Weekly Newsletter 10/22/10
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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  
Has the Rally Run Its Course?

The major indexes are looking a little tired. The NASDAQ Composite chart is representative of the DJI and S&P 500. It shows the indexes are consolidating ahead of the election in 10 days and the FOMC meeting which coincides with the election. The trend is still up, but at a slower pace as the modest gains for the week (see the data below) show.

You will have read that the markets have most probably factored in the Quantitative Easing (QE) expected from the FOMC meeting and the consolidation evident in the NASDAQ chart would seem to confirm that hypothesis.

NASDAQ Composite

While the indexes may consolidate further in the next 10 days, there will still be individual stocks that make spectacular breakouts. For example, yesterday VIcor (VICR), which was a "MTC" choice gained 14%. Other MTC stocks that made strong gains recently were LDK (24.3%), NBIX (31.7%). Overall, this weeks breakouts rose 3% compared to the major indexes that were little changed.

 New Features this Week Additional Value that we added this week
Modified Alert Preferences Setup

We have consolidated the alert preferences setting (previously split between Account Management and Alert Preferences) into a single Alert Preferences page under Take Action - Alerts!. A screen shot is shown below.

Your existing settings should not be affected by this re-organization.

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

Understanding Email Alerts

Where, how and under what conditions alerts are managed and sent may be confusing so we have developed this short guide.

We deliver email alerts when a stock reaches its breakout (or breakdown) price. Email alerts are available to Trial, Gold and Platinum subscribers and there are several methods of selecting which alerts to receive and when. The purpose of this article is to explain how to manage and interpret our email alerts.

Email Alert Options and Management

Turning Alerts On or Off
  • Email alerts are available to Trial, Gold and Platinum subscribers
  • Alerts are turned on or off through the Take Action - Alerts! > Alert Preferences menu choice
  • Alerts on "Long Position" watchlists are automatically enabled but can be disabled
  • Alerts on "Short Position" watchlists are not automatically enabled and must be specifically requested
Restricting the Alerts Received
  • Trial and Platinum Subscribers are able to control what alerts they will receive
  • The alerts to be received are also controlled from the Take Action - Alerts! > Alert Preferences menu choice
  • You can choose to select
    • only those alerts that meet your watchlists filters (set for each watchlist)
    • only alerts for symbols that are in your Personal Watchlists (PWLs)
    • alerts that satisfy your filters and/or are on your PWLs
  • When you view the site Alert Monitor, the monitor will show symbols that correspond to your alert preferences. You can also choose to see the status of all alerts in the Alert Monitor
Alert Preferences

Email Alert Timing
  • Email alerts matching your alert pereferences are sent as soon a stock rises to its breakout price or falls to its breakdown price.
  • Normally, daily volume is not a factor
  • However, if you set a minimum volume on your cup-with-handle filter, then you will receive an email from the CwH list only when the daily volume reaches that level
Volume Interpretation
  • The volumes in email alerts are delayed by 15 minutes for the NASDAQ and 20 minutes for the NYSE and Am Ex exchanges.
  • The projected volume shown in the alert is a "straight line" projection of the delayed volume until the end of the session. Frequently, volume is heaviest in the first 30 minutes of trading, so early projected volume figures are not likely to be accurate
  • We have undertaken considerable research into what volume levels  are necessary for a successful breakout. We found that while a successful breakout can occur for almost any volume level, breakouts with a volume level of 2.25 times the 50 day average volume are more likely to give a return of at least 25% following breakout. We therefore suggest that you only enter a long position when the daily volume has already reached the 2.25 times ADV threshold.

Factors Affecting Performance After Breakout

We have used our extensive history of breakouts from a Cup-with-Handle pattern to evaluate the factors that will most likely lead to breakouts that gain at least 25% in the six months after breakout, even allowing for those that get stopped-out with an 8% stop loss factor.

Part 1: The Influence of Breakout Day Volume

Part 2: The Influence of RS Rank

Part 3: Further Analysis of RS Rank

Part 4: The Influence of Fundamentals, Rank in Industry and Industry Rank

Part 5: The Influence of Specific Fundamental Factors and Conclusion

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 11132.6 0.63% 6.76% Up
NASDAQ 2479.39 0.43% 9.27% Up
S&P 500 1183.08 0.59% 6.1% Up
Russell 2000 703.43 0.04% 10.94% Up
Wilshire 5000 12391.5 0.52% 7.78% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
0.63 %
NASDAQ Composite
6.79 %
Dow Jones
-0.64 %
Russell 2000
10.94 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Auto Parts Stores Beverages - Brewers Beverages - Brewers REIT - Residential
 Most Improved Industry (by change in technical rank2)
Processing Systems & Products
+ 66
Nonmetallic Mineral Mining
+ 93
+ 149
Long Distance Carriers
+ 186
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 27 26.38 5.3% 2.98%
Last Week 24 25.92 7.54% 2.84%
13 Weeks 356 27.77 15.71%
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 QLTY Quality Distribution Inc. 115
Top Technical LFL LAN Airlines S.A. 43
Top Fundamental GSIT GSI Technology Inc. 99
Top Tech. & Fund. LFL LAN Airlines S.A. 43
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 REXI Resource America Inc. 108
Top Technical REXI Resource America Inc. 108
Top Fundamental LPSN LivePerson Inc. 93
Top Tech. & Fund. LPSN LivePerson Inc. 93
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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