Weekly Newsletter 09/17/10
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You are receiving this email because you are or were a BreakoutWatch.com subscriber, or have subscribed to our weekly newsletter. This newsletter summarizes the breakout events of the week and provides additional guidance that does not fit into our daily format. It is published each weekend.
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 NASDAQ Composite comfortably broke through resistance at 2309 to close the week at 2315. This is significant because it failed to pierce resistance at this level in August. It faces its next test at 2341. The NASDAQ was the strongest performing index as technology companies are expected to benefit most as the recovery gathers pace.

NASDAQ Conmposite

The chart shows a volume spike on Friday but this was due to Friday being a 'quadruple witching day' when volumes always increase as options and futures contracts expire and are  re-negotiated.

Our trend model turned positive for all the major indexes this week. This is consistent with the more bullish outlook among investors. The American Association of Individual Investors (AAII) reports that bullish sentiment is at its highest level since August, 2009. (If you are a contrarian, this may not be good news!) They offer two reasons:
"The first is the market’s recent rebound. The rise in stock prices is giving some investors hope that a short-term bottom in the market has been formed. The second is the reduction in chatter about potential deflation and a double-dip recession. Though the economic data has not been great, it has been good enough to give some assurance that recovery is continuing."
The more positive mood and increasing volume caused a surge in breakouts this week to 41 compared to the thirteen week average of 15.
 New Features this Week Additional Value that we added this week
Real Time Volume Filters

A new addition to the cup-with-handle watchlist filter options allows you to restrict email alerts to only those CwH breakouts that meet a specific volume level.

This goes into effect on Monday, September 20, and is available to Trial and Platinum subscribers.

This new option allows you to receive alerts at the higher volume levels we have identified as necessary for the most successful breakouts.
This Week's Top Tip Tips for getting the most out of our site
Using Real Time Volume Filters

Platinum subscribers can set parameters that control when and on what basis they receive email alerts. These alerts are controlled from the "Filter Settings" tab on each watchlist.

The cup-with-handle watchlist now has an additional feature that allows you to set a real time volume threshold. The threshold can be higher or lower than the default volume threshold which is 150% of the 50 day moving average volume, and you can choose to receive alerts based on an actual volume threshold or a projected volume threshold.

A projected volume threshold is based on a straight line extrapolation of the volume at a specific time until the end of the session. For example, a session lasts 6.5 hours, so let the volume after 30 minutes by 100k shares, then the projected volume to the end of the session will be

100k / 0.5 * 6.5 => 1300k shares

If the projected volume threshold were set at 1300k shares, then in this case an alert would be issued 30 minutes into the session.

If an actual volume threshold were set at 1300k shares, then an alert would not be issued until the actual daily volume level was reached, which would be some time later.

The projected and actual volume filters are mutually exclusive - you can set one or the other. If zero, then the volume filter is ignored.

This example shows how an actual volume alert filter would be set combined with an MTC (Meets Target Criteria) filter.

volume filters   

The filters outlined in blue represent characteristics of the stock that are known before breakout and the two filters outlined in red are the volume filters that are applied in real time.

In this example, an alert would be sent when the actual volume reached 2.25 times the 50 day average volume.

The Backtest, which can be used to test which filter values have worked in the past, does not take into account these new volume filters.

Also, although our price data is in real time, our volume data is delayed by 15-20 minutes. For that reason, you may want to set the real time volume alert level
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 10607.8 1.39% 1.72% Up
NASDAQ 2315.61 3.26% 2.05% Up
S&P 500 1125.59 1.45% 0.94% Up
Russell 2000 651.44 2.35% 2.74% Up
Wilshire 5000 11740.4 1.63% 2.11% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
3.26 %
Dow Jones
1.5 %
Dow Jones
-1.25 %
Russell 2000
2.74 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Beverages - Brewers Beverages - Brewers REIT - Residential REIT - Residential
 Most Improved Industry (by change in technical rank2)
Basic Materials Wholesale
Basic Materials Wholesale
+ 197
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 41 15.77 3.65% 1.86%
Last Week 10 13.92 4.69% 2.12%
13 Weeks 219 16.15 11.83%
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 CCIX Coleman Cable, Inc. 105
Top Technical MFE McAfee, Inc. 28
Top Fundamental HMSY HMS Holdings Corp. 36
Top Tech. & Fund. HMSY HMS Holdings Corp. 36
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 PIR Pier 1 Imports Inc. 100
Top Technical TPCG
Top Fundamental NEM Newmont Mining Corp. 37
Top Tech. & Fund. GIII G-III Apparel Group, Ltd. 51
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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