong hands–which could propel them to gains in 2009.
Education stocks are no exception, with stocks like Apollo (APOL), DeVry (DV) and Strayer Education (STRA) all consolidating relatively quietly in recent weeks. I wouldn’t say the group is strong … but that could change.
Apollo Group is the gorilla of the bunch. It’s reporting earnings on Thursday, January 8 … if it’s greeted with enthusiasm, it could propel not just APOL, but also DV, STRA and others much higher.”
Well, that is exactly what happened–APOL surged to new peaks on January 9, and it took the whole group along for the ride. However, DeVry and Strayer, while rising on the good tidings, have not hit new-high ground. One that has is ITT Technical Institute (ESI), which surged past resistance just above 100 on more than quadruple its normal volume. Powerful!
Flash Player 9 or higher is required to view the chart Click here to download Flash Player nowESI’s story isn’t that different from all the for-profit education stocks–basically, a poor economy is leading more people to go back to school to boost their resumes, and they’re staying there longer because jobs aren’t plentiful. (You can read more about the company in this week’s Cabot Top Ten Report.)
I like the powerful breakout by ESI above resistance, and the bullish action among a variety of stocks in the group. And what I like even more is the company’s earnings report this morning: Revenues grew 21% to $280 million, total student enrollment grew 17% to nearly 62,000 and earnings leaped 34% to $1.61 per share, 17 cents ahead of estimates. The stock reacted well this morning on the news, and I think the stock is a good buy on any weakness.