At the close of each trading day, we use our proprietary computer algorithm to scan our database for stocks setting up in cup with handle, double bottom or flat base patterns. Stocks which meet our minimum price and average daily volume requirements are selected based on their technical condition alone. That is, if they meet a minimum RS Rank (showing price outperformance against other stocks) and are currently tracing one of the patterns, they are identified and placed on our CwHWatch, FBWatch or DBWatch watchlists. Each stock in these lists is currently in a base and may be setting up for an impending breakout during the next trading day.

For a review of the methodologies used to select stocks for the three BreakoutWatch chart patterns, see:
Cup-with-Handle Methdology, Double-Bottom Methodology and Flat Base Methodology

As soon as the new watchlists are prepared, we email a report entitled “Today's Breakouts and Top Ten Report” to each subscriber. This report summarizes the day's trading activity against the previous evening's watchlist and informs you that the new watchlist is ready for you to review in anticipation of the next trading day. In order to review the watchlist in its entirety, you will need to visit the site.

You may notice that we do not require that a stock meet certain fundamental requirements if it is to be included on a watchlist. We do this for several reasons.

• First, it is our intent to identify intermediate-term technical patterns used for trading breakouts. We do this in an 'agnostic' manner, identifying potential breakouts regardless of their underlying business condition. This ensures that we are identifying all stocks on the move based on the market's interpretation of their worth rather than our own personal preferences.
• Second, fundamental reporting is a lagging indicator and we believe that technical condition will often speak for a stock before financial reports or news 'explain' the reason for the move.
• Third, for those who follow a growth-oriented investment strategy, we have found that many of the fundamental guidelines are open to subjective interpretation. By automatically identifying stocks for inclusion on a watchlist based solely on objective technical conditions, we do not introduce unnecessary bias. We then allow the user to interpret the fundamentals and make their purchase decisions based on their personal preferences and investing goals.

We have eliminated the most time consuming task in an intermediate term growth stock investing strategy by automatically identifying stocks setting up for a potential breakout on the following trading day. Given a set of potential breakout candidates, you may then choose which stocks to pursue based on your risk tolerance, fundamental requirements and personal preferences. Our tools have been designed to streamline this process for you, meaning the time you spend making a purchase decision is significantly reduced. Our automated intraday breakout alerts then ensure that you will not miss a buying opportunity when your stocks of choice stage their breakout move.

Following are two alternate approaches to making purchase decisions. With either approach, remember that the market backdrop should also be favorable before entering new long positions. A review of our market analysis page will give you an excellent picture of the current state of the markets.

While we have given you an idea of the time you would spend with each approach, the more due diligence you perform on a stock, the more time you will spend. Once you have completed the initial due diligence, the review process will take less time if the stock makes a subsequent appearance on a watchlist. Also, the more proficient you become at using the available site resources, the more quickly you will be able to review any one stock. While the Investor's Business Daily tells you their approach will take “20 minutes a day,” this generally refers only to the first step, that is, identifying potential candidates. It does not take into account the time it then takes to review each chart to determine if the stock is setting up in a basing pattern, to identify a pivot point, to review the fundamentals, to perform due diligence, check charts of other stocks in the same industry to assess the overall technical condition of the industry, and to check the industry direction and rank. It also does not take into account the time it takes to review each candidate's daily price/volume action to determine if it has broken out of a basing pattern.

Summary: The timely identification of a stock nearing an impending breakout is performed automatically using our watchlist creation methodology. Review the stocks in each new BreakoutWatch prior to the following day's market open, narrow your candidate list using the filter tools provided, pre-select desired candidates to pursue, and then purchase when/if a breakout alert is issued.

Step 1:
This approach begins at the end of the market day with the publishing of our newest three BreakoutWatch lists. When you receive 'Today's Breakouts and Top Ten Report' you will know that the newest watchlists have been prepared. This is dated for the end of day close to which it corresponds and is then used for trading on the following market day.

In this example, the end of day email report summarizes breakouts and attempted breakouts during trading on 6/30/03 and indicates new watchlists prepared as of the 7/1/03 market close are available at the site. These watchlists are used for trading on 7/2/03:

Sample End of Day email Summary Report

Step 2:
Go to the site and view the BreakoutWatch. Use this to make a more thorough comparison of all the stocks currently setting up for a potential breakout on the following trading day.

Here is CwH BreakoutWatch^SM for 7/1/03, comprised of a 99 total stocks in cup with handle bases:

Sample BreakoutWatch^SM

Step 3:
Use the list filtering feature to narrow the view of stocks to those most closely meeting your personal trading preferences. The following is not a set of recommended filters, but instead, an example of how one might use the filters to focus on stocks most nearly meeting their trading strategy. (Note: while all subscribers can view the full watchlist contents, only Platinum subscribers can use the on site filtering features.)

