Weekly Newsletter 09/18/09
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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  

The market continues to trend higher but at a slower pace. Our equivolume chart of the NASDAQ Composite shows that the index set a new intraday high for the year on Thursday and met resistance at that level on Friday. The chart shows how well the index has performed since the brief consolidation at the beginning of September with five accumulation days and only two days when profit taking produced a small loss.

Friday's accumulation day is slightly suspect because it was also a 'quadruple witching' day. The spike in volume is caused by fund managers closing and opening options and futures contracts but the small gain shows that the underlying trend is still bullish.

Equivolume Chart

On our equivolume chart, the width of the day's 'candle' and the number below the candle represent the ratio of the volume to the 50 day average volume. Note that the trend in September has been to beat the average daily volume. The average volume is increasing and each day the volume is beating the average so volume is actually rising exponentially, which demonstrates that more and more money is flowing into stocks.

This increase in volume and upward price trend has produced an increase in the number of breakouts and an improvement in their average gains for the week. In our top tip below we show that the High Tight Flag pattern is producing some excellent results. Here is an example of a high flyer breakout from a HTF pattern.


 New Features this Week Additional Value that we added this week
No new features this week.
This Week's Top Tip Tips for getting the most out of our site

High Tight Flag Breakouts Outperform the Rest

The market recovery this year has created many cup-with handle patterns as stocks recover from the bear market but conditions have been just as favorable for the High Tight Flag (HTF) pattern. Once quite rare, the V-shaped market recovery since March has produced a plethora of breakouts from this pattern as so many stocks have gained 100% or more in a short time frame. In fact, the number of successful breakouts from this pattern is second only to the Cup-with-Handle pattern.

Interestingly, far from suffering exhaustion after their rapid rise, HTF breakouts sustain their momentum and have outperformed the other patterns, as the following table shows.

Breakout Performance over Last 90 Days
Average Gain to Intraday High
High Tight Flag
Head and Shoulders Bottom
Flat Base

Although the steep market ascent is now slowing, the HTF breakouts continue to perform well. Of the fourteen breakouts this week that gained at least 10% after breakout, eleven of those were from an HTF base and just three from a CwH base.

B'out Date Symbol Base
B'Out Price RS Rank Gain at Intraday High
9/14/2009 PERY HTF 13.43 88 26.58
9/14/2009 IRE HTF 16.05 99 25.73
9/16/2009 USG CwH 15.91 84 24.95
9/16/2009 AIB HTF 8.44 93 23.46
9/15/2009 REXX CwH 7.2 82 19.17
9/14/2009 MAC HTF 30.22 90 17.5
9/16/2009 GCI HTF 9.22 93 16.38
9/15/2009 MSO HTF 7.62 94 15.98
9/14/2009 SLG HTF 38.5 87 15.87
9/15/2009 BYD CwH 11.18 85 14.22
9/15/2009 GET HTF 21.97 91 14.16
9/15/2009 LENB HTF 12.49 88 11.05
9/15/2009 SOA HTF 12.45 98 10.6
9/15/2009 VCI HTF 16.25 99 10.15
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 9820.2 2.24% 11.89% Down
NASDAQ 2132.86 2.5% 35.25% Up
S&P 500 1068.3 2.45% 18.27% Up
Russell 2000 617.88 4.09% 23.71% Up
Wilshire 5000 11032.2 2.6% 21.4% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
4.09 %
Russell 2000
20.51 %
Russell 2000
54.43 %
NASDAQ Composite
35.25 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Home Furnishing Stores Copper Auto Dealerships Auto Parts Stores
 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 29 13.69 11.05% 6.81%
Last Week 23 11.15 12.22% 6.31%
13 Weeks 182 13.77 22.81%
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 ADPI American Dental Partners 0
Top Technical NGSX NEUROGESX, INC. 0
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 AMSC American Superconductor 56
Top Technical AMSC American Superconductor 56
Top Fundamental AMSC American Superconductor 56
Top Tech. & Fund. AMSC American Superconductor 56
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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