Weekly Newsletter 04/15/06
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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  

Market Summary

The markets delivered a mixed result in this shortened trading week as trading levels fell in the face of continuing uncertainty about interest rates and as investors kept their powder dry ahead of first quarter earnings results which begin in earnest next week. The few earnings results that have appeared so far portend well but investor enthusiasm for stocks has been dampened by potential inflationary pressures coming from a tightening labor market and increased energy costs, while rising bond yields suck funds from the equities markets. The uncertain geopolitical situation centering around Iran and the middle-east probably also added to the cautious mood. For the week, the DJI rose 0.16%, the NASDAQ Composite lost 0.55% and the S&P 500 gave up 0.49%. After adjusting for the shortened week, volumes were down by about 10%. A pullback on lighter volume is a sign of a well-behaved market following the recent 5 year highs posted by all the indexes.

The sharply lower weekly volume for the NASDAQ is clear on the 1 year weekly chart shown below. Note that although the index closed down for the week, it touched its 10 week (50 day) moving average and recovered. Note also that the Bollinger Bands are tightening which is usually a precursor to a breakout, although the breakout direction cannot be determined. I'll hazard a guess that the coming earnings season will exceed expectations while the economy will continue to grow and inflation will be kept in check resulting in a breakout to the upside.

Light volumes kept breakout attempts low for the week and there were just 17 confirmed compared to a thirteen week average of 32. Most closed within the 5% range of their pivot usually considered acceptable for purchase after breakout. Those exceeding that range were BTUI which gained 14.14%, GOL which gained 8% and ARD gained 7.2%.

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 New Features this Week Additional Value that we added this week

The TradeWatch history display was corrected to show the sell price on the day after a recommended sale.

A bug in the Sell Alert processing was corrected which under rare circumstances prevented a timely sell alert from being sent.

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

Understanding Sell Signals from the Sell Assistant

As a subscriber remarked to me this week, buying is easy but selling is the hard part. That's why we felt our service would not be complete without providing sell assistance and why we have worked so hard at getting a Sell Model that gives good results. We use the Sell Model in two different ways, and confusion can arise if you don't understand the separate uses.

1. The Sell Assistant

The Sell Assistant is designed to determine if you should sell a stock at the close of the last day of trading as of when you use the tool. This can result in the Sell Assistant issuing a sell signal on a particular date but when you use it again with the same information a few days later, the sell signal may have disappeared. This will happen if the latest closing price is higher than the close on the day the original sell alert was issued.

Consider, for example, BOT bought from our TradeWatch Best Return list on 3/21/06 for a price of $131.20. A Sell Alert was issued on 3/28/06 and if you had looked at the Sell Assistant that night you would have seen:

If you had looked a again a few days later, say on 4/5/06, you would have seen that the Sell Signal (indicated by the S) had disappeared:

The reason for the apparent discrepancy is that the price had moved higher since the original sell alert was issued and so the earlier sell signal is ignored.

2. TradeWatch History

When you look at the TradeWatch history, we report the gain/loss based on when the first sell signal was issued by the sell model . We show that on the chart you obtain when clicking on symbol in the history list. So for BOT from the TradeWatch History you will see:


The Sell Assistant always tries to determine if you should sell the stock at the next open and ignores any previous sell signal it might have issued. When viewing the history of any stock on our TradeWatch lists, the first sell signal is shown to represent the results you might have obtained if you had traded the stock according to our methodology.

Another Bug Mea Culpa

While preparing this article, I discovered a bug that prevented sell alerts being issued under certain circumstances. The small number of tradeWatch subscribers affected by this bug have been notified.

If you think our service has great potential but you are too busy, or find it too complex, you should consider talking to one of the investment advisors listed below who use our service to generate great returns for their clients.

Investment Advisors Using our Service

TradeRight Securities, located in a suburb of Chicago, is a full services investment management company and broker/dealer. They have been a subscriber, and user, of BreakoutWatch.com for some time now. They practice CANTATA and use Breakoutwatch.com as a “research analyst”. You can learn more about TradeRight Securities at: www.traderightsecurities.com. If you’re interested in speaking to a representative, simply call them toll-free at 1-800-308-3938 or e-mail gdragel@traderightsecurities.com.

PivotPoint Advisors, LLC takes a technical approach to investment planning and management. A breakoutwatch.com subscriber since May, 2004, they use breakouts, market signals, and now TradeWatch to enhance returns for their clients. Learn more at http://pivotpointadvisors.net or contact John Norquay at 608-826-0840 or by email at john.norquay@pivotpointadvisors.net.

Note to advisors: If you would like to be listed here, please contact us. As a service to those who subscribe to us, there is no additional charge to be listed here.

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 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Market1
Dow 11137.7 0.16% 3.92% enter
NASDAQ 2326.11 -0.55% 5.48% enter
S&P 500 1289.12 -0.49% 3.27% enter
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
-0.7 %
Dow Jones
-0.58 %
NASDAQ Composite
0.52 %
NASDAQ Composite
5.48 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Steel -Producers Steel -Producers Machinery-Const/Mining Machinery-Const/Mining
 Most Improved Industry (by change in technical rank2)
+ 78
+ 79
+ 115
+ 144
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 17 29.23 3.15% 0.91%
Last Week 24 31.62 8.06% 3.14%
13 Weeks 437 32.54 13.77%
Breakout Count for Week
Business Services
Business Svcs-Misc
Electr-Semicndtr Equip
Real Estate/ REIT
Real Estate-REIT
Building-Heavy Constr
Computer Software
Comp Software-Desktop
Finance-Misc Services
Oil & Gas
Oil & Gas-Refining/Mktg
Oil & Gas
Oil & Gas-U S Explr/Prod
Oil & Gas
Oil & Gas-Mach/Equip
Transportation -Airlines
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
Company Name
Expected Gain1
Best Overall SWB Smith & Wesson Hldg Corp 99
Top Technical THS TreeHouse Foods Inc 22
Top Fundamental FCL Foundation Coal Holdings 39
Top Tech. & Fund. GI Giant Industries Inc 33
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
Company Name
Expected Gain1
Best Overall STRL Sterling Construction Comp Inc 60
Top Technical STRL Sterling Construction Comp Inc 60
Top Fundamental ALJ Alon USA Energy Inc 44
Top Tech. & Fund. ALJ Alon USA Energy Inc 44
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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