Weekly Newsletter 05/01/09
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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  

Friday brought news that the worst of the recession may be over as consumer confidence jumped by the most in two years and manufacturing contracted at a significantly slower rate. The major indexes rose, with the exception of the Russell 2000, but did not embrace this news with enthusiasm as volumes fell to well below average levels. Financial stocks fell as the Administration announced a delay in delivering the stress test results - a sure sign that they contain something that threatens to roil the markets and the delivery of the news is being carefully scripted to please the threatened banks. Will the spin be sufficient to sustain the rally? We'll find out on Thursday although Friday's jobs report may be a downer.

Chart of the Week

A new subscriber wrote to me of his frustration with IBD for not giving him a heads-up on potential breakouts so I have decided to introduce a new feature where each week I will present a chart with promising potential. This will not be a recommendation to buy - for that you must wait for the breakout - but if it does breakout, you saw it here first.RVSN

Radvision scores highly in our expected gain metric because of its high Relative Strength Rank (92) and recent upward moves on strong volume. Most of this is driven by a recent upwards revision of earnings estimates by 230% (source: AAII Journal, April 2009). On Thursday, their Chairman made a tender offer for an additional 5% of their shares to add to his current 24.5% holding. His offer price was $6.30 but the stock closed well above that level at $6.90 on Friday. Earnings are due to be reported on May 5.

This is not a CANSLIM stock - earnings have been negative (but are projected to turn substantially positive this year) and it is comparatively lightly traded with an average volume of just 59,000 shares. What I like about the chart is the big moves up on above average volume as it progressed up the right side of the cup and the declining volume in the handle. This is one to watch for a potential breakout on Tuesday if earnings are better than expected.

I also liked DGIT which is more of a mainstream pick with strong fundamentals, but a 6% drop on Friday on above average volume is worrisome, so it was not my chart of the week.

 New Features this Week Additional Value that we added this week

A limitation of the current personal watchlist page became apparent to me this week. The page only allows pasting of symbols from the clipboard, or manual entry. I wanted to update my Personal Watchlist with symbols from a screening service but was not able to copy the list to the clipboard, but I could save the symbols to a text file. I then needed to add the list to my Personal Watchlist so I modified the existing page to allow input from a file on my personal computer. I'm making this feature available to everyone now. The new PWL input page looks like this:


This Week's Top Tip Tips for getting the most out of our site
If, like me, you build your watchlists from several sources, then the Personal Watchlist is the place to put those selections so you can be alerted when they attempt a breakout. We are working with another information provider to enhance our sources of watchlist stocks and will be enhancing this service further in the near future. We can't reveal the details yet, but hope to have something to announce within the next two weeks.
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 8212.41 1.69% -6.43% Down
NASDAQ 1719.2 1.47% 9.02% Up
S&P 500 877.52 1.3% -2.85% Down
Russell 2000 486.98 1.72% -2.5% Up
Wilshire 5000 8998.73 1.53% -0.97% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
1.72 %
NASDAQ Composite
16.44 %
NASDAQ Composite
-0.1 %
NASDAQ Composite
9.02 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Auto Parts Stores Auto Parts Stores Auto Parts Stores Cigarettes
 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. 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 20 11.46 9.99% 5.02%
Last Week 20 10.54 11.91% 1.7%
13 Weeks 140 12.15 20.45%
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 RVSN Radvision Ltd. 115
Top Technical DGIT Digital Generation Syst 76
Top Fundamental DGIT Digital Generation Syst 76
Top Tech. & Fund. DGIT Digital Generation Syst 76
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 SMSI Smith Micro Software Inc 110
Top Technical CSTR Coinstar Inc 67
Top Fundamental CSTR Coinstar Inc 67
Top Tech. & Fund. CSTR Coinstar Inc 67
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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