Weekly Newsletter 02/26/10
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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 major indexes consolidated after rising 7% between February 4 and February 22 following continued mixed economic reports in the domestic and global economies. The sideways movement is evident in the 3 month NASDAQ Composite chart.

The extent to which the economy is dominating the markets is evidenced by the decline in the indexes since the start of the year despite a strong earnings season. Positive surprises outnumbered disappointments by more than 4:1 and average earnings were up 43% over a year ago (over 10% if the financial sector is excluded). With earnings season almost over, the domestic and global economies are likely to play an even more important role in determining market trends.

NASDAQ Composite

Despite the decline in the major indexes this week, breakouts increased over the week before and made healthy gains after breakout as shown in the intraday gain column of our table of breakouts for the week. At weeks end, only one breakout had failed to make progress.

Breakout Date Symbol Chart Pattern BoP RS Rank Gain Intraday Gain
02/26/10 ODP CwH 7.07 97 2.12% 3.11%
02/26/10 AMR CwH 9.15 89 0.44% 1.09%
02/25/10 PPO CwH 13.88 83 7.85% 10.37%
02/25/10 LINTA CwH 11.63 91 8.25% 10.15%
02/25/10 ETM CwH 9.45 98 7.62% 10.48%
02/24/10 ASH CwH 47.01 97 0.15% 0.96%
02/23/10 WFMI CwH 34.72 87 2.22% 3.80%
02/23/10 ODP CwH 6.73 93 7.28% 8.32%
02/22/10 KEI CwH 6.51 88 10.45% 15.98%
02/22/10 ATV CwH 6.9 82 -6.52% 5.80%
02/22/10 ACTG CwH 9.45 87 4.97% 6.56%

 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

As we reported last week, we are working on a version of the Zacks Strategy Simulation to be applied to our cup-with-handle watchlist.  We had hoped to have it ready for release this week, but we need to add some more options and complete testing.

Nevertheless, we can show you the results since 2009 using the target criteria which we developed over the last few weeks.

Here is a chart of the results using a strategy of buying on alert if the RS Rank is at least 92 and using an 8% stop below the breakout price and a 12% trailing stop (these stop values need further refinement).

RS Rank >= 92

Now, if we add a filter for CEF2 >= 0.6 and CEF3 >= 0.6, we get a significant improvement:

RS Rank >= 92, CEF2 >= 0.6, CEF3 >= 0.6

I am hopeful that this tool will prove an invaluable resource for refining our target criteria further. Look forward to its release next week!
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 10325.3 -0.74% -0.98% Up
NASDAQ 2238.26 -0.25% -1.36% Up
S&P 500 1104.49 -0.42% -0.95% Up
Russell 2000 628.56 -0.48% -0.87% Up
Wilshire 5000 11453.2 -0.4% -0.39% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
-0.25 %
Russell 2000
4.67 %
NASDAQ Composite
10.33 %
Wilshire 5000
-0.39 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Major Airlines Major Airlines Housewares & Accessories Housewares & Accessories
 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 11 12.46 6.97% 4.08%
Last Week 6 12.23 5.6% -0.12%
13 Weeks 189 13.08 13.11%
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 AEA Advance America, Cash Advance Centers Inc. 113
Top Technical CVVT China Valves Technology, Inc. 75
Top Fundamental ECPG Encore Capital Group, Inc. 62
Top Tech. & Fund. ECPG Encore Capital Group, Inc. 62
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 ATV Acorn International, Inc. 103
Top Technical WFMI Whole Foods Market, Inc. 52
Top Fundamental WFMI Whole Foods Market, Inc. 52
Top Tech. & Fund. WFMI Whole Foods Market, Inc. 52
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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