Weekly Newsletter 02/17/13
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Market Summary Weekly Breakout Report Top Breakout Choices Top 2nd Chances New Features Tip of the Week
Prior editions of this newsletter with our valuable Tips of the Week are available here.
 Weekly Commentary  

The NASDAQ Composite is testing resistance at 3195. The index closed just 3 points below that level on Friday, and seems to have stalled with its first weekly loss of the year. It increasingly looks as though sequestration will go into effect, which economists estimate will halve the GDP growth rate. While the connection between the markets and GDP is a tenuous one, the risk must be more to the downside than the upside.

NASDAQ Composite

While the number of breakouts continues to be below the thirteen week average, they continue to perform quite well with an average gain for the week of 3%.
 New Features this Week Additional Value that we added this week

No new features this week.
This Week's Top Tip Tips for getting the most out of our site
Recommended Buy Criteria - Buy at Open

Last week we ran a simulation of the CwH Backtest tool to seek the most profitable buy criteria since June, 2012 using the Buy on Alert strategy. This week we repeat the exercise for the Buy at Open strategy. The buy at open strategy is for those who cannot react to intra-day alerts and instead do their trading at the next open based on the breakouts  that occurred during the day. This generally means placing an overnight order that will be executed the next day.

The simulation was done for 4 positions (meaning that 1/4 of available cash was used for each buy) using all combinations of criteria in the following ranges:
  • BoP Stop Loss %: 5 to 10 in 1% increments
  • Trailing Stop: 2 to 8 in 1% increments
  • Min. Vol. to Adv Ratio %: 1.25 to 2 in 0.25% increments
  • Confirmation Vol. Ratio %: 1.25 to 2.5 in 0.25% increments
  • Top Industry percentile: 25 to 50 in 1 percentile increments
Other criteria were held at their default values: RS 92, minimum BoP:$6, Minimum ADV 100,000, use Market Trend, Target Gain 100%.

The criteria that gave the best results were quite similar to those obtained for the buy on alert strategy. The only exception was that the industry selection filter was more restrictive by requiring that the industry be in the top 27% of industry rankings.
  • BoP Stop Loss %: 5%
  • Trailing Stop: 7%
  • Min. Vol. to Adv Ratio %: 1.25
  • Confirmation Vol. Ratio %: 1.5 (doesn't really apply with this strategy)
  • Top Industry percentile: 27

The 4 position strategy since June 1, 2012 provided a 31.2% gain - slightly less than the 46% gain obtained with the buy on alert strategy but still better than the 19% gain in the S&P 500 over the same period.

4 postion results

4 position chart
One Last Caveat

These results were obtained by optimizing the selection criteria over historical data. While the period of the backtest was representative of recent market conditions, the exact sequence of trades represented will never be repeated and so future results using  these criteria, could be better or worse.
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 13981.8 -0.08% 6.7% Up
NASDAQ 3192.03 -0.06% 5.71% Up
S&P 500 1519.79 0.12% 6.56% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
1.04 %		 Russell 2000
18.92 %		 Russell 2000
12.59 %		 Russell 2000
8.69 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Building Materials Wholesale Building Materials Wholesale Lumber - Wood Production Lumber - Wood Production
 Most Improved Industry (by change in technical rank2)
Toy & Hobby Stores
+ 148		 Toy & Hobby Stores
+ 177		 Toy & Hobby Stores
+ 179		 Toy & Hobby Stores
+ 180
Charts of each industry rank and performance over 12 months are available on the site

1The Market Signal is derived from our proprietary market model. The market model is described on the site.
2The site also shows industry rankings based on fundamentals, combined technical and fundamentals, and on price alone. The site also shows daily industry movements.
 Weekly Breakout Report How confirmed breakouts performed this week
# of Breakouts
Period Average1
Max. Gain During Period2
Gain at Period Close3
This Week 13 20.15 4.34% 3.01%
Last Week 12 19.62 5.91% 4.27%
13 Weeks 275 20.62 11.68%
 7.39%
1The average number of breakouts in each week over the previous 13 weeks.
2This represents the return if each stock were bought at its breakout price and sold at its intraday high.
3This represents the return if each stock were bought at its breakout price and sold at the most recent close.
 Top Breakout Choices Stocks on our Cup-and-Handle list with best expected gain if they breakout
Category
Symbol
Company Name
Expected Gain1
Best Overall RGEN Repligen Corporation 100
Top Technical RGEN Repligen Corporation 100
Top Fundamental SLCA U.S. Silica Holdings Inc 65
Top Tech. & Fund. SLCA U.S. Silica Holdings Inc 65
1This is the gain predicted by our Expected Gain model if the stock breaks out. Expected Gains for all cup-and-handle stocks are published on our site.
 Top Second Chances Stocks that broke out this week and are still in buyable range
Category
Symbol
Company Name
Expected Gain1
Best Overall VTNC Vitran Corporation, Inc. (USA) 93
Top Technical AGO Assured Guaranty Ltd. 39
Top Fundamental CAMP CalAmp Corp. 78
Top Tech. & Fund. CAMP CalAmp Corp. 78
1This is the gain predicted by our Expected Gain model after the stock has broken out which uses the volume on breakout as a predictive term. Because the model variance is +/- 38% the expectation can be negative.
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