Looking to buy AFAM on a dip

I am looking to buy AFAM (Almost Family, Inc.) @ $47.60, stop @ $39.85. My initial target will be $52.50, but if price rallies strongly in the next week or so, I will stay in longer. AFAM is a CANSLIM winner, so relative to the rest of the market, it has very strong fundamentals.

It operates in the home health care service (visiting nurses and personal care), which should benefit strongly as the boomer generation retires and ages.

It meets each criteria in the CANSLIM screening process:
  • Current earnings growth: 140%+
  • Annual earnings growth: 80%+
  • New: it is making new prices highs as the rest of the market is near it's lows.
  • Supply/demand: the small 8m share float will allow it to rally quickly as investors realize its fundamental strength
  • Leader: 12-mo relative strength is in the 100th percentile
  • Institutional ownership: 40% of float is held by institutions, indicating support for the company, and which leaves enough room for new institutions to bid up the price.
  • Market: the S&P 500 index posted a follow-through day on 10/16/08. There have been some distribution days recently, but as long as the market holds the recent lows, the uptrend is intact.

The chart above shows AFAM's picture perfect breakout from a double-bottom base. Notice on the breakout day, volume was 50%+ greater than average, showing strong institutional buying into new highs. Since I missed the correct buy point at $43.20, I have to sacrifice a bit of upside. However, I like the base and the stock enough to enter at a higher price. I will adjust my trade size in order to risk as much as I normally would had I gotten in at the correct price. My stop is 7-8% below the correct entry price, around $40.

If the overall market holds up, this stock could continue it's strong breakout rally.

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