Weekly Newsletter 01/07/11
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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 new year is off to an impressive start with the NASDAQ Composite index leading the way with a gain of 1.9% since its December 31 close. At Friday's close of 2703 It is now just 32 points away from the final resistance level at 2735 before reaching its 2007 high of 2861.5.

NASDAQ Composite

Volumes for the week were higher than the 50 day average, which combined with rising prices, allowed us to report 24 confirmed breakouts - higher than the 13 week average.

Best performer of the week was BSQR which was one of three breakouts from a high tight flag pattern with a gain of 15.7%. CSII and BSFT were the other two which also made excellent gains of 5.8% and 7.3% respectively.

 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

Value of Industry Filter Confirmed

Just before the holidays, we introduced a new option in our cup-with-handle backtest which allowed you to limit the breakouts selected for the backtest to those in a particular top percentile of industry groups. We did some backtesting ourselves using just one portfolio position and found that the backtest gave the best returns if it was limited to stocks in industries that were in the top 60% of industry rankings. We described that finding in our December 10, 2010 Newsletter.

We have done some testing since then and have confirmed the result. This chart shows the returns for four portfolio positions when the backtest is run over the last five years for breakouts in the top 5%, 10% and so on industry ranking percentiles.

4 position backtest

The chart shows that the best overall return is obtained by selecting stocks that are in the top 70% of industry rankings.

Based on these findings we are going to revise our MTC (Meets Target Criteria) designation to include stocks that are in industries that are in the top 70% of industry rankings. We will do this in the coming week and advise you of its status in next week's newsletter.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 11674.8 0.84% 0.84% Up
NASDAQ 2703.17 1.9% 1.9% Up
S&P 500 1271.5 1.1% 1.1% Up
Russell 2000 787.83 0.53% 0.53% Up
Wilshire 5000 13428.9 1.05% 1.05% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
1.9 %
Russell 2000
13.55 %
Russell 2000
25.17 %
NASDAQ Composite
1.9 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Silver Silver Silver Auto Parts Stores
 Most Improved Industry (by change in technical rank2)
Beverages - Brewers
+ 165
Manufactured Housing
+ 152
Manufactured Housing
+ 204
Gaming Activities
+ 200
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 24 20 6.75% 2.98%
Last Week 7 21.85 7.77% 3.57%
13 Weeks 304 23.23 16.1%
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 GENT Gentium S.p.A. (ADR) 113
Top Technical AHD Atlas Pipeline Holdings, L.P. 51
Top Fundamental POL PolyOne Corporation 65
Top Tech. & Fund. FTNT Fortinet, Inc. 42
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 STAA STAAR Surgical Company 104
Top Technical OSUR OraSure Technologies, Inc. 91
Top Fundamental POL PolyOne Corporation 62
Top Tech. & Fund. POL PolyOne Corporation 62
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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