This week we'll analyze the NASDAQ Composite weekly chart as there are a number of interesting features. Also, it is on the NASDAQ Exchange that we expect the majority of stock breakouts. The chart shows the index found support at the 50 day moving average level this week after it looked as though investors were losing confidence that the rally could be sustained. The chart also shows the indecision present in the market for several weeks now. The 'Doji' pattern this week and in five of the last six weeks is indicative of a market looking for direction to the up- and down-side and not finding it.

Another feature of the chart is the tightening Bollinger Bands. The bands tighten as the daily trading range becomes less volatile and this is often a precursor to a breakout either to the up or downside.

Overall, the bias remains to the upside and as long as the economic news continues to improve, then we can expect that to continue, although at a slower pace than the last six months.

We wish our newsletter subscribers a happy and safe Labor Day weekend.

No new features this week.

Our recommendation for using the Zacks Strong Buy alerts is to buy as close to the alert price as possible. In other words, do not wait for the breakout to be confirmed but instead buy as soon as an alert is issued.

We wondered what the result would be if we applied the same buy strategy to our cup-with-handle list.

To compare the effects of buying on alert we looked at the highest intraday high reached for breakouts from the ZSB and CWH lists since March 9, when the market hit bottom.

We found that of the 57 alerts from the ZSB list (including our backtest data) the average gain to intraday high was 26.7% while the average gain to intraday high for CWH alerts, of  which there were 313, was 23.4%

After running a Student's t-test to see if the difference in the means was statistically significant, we found that the probability that the results were equivalent was just 0.33. This means that there was a meaningful difference in profits gained from the Zacks Strong Buy alerts.

This result shows that alerts from the Zacks Strong Buy list perform significantly better, on average, than alerts  from the cup with handle list. Since most of the ZSB alerts are also cup-with-handle alerts, it follows that the ZSB list is a useful filter for CWH alerts.

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