|Weekly Newsletter 02/26/05|
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New Service: Breakdown Alerts - see this weeks Top Tip
The indexes closed the week on a high with the DJI setting its best level for the year while the S&P 500 just failed to better the high set on February 16. The NASDAQ closed at its high for the week, but is still well below its 50 day moving average which it touched and then retreated from on February 15.
The 'N' in CANTATA favors new stocks and for that reason the NASDAQ has been the market where we have expected the majority of CANTATA quality breakout stocks to come from. However, readers of this newsletter will have noted that we have been decidedly negative about the prospects for the NASDAQ for several weeks now. While the last three days have been more positive for that index, we still feel that until what has become the bugaboo of the 50 day moving average is beaten, then it will continue to struggle.
A glance at our Industry Analysis table based on technical condition quickly shows where the strength is, and so it is not surprising that the DJI and S&P 500 are substantially outperforming the NASDAQ. The top three sectors are oil and gas related, which is of course because of the ongoing rise in oil prices, and the 4th is Foreign Banks, which must be attractive in view of there being no floor in sight for the dollar.
To see where the next strong breakouts will come from, lets look at our equivolume chart of the DJI. It shows a classic cup-with-handle shape. While a CwH pattern for the index is not of great significance in itself, (because we don't buy the index, but instead buy the stocks within the index that are breaking out), it does show that the majority of the stocks making up the index must also be in a CwH pattern. If strong institutional buying were to occur we would expect the DJI stocks (and secondarily the S&P 500) to be the ones that would show the best returns. (Note: we don't follow the small cap indexes, although that is something we hope to add in the near future).
Since institutions must, for the most part, invest the funds they have on deposit, we would like to see retail investor confidence rise so that institutions have more funds to invest. This is the key to driving overall indexes higher, rather than sectoral rotation.
Although the number of successful breakouts was down to 24 this week, their overall performance was substantially better with an average gain for the week of 6.5% (more than 10 times the DJI). BOOM was the big bang of the week with not one but two breakouts. It broke out on Tuesday and then formed a new short handle before breaking out again on Friday for an overall gain of 31.6%. The poster child for the year remains DHC which has now gained 83.5% since its February 1 breakout.
|Market Summary||Overview of market direction and industry rotation|
|Weekly Breakout Report||How confirmed breakouts performed this week|
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|
|Top Second Chances||Stocks that broke out this week and are still in buyable range|
|New Features this Week||Additional Value that we added this week|
ShortSale Selection Criteria Amendments
Based on feed back from subscribers, we have changed the way we filter for institutional investment and added a new criterion about the relationship of the most recent close to the 50 day moving average.
The full set of criteria is listed on the site.
|This Week's Top Tip||Tips for getting the most out of our site|
Last week we introduced ShortsaleWatch, our new watchlist of stocks that may be suitable shorting candidates. This was enthusiastically received and we are now ready to start issuing alerts based on this watchlist. We are also introducing alerts on breakdowns from the Flat Base watchlist.
Breakdown alerts are available to Gold and Platinum subscribers and are an optional feature available at no additional charge. The alerts will be issued from each watchlist as described below and are based on real-time prices checked at one minute intervals.
A 'Breakdown Alert' will be issued during trading hours based on ShortsaleWatch when the following conditions are met:
A 'Breakdown Alert' will be issued during trading hours based on FlatbaseWatch when the following conditions are met:
When an alert is issued, it will also be listed on the site on the 'Alerts' page. There will also be a new report under the 'Monitor' menu called 'Recent Breakdowns' which will show breakdowns for the day and previous days in the same way the current Breakout Report does.
To modify your account to receive Breakdown Alerts, please login to the site and choose Account Management > Update Account.
Then check the Send breakdown alerts option as shown below.
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