On Demand

STOCKS: Waiting For Heavy Volume Breakout In IACI

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The market's been running higher for a while now and the number of base breakouts is shrinking. That's not necessarily a bad thing but careful not chase extended stocks. Scads of growth names broke out weeks ago. They're too far past proper buy points to consider buying now.

That said one growth name that still looks interesting here is IAC/Interactive Corp. (IACI).

THE NUMBERS
Fundamentals are solid at IACI. Sales growth has accelerated for four straight quarters, from 23% to 25% to 32% to 39%. In its latest reported quarter, sales rose 40% from a year ago to $680.6 million. Earnings increased 39% to $0.86 a share. Annual earnings are expected to grow 25% this year and next.

IACI owns a collection of Internet properties including Ask.com, Match.com and The Daily Beast. In late August, the company acquired the About Group from the New York Times for $300 million. About's main asset is About.com.

CONSTRUCTIVE ACTION
Heavy volume came into the stock during the week of July 27. It rose 11% for the week and broke out of an 11-week consolidation. It didn't get very far but continues to show constructive action, trading tightly and firming up at its 10-week-moving average.

BASE ON BASE
IACI's current chart pattern is known as a base-on-base pattern. The pattern forms when a stock breaks out, rallies less than 20%, then forms another base on top of the first base. Keep an eye on IACI for a heavy-volume move over its recent high of $59.20.

RALLY STAGE MATTERS
Keep in mind that the strongest stocks tend to come out in the early stages of a market uptrend so it's important not to buy second- and third-tier stocks in a group at this point. No question IACI is a market leader, but the one risk here is that it's made a big price move already. Late-stage breakouts can work but they're more prone to failure.

The one thing IACI has going for it is that the major averages remain in confirmed uptrend. In other words, the market tide continues to flow positive.

Looking for more trading ideas? Read our daily Markets section here.

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[Editor's note: Shreve provides live market analysis every day on the TFNN radio network, hosting a daily call-in talk show: Breakout Investing, from 3-4 ET. Listen live]

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About the Author

Ken Shreve got his start in the financial markets with Investor’s Business Daily (IBD). He spent over 10 years as an editor and columnist for IBD and its Web site Investors.com.  He also acted as the Investors.com "Market Wrap" anchor and presented IBD investing workshops and seminars nationwide. Shreve continues to provide market commentary on national radio and has appeared on CNBC.

He now writes Ultimate Growth Stocks, a weekly newsletter at TFNN and hosts Breakout Investing, Monday through Friday from 3-4 PT. Learn more at www.kenshreve.com.

Ken has also contributed to TheStreet, Realmoney.com and Realmoneypro.com and has been a regular contributor to Jim Cramer’s “Off the Charts” segment on Mad Money.

For more information about his growth stock newsletter and model portfolio, e-mail him at ken.shreve@yahoo.com

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