Weekly Newsletter 04/23/10
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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  


This week we take a longer view of the NASDAQ Composite since the start of the market downturn in late 2007. We see that the index has made a remarkable recovery since March, 2009 and has retraced 80% of its losses. We also see that it is at a significant resistance level. We have expected a period of consolidation for several weeks now which has not yet occurred so this might be the point at which the market takes a breather. We see that the index has been riding up the uppermost Bollinger Band for an extended period. While riding the upper band is not unusual, we have not seen anything like this recent behavior since the start of the rally last March. However, it is clear that confidence is returning as more and more good economic news accumulates so even if the markets do take a short pause, the prospects for a continued rally are good.

NASDAQ Composite

 New Features this Week Additional Value that we added this week
New Feature for Essential.Breakoutwatch.com Subscribers - Watchlist Monitor

Google is now an excellent source of free real time financial data with an array of API's  (Application Program Interface) which allow the development of some interesting applications.

We've taken advantage of that to build an application which monitors price and volume data for all the stocks on the 'essential' site's  long watchlists. Price data is shown in real time while volume data is delayed by up to 20 minutes (less for NASDAQ stocks). The application compares real time prices to breakout prices and marks a stock as being a 'Possible Breakout' if the current price exceeds the breakout price (BoP). The application also shows the ratio of the actual volume to average volume so you can get a measure of the strength of the possible breakout. Data is refreshed every 5 minutes. Further information is provided by clicking a symbol on the watchlist monitor which brings up a real-time Google stock chart.

The monitor is accessed from the 'Watchlists' menu. Here's a reduced size screenshot of part of the display:

essential monitor

Although not as highly functional as our Alert Monitor on the main site, this should add considerable value to subscribers to the essential.breakoutwatch.com site. As we get more experience with the Google API we expect to add more functionality to the watchlist monitor.

This Week's Top Tip Tips for getting the most out of our site


We are rethinking our approach to email alerts and would like your feedback.

Following an increase in real time data rates and the loss of a large percentage of our subscribers after the market meltdown, we were forced to economize on our data feeds. We did so by keeping the real time price feed and dropping real time volume quotes in favor of delayed volume. The result was a mixture of real time prices (updated every minute) and volume data delayed by 20 minutes. This is still the case as our subscriber level has not yet recovered to the point where we can again afford full real time alerts. The result is an email alert situation that is unsatisfactory for a couple of reasons:

  1. You will recall that our alerts require a volume projection. After this change, we could no longer send out alerts as soon as the markets opened so we started sending out alerts at 9:50 when volume data was first available. Because most big price moves occur soon after the open, this meant that many alerts were too late and too often a significant price move in the opening minutes would not be notified until 9:50. This problem is most noticeable with Zacks alerts which tend to move up very quickly at the open.

  2. The volume projections are unreliable. If there is heavy volume in the opening minutes, this is projected as being heavy volume throughout the day and gives a false reading. Most alerts are not confirmed because the volume target for the day was not met.

The first problem would be resolved if we monitored the markets as soon as they opened and sent alerts based on price only. A jump above the BoP would be immediately recognized and an alert issued. This would result in a lot more alerts, however.

If we retain the requirement that volume should be part of the alert, we can resolve the unreliability of the projection by only sending an alert when the breakout volume is actually met. This raises another question, which is what should the breakout volume be?  We have found that volume only becomes really significant when above 2.25 times average daily volume but waiting until that level is met could mean a significant delay in issuing an alert.

What do you think? Please let us know by completing our really short survey.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 11204.3 1.68% 7.44% Up
NASDAQ 2530.15 1.97% 11.5% Up
S&P 500 1217.28 2.11% 9.16% Up
Russell 2000 741.92 3.82% 17.01% Up
Wilshire 5000 12745.8 2.36% 10.86% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
3.82 %
Russell 2000
20.22 %
Russell 2000
23.48 %
Russell 2000
17.01 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Home Furnishing Stores Home Furnishing Stores 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 19 16.62 6.58% 4.09%
Last Week 22 16.08 8.61% 5.9%
13 Weeks 245 17.23 19.15%
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 JASO JA Solar Holdings Co., Ltd. 110
Top Technical SWWC Southwest Water Co. 53
Top Fundamental CAAS China Automotive Systems Inc. 72
Top Tech. & Fund. CAAS China Automotive Systems Inc. 72
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 MSO Martha Stewart Living Omnimedia Inc. 97
Top Technical OFG Oriental Financial Group Inc. 58
Top Fundamental TUP Tupperware Brands Corporation 40
Top Tech. & Fund. TUP Tupperware Brands Corporation 40
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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