Weekly Newsletter 03/17/07
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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  

Market Summary

Market Signal at Exit

On Tuesday the NASDAQ Composite registered its fifth distribution day in eleven sessions and our market signal went to exit. At the time, the rally that had begun the previous week was still barely viable but the low set on March 5 was taken out the next day. Although a new low was set on Wednesday, the markets recovered in the afternoon and a possible new rally started. The first possible follow-through day to confirm that rally would be on the fourth day of the rally, which is Monday. The markets would have to deliver an accumulation day and simultaneously be at least 1.5% above Wednesday's close before our market model will confirm the rally. Until then, we recommend liquidating all growth stock holdings. For the week, the DJI lost 1.35%, the NASDAQ Composite slipped 0.62% and the S&P 500 lost 1.13%. None of the major indexes have been under accumulation since the second week in January. The NASDAQ has undergone four distribution weeks since then and the DJI and S&P 500 three each.

We are pessimistic about the outlook for the markets even if the current tentative rally is confirmed by a follow-through day. It is usual for there to be several failed rallies as the market moves into a correction, but this time there are underlying economic factors that could deepen the correction to a real bear market (usually a correction is of the order of 10% and a bear market 20% or worse). For a thoughtful analysis of the reasons why, we once again refer you to Nouriel Roubini's Blog.

The three major indexes all show a similar pattern as can be seen in the charts below. Over the last three weeks, the shadows (tails) of the candlesticks have been getting progressively longer and are coming closer to the 200 day moving average. We would not be surprised to see the current rally fail and the 200-day moving average support level tested shortly thereafter. That would represent a 10% correction for the NASDAQ, and a 7% correction for the Dow and S&P 500.

In view of these possibly devastating scenarios, we are strengthening our short sale offering, of which there is more below.

Get a 14 day Trial of our premium 'Platinum' service and TradeWatch for just $9.95 and if you subsequently subscribe to any subscription level we will credit your $9.95 to your subscription.

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 New Features this Week Additional Value that we added this week

Our daily TradeWatch email was enhanced to include the Short at Open for the next session. An example from Friday, March 16 close is shown below. To understand the Short stop Price columns, please see our March 3 Newsletter.

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

Short at Open Performance to Date

We are continuing to develop our short position tools and will have further announcements next week. Since introducing our 'Short at Open' list in the March 3 Newsletter we suggested 10 stocks. Four positions were covered for an average gain of 7.13%, and there are six position not yet covered. Until Friday's close, these positions showed a profit of 2.47%. The overall gain to date is 4.41%.

Short Positions Closed
SymbolShort DateShort PriceCover PriceCover DateGain/Loss %
ATVI 3/5/200716.5216.173/14/2007 2.12%
GES 3/14/2007 38.9837.833/15/2007 3.04%
SAY 3/14/200722.819.523/15/2007 16.76%
SWIR 3/13/200713.8512.993/14/2007 6.60%
 Average Gain 7.13%
Short Positions Still Open
SymbolShort DateShort PriceCover PriceCover DateGain/Loss %
AAPL 3/5/200786.8489.59  -3.07%
BRLC 3/6/20077.887.7  2.34%
BRLC 3/14/20077.887.7  2.34%
MHK 3/13/200785.8583.12  3.28%
RFMD 3/15/20077.637.5  1.73%
XMSR 3/5/200714.2413.16  8.21%
 Average Gain 2.47%
Average Overall 4.41%

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.

Get a 14 day Trial of our premium 'Platinum' service and TradeWatch for just $9.95 and if you subsequently subscribe to any subscription level we will credit your $9.95 to your subscription.

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 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Market1
Dow 12110.4 -1.35% -2.83% enter
NASDAQ 2372.66 -0.62% -1.77% exit
S&P 500 1386.95 -1.13% -2.21% enter
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
-0.62 %
NASDAQ Composite
0.93 %
S&P 500
-4.98 %
NASDAQ Composite
-1.77 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Tobacco Products, Other Tobacco Products, Other Tobacco Products, Other REIT - Healthcare Facilities
 Most Improved Industry (by change in technical rank2)
+ 54
+ 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 10 19.38 0.7% -3.36%
Last Week 15 20.77 2.29% -0.92%
13 Weeks 347 21.15 8.65%
Breakout Count for Week
Closed-End Fund - Debt
Regional - Midwest Banks
Networking & Communication Devices
Home Furnishings & Fixtures
Closed-End Fund - Equity
Internet Software & Services
Internet Information Providers
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 LPSN Liveperson Inc 99
Top Technical STTX Steel Technologies Inc 34
Top Fundamental WBD Wimm Bill Dann Foods Ojsc 47
Top Tech. & Fund. WBD Wimm Bill Dann Foods Ojsc 47
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 AVCI Avici Systems 75
Top Technical AVCI Avici Systems 75
Top Fundamental AVCI Avici Systems 75
Top Tech. & Fund. AVCI Avici Systems 75
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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