|Weekly Newsletter 08/28/09|
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The markets edged higher this week with the Russell 2000 being the only major index to fall, but only slightly. The overall impression is of a market that wants to move higher but is fearful that the six-month rally has left the market over-bought. While the recovery since March 9 has certainly been unusually strong, it is also true that the fall was extremely steep. It could be that what we lost on the roundabouts we have now regained on the swings and that market values are, as a result, about where they should be.
We have continued to work on our Zacks Stong Buy Strategy this week and the results are presented below. We were concerned that the results since we launched the strategy two months ago were not consistent with the five-year backtest but after bringing the backtest up to date we are satisfied that this strategy still has strong potential. Although the results since March 9 show only a gain of 30% compared to the S&P 500's 48% gain we think that's quite a good result considering the uncertainty and perceived risk in the market in that time frame.
To participate in this strategy you must first take out a 30 day trial with Zacks Investment Research. You can do so by clicking the Zack's Logo:
|New Features this Week||Additional Value that we added this week|
Enhanced Zacks Strong Buy Reporting
We've tweaked the reporting for this watchlist by adding an ability to filter the report by watchlist and also set the stop loss for reporting purposes.
There are now two drop downs at the top right-hand corner of the ZSB report page. After selecting the values, click the Go! link to regenerate the report.
Enhanced Zacks Strong Buy Backtest
The backtest database has now been updated to include data through August 14.
We've added a trailing stop loss factor to the backtest. This works by comparing the closing price each day to the highest intraday high since the stock was bought. If the close is less than the highest intraday high multiplied by the trailing stop factor, then the stock is presumed sold at the close.
To apply the stop loss factor in the real world, one would have to monitor the stock in real time or place a sell at close order.
The backtest can now be run with a stop based on alert price (the price at which it is assumed the stock was bought) and a trailing stop. Some examples are shown in the Top Tip section.
|This Week's Top Tip||Tips for getting the most out of our site|
Using Trailing Stop for Enhanced Returns
Using the backtest tool to test the effect of using trailing stops is an interesting exercise which shows both the benefits and risks of using a trailing stop
Lets first consider ZSB alerts from the High Tight Flag watchlist. We saw a plethora of HTF chart patterns after the March V-shaped bottom and ZSB alerts from this watchlist have done quite well this year.
Although we take great care in producing these results, the introduction of any software change can have unexpected consequences on the rest of the software. For this reason we always provide transparency through the publication of the underlying assumptions and individual trades in the backtest. We invite you to verify these results for yourself with the backtest tool and we always welcome constructive criticism on the Support Forums.
|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|
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