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Ryland: 2012 Case Study In The Classic Turnaround

CAN SLIM stocks shone in the strong uptrend during 2012's first quarter. The next three quarters provided a tougher environment.

Check out how the 's Relative Strength line behaved over the course of the year (click here to see a daily chart). It tells such a story in Q4.

Still, there were big winners in 2012, as this current series in Investor's Corner is showing.

One of the year's leading stocks was Ryland Group (RYL). It's a homebuilder that was more of a turnaround play, rather than a perfect representation of IBD's investing strategy.

The Westlake Village, Calif.-based builder had been enduring years of quarterly losses and declines in revenue, but its fundamentals improved markedly as 2012 progressed. The stock provided a way to bet on the housing market rebound that eventually came along.

Ryland had sketched a deeper-than-ideal, cuplike base in the second half of 2011. (1) The stock tacked on a to that pattern in December 2011, creating a at 16.32. (2) You also could have viewed the stock as having added an earlier handle in November 2011 — or just see that area as a period of tighter trade forming the base's right side. (3) Ryland broke out past its 16.32 handle entry in the week ended Jan. 6, 2012. (4) This was just a couple of weeks after the follow-through day on Dec. 20, 2011, that confirmed a new market uptrend, so IBD-style investors had the green light to buy.

Note that wasn't that huge in the week ended Jan. 6, (5) but it was up from the prior week. Plus, turnover kicked in nicely during the following week. (6) Institutions were big buyers.

Sometimes you'll see volume pick up shortly after being light for the initial . Many breakouts that show such action still end up providing nice gains — particularly if the market is strong and the sector is a leader.

Ryland has moved up well since its breakout at the start of 2012. It generally found support along its rising 10-week moving average as it advanced. The stock formed some more bases during the year and then broke out from those patterns, including its recent later-stage structure. Through Monday, it's up 130% for the year.