Weekly Newsletter 12/29/07
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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  

Special End-of-Year Promotion

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You can extend your existing subscription at these rates even if it expires several days, weeks or months from now.

NEW WATCHLIST COMING JANUARY 2: HIGH TIGHT FLAG
(see this week's Top Tip for 2007 performance analysis)

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Market Summary

The weekly market summary will return next week.

 New Features this Week Additional Value that we added this week

High Tight Flag Watchlist

Commencing Wednesday January 2nd, 2008 we will begin publishing a High Tight Flag (HTF) watchlist. This promises to be a very profitable source of trades if stocks on the list are bought on breakout. We will begin sending breakout alerts for these stocks beginning Monday, January 7th.

The watchlist is quite simple with links to a chart, the industry group to which the stock belongs and our CE evaluation for the stock. Here's a sample from December 26, 2007.

High Tight Flag Watchlist for 12/26/07
Symbol Pivot Price Pivot Date 8 Week Gain % Handle Days Avg. Vol. % Below Pivot Industry RS CE
HOKU 13.53 12/11/07 130.49 10 91825 6.21 Diversified Electronics 99 10.24

This Week's Top Tip Tips for getting the most out of our site

High Tight Flag Performance during 2007

Last week we introduced the criteria for our new watchlist based on the High Tight Flag pattern. This week we have looked at the performance of the pattern during 2007 and present the results below. You should note that the performance is potentially understated because stocks that broke out later in the year have possibly not yet had time to reach their full potential.

Algorithm Criteria

Our algorithm looks for stocks that meet the following criteria:

  • they must have formed a handle within the last 3 weeks of trading
  • the handle must be at least 5 days long (we may reduce this on further research)
  • the decline in the handle must be no more than 20%
  • there must have been a gain of at least 100% in the eight weeks prior to the handle formation
  • there is no minimum price or volume requirement (we may add a minimum volume in the future)

Some definitions of the high, tight flag (HTF) require that the stock be moving sideways before the rise and that volume be declining in the handle (like the CwH). We have not incorporated those criteria in the algorithm.

Performance Results for 2007

The results were obtained using the following methodology

  1. All stocks that would have qualified as an HTF using our criteria were identified for each trading session in 2007
  2. Breakouts were identified as those stocks that rose above the pivot price + $0.10
  3. Their subsequent gain to their maximum intraday high following breakout measured from the breakout price.
  4. The maximum drawdown from the breakout date to the maximum intraday was also measured. If the price never dropped below the breakout price before the maximum high was reached then the draw down was zero.
  5. Because our usual minimum price for our watchlists is $6, we analyzed the results for stocks below and above that price limit.

Summary of High Tight Flag Patterns for 2007 All >= $6 < $6
No.of Distinct HTF Patterns Recognized 165 105 60
No. of Breakouts 53 37 16
Average gain to Max. High after breakout 73% 50% 126%
Average Drawdown before Max. High after breakout 6.43% 4.48% 7.28%

Symbol
(click for chart)

Brkout
Date
Brkout
Price
Avg
Vol
Max
Gain %
Draw
Down %
Days To
MaxGain
SLP01/04/073.045048194440.830.33259
HAYZ01/09/074.18273774387.59085
PTT02/09/079.151417778371.8242.08321
BNVI02/16/073.973276324.1807
OFI02/16/076.2100170262.511.2945
SLP02/16/074.554943262208.8818.35216
PRH02/21/071.7118280198.3215.219
OPK02/23/072.28294080183.7210.0952
DRJ02/26/073.6996085141.23010
MDII02/28/070.85230990.91550
GRIL03/08/077.081615490.244.6627
FSLR03/22/0758.046676689.5610.39280
GRIL03/26/078.11615477.5509
HQS04/05/077.8422069271.28039
URRE04/05/079.227533865.8223.26215
FSLR04/10/0759.986910862.938.24261
OPK04/12/074.220590061.7504
JSDA04/13/0726.2720749260.9703
BTJ04/26/0740.081053965310.374
RCCC05/04/0726.11031648.08059
MTOX05/15/0726.1452038.347.7851
IMB05/22/0733.44234334032.49015
HRSH05/31/075.0213682030.9585
TBSI06/04/0723.8510079229.4713.96136
IMB06/05/0736.23234334027.0681
NFI06/19/0739.5827695824.100
KMGB06/29/0726.084114223.5103
AQNT07/02/0764.6602023.39839
NPLA07/02/072.535620423.13010
TPC07/12/0722.747591122.99019
DYII07/16/073.04659632022.8302
LPHI07/16/0725.7100779222.8110.192
QEPC08/03/0712.491482821.1930.3474
LDK08/09/0747.6810223820.7720.4749
SUF09/21/077.39196520.02014
AKNS10/04/078.52347219.9804
SIMC10/08/0712.48159682319.3701
ANW10/10/0739.5927253418.708
EJ10/24/0730.38308777418.240.827
BZP10/25/0710.743547620817.059.0342
CFSG10/26/0713.98388615.806
YGE10/26/0733.617817013.3827.3261
ZIXI10/26/073.2816743212.1414.6345
BIDU10/29/07359.551864779.9408
DRYS10/29/07130.5858149.9480
QSC10/30/071.26450309.21034
CXZ10/31/072.630766528.3206
ASTI11/05/0720.642124565.103
QSC11/12/071.536450304.58021
RSTO11/20/076.64 642084.2500
FSLR11/29/07230.1529703.516.7628
STP11/29/0775.7410227082.880.4525
STP12/21/0785.0410227080.5883

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 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Market1
Signal
Dow 13365.9 -0.63% 7.24% enter
NASDAQ 2674.46 -0.65% 10.73% enter
S&P 500 1478.49 -0.4% 4.24% enter
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
S&P 500
-0.4 %
NASDAQ Composite
3.88 %
NASDAQ Composite
1.42 %
NASDAQ Composite
10.73 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Major Integrated Oil & Gas Major Integrated Oil & Gas Personal Computers Air Services, Other
 Most Improved Industry (by change in technical rank2)
Aluminum
+ 54
Aluminum
+ 99
Long Distance Carriers
+ 213
Long Distance Carriers
+ 210
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 (similar to IBD). 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 2 15 6.37% 4.94%
Last Week 31 15.38 5.68% 1.36%
13 Weeks 208 16.77 11.95%
0.25%
Sector
Industry
Breakout Count for Week
HEALTH SERVICES
Medical Appliances & Equipment
1
MANUFACTURING
Diversified Machinery
1
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 AXTI Axt Inc 105
Top Technical CY Cypress Semiconductor Cp 47
Top Fundamental SWN Southwestern Energy Co 27
Top Tech. & Fund. SWN Southwestern Energy Co 27
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 SMTS Somanetics Corp 26
Top Technical SMTS Somanetics Corp 26
Top Fundamental SMTS Somanetics Corp 26
Top Tech. & Fund. SMTS Somanetics Corp 26
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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