Technician Leo Fasciocco focuses on "breakout stocks" -- those that have moved out of their technical basing patterns; one such breakout candidate is American Science & Engineering (NASDAQ: ASEI).
In his Ticker Tape Digest, he explains, "Its X-ray inspection systems offer superior detection for explosives, dirty bombs and nuclear devices, making the company an obvious play on the war on terror."
"With annual revenues of $160 million, the company’s complete range of products include cargo inspection systems for port and border security, baggage screening systems for facility and aviation security, and personnel and passenger screening systems.
"Its systems protect high-threat facilities and help combat terrorism and smuggling. Its customers include leading government agencies, border authorities, military bases, airports and corporations worldwide.
"ASEI is one of the strongest stocks in the market. ASEI had a big jump a few weeks ago when it reported net for the fiscal second quarter ended September 30 increased 72% to 83 cents a share from 48 cents a year ago.
"The 83 cents topped the consensus estimate on the Street of 72 cents a share and the highest estimate of 77 cents a share. Revenues rose 50% for the quarter. ASEI said the gains came from across all businesses. It said too that bookings for the quarter jumped 68% to $94 million.
"The stock's long-term chart showed key upside resistance around 70. It pushed through that zone but then pulled back. Driving through that long-term upside resistance will bode well for the stock's long-term prospects.
"Technically, the stock's daily chart shows a classic cup-and-handle base. The structure is almost perfect. The stock's technicals are very bullish too.
"Its momentum indicator is strongly bullish and the accumulation - distribution line is in a strong up trend. It has pushed to a new peak confirming the action in the price of the stock. That means the underlying buying is bullish.
"ASEI's net for the fiscal year ending March 30 is projected to surge 54% to $3.08 a share from $1.99 a year ago. The stock has a price-earnings ratio of 21. We see that as low given the current growth rate. So, the stock could be attractive to value-growth investors.
"The largest fund holder is Fidelity Leveraged Common Stock Fund with a big 6.3% stake. It was a recent buyer of 196,000 shares. Also, Fidelity Advisor Leveraged Company Stock Fund was a recent buyer of 195,000 shares. It has a 4.2% stake. ASEI has only 8 million shares outstanding.
"ASEI has held well against the stock market's selloff during the week. By moving above its breakout point of 74.03. we can target the stock for a move to 88 within the next few months."