For example, if I preferred to restrict my purchases on the following day to those stocks which have a non-laggard RSRank of 70 or better, with handles of at least 5 days (which is the minimum recommended by William O'Neil for a lower risk breakout), with fundamental scores (CEF) that meet at least the top half of all possible points (maximum 11 points), with Chart Qualtiy (CQ) scores of at least 1.0 (lower scores tend to indicate lower quality bases), and in industries that have not fallen in Rank more than 15 spots, the filters would result in the following list of 20 stocks:

Sample Filters

When you have found a set of filters which you believe most closely match your personal preferences, you can save them for future visits to the site. (Available to Platinum subscribers only.)

Filters Overview

You may also find it helpful to sort the list. Click on the column header for any column to perform a sort. For example, you can sort by total CE score or on the Chart Quality (CQ) score to bring stocks with higher values to the top of the list.

Step 4:
Review the charts of the remaining stocks and eliminate any stocks with flawed bases from consideration. (Note: We create a cached version of the chart for stocks on the watchlist so that charts are displayed very quickly.) The charts automatically display the left cup, base low and pivot point (breakout price) for each stock.

Sample Chart

Step 5:
For those stocks which remain, click on the CE score and review the details for the stock. Stocks which fall into the green CE Zone contain the best combination of both fundamental and technical characteristics. Review the fundamental details and eliminate any stocks which do not meet your preferred personal minimums or that show potential red flags. For example, while sales and earnings growth rates may still be high enough to warrant a high fundamental (CEF) score, they may not be accelerating at a rate you prefer. You might want to eliminate this candidate in favor of another watchlist candidate with a higher rate of accelerating earnings and sales.

Sample CE Detail

If desired, use the provided links in the CE Detail to perform a more in-depth due diligence. These can provide clues as to the company's core competencies, competitive positioning, and accounting practices. You can also use this process to look for both accounting and/or business red flags such as SEC investigations, class-action law suits, other material legal proceedings, adverse news, etc.

For a review of the Methodology used for CANTATA Evaluator (CE) scoring see:

CE Methodology
CE Scoring Summary
CE Zone Methodology

Step 6:
While viewing the CE Detail, click on the Industry Name and view the list of stocks within the industry. This will give you an idea as to whether the stock is a leader or a laggard within the group with respect to RSRank, fundamentals (CEF), and/or overall technical condition (CET). You might choose to eliminate a stock from consideration in favor of other watchlist candidates that possess better leadership characteristics.

Sample Industry Components Listing

Step 7:
While viewing the CE Detail, click on the Industry Rank and view the history of the stock's Industry over the last year. In the near term, this will give you a generalized view of the technical condition of all stocks in the same group. You can use this view to assess whether the stock comes from an industry group rising in overall technical condition and/or rank. Look for signs that the technical condition of the group might be rolling over (deteriorating). You may want to eliminate a stock in favor of another watchlist candidate that comes from a stronger group.

Sample Industry Chart

For a review of the Methodolgy used for Industry ranking and scoring, see:
Industry Rank and Industry Score Methodology

Step 8:
Now that you have assembled a list of candidates, wait for them to break out of their basing pattern before making a purchase.

Gold and Platinum subscribers automatically receive intraday email alerts as each stock attempts a breakout. Platinum subscribers can choose to receive alerts on all stocks or only on those stocks meeting their saved preferred filters.

Sample email Alert

These alerts can also be viewed on the site itself by selecting the Alerts menu from the home page:

Sample Site Alerts Summary

If you are a Silver subscriber, you will either need to review the end of day email report, review the day's breakouts by viewing the Breakout Report, or monitor these stocks on your own. If you use an end-of-day approach in order to confirm a breakout before entering a new position, there is a risk that the stock will already be extended before the next day's market open.

Sample End of Day E-Mail Breakout Report
Sample Breakout Report

Step 9:
Once you have purchased a stock, monitor the open position for potential sell rule violations. If you are unable to monitor the stock regularly during the day, place a protective stop order with your broker to protect yourself from sudden downswings.

For an overview of sell rules as suggested by William J. O'Neil, see this link .

Summary: The timely identification of a stock nearing an impending breakout is performed automatically using our watchlist creation methodology and an intraday alert automatically notifies you that a stock is attempting a breakout on volume. On receipt of an email breakout alert, review the chart, review the CE Detail, make a purchase decision. (Note: This approach requires a Gold or Platinum subscription which includes email alerts)

Step 1:
Review the email alert when received to assess whether the stock is one that you would be willing to purchase.

Step 2:
Click on the chart link within the email to review the chart for potential technical flaws. (See Step 4 under Approach 1)

Step 3:
Click on the CE Detail link within the email to review the stock's fundamental and technical characteristics. Assuming you have previously performed a more in-depth due diligence on the stock, this quick review may be sufficient. Use the “News” link to find any current news of importance. (See step 5 under Approach 1)

Step 4:
While viewing the CE Detail, click on the Industry Name and view the list of stocks within the industry to determine whether the stock is a leader or laggard. (See step 6 under Approach 1)

Step 5:
While viewing the CE Detail, click on the Industry Rank and view the history of the stock's Industry over the last year. (See step 7 under Approach 1)

Step 6:
Make a final purchase decision.

Step 7:
Once you have purchased a stock, monitor the open position for potential sell rule violations. If you are unable to monitor the stock regularly during the day, place a protective stop order with your broker to protect yourself from sudden downswings.