Weekly Newsletter 01/14/11
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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 NASDAQ Composite closed on Friday at 2755.3 putting it above the penultimate resistance point of 2724.4 (December 26, 2007) before reaching its 2007 high of 2861.5. That's just 3.9% higher than where we are now so we should see a test of a new 10 year high soon, possibly in the coming week. Will the NASDAQ Composite pass the test?

Earnings will be the key. If we see more sizzling performers like J. P. Morgan and Intel (likely, certainly in the financials) and semiconductors keep moving up (the SOX is 5% higher since last Friday) then I expect we will break 2861 in the next two weeks. What happens after that is anyone's guess. The markets are looking over extended after the steep run up since September, so I expect a period of consolidation after we set new highs.


Of the 17 confirmed breakouts for the week, only three were below their breakout price by Friday's close. The rest gained an average of 3.9%. The best performers broke out from a cup-with-handle base and were Callon Petroleum (CPE), + 18.9%, and Gentium (GENT),+ 12.5%. ValueVision Media (VVTV) broke out from a High Tight Flag and gained 7.6% by Friday's close.

We regret that our real-time feed was down on Friday so no alerts were issued. This is particularly unfortunate as this was such a strong day for the markets. We have extended the subscription period of all Trial, Gold and Platinum subscribers by two days in compensation.

 New Features this Week Additional Value that we added this week
Adjustment to the Meets Target Criteria Designation

As we promised last week, we have modified our Meets Target Criteria (MTC) designation so it is assigned only to stocks that are in industry groups that are in the top 70% of the industry rankings. In practice, this means that stocks that rank 1 - 149 in or technical ranking of industries can be given an MTC rating.

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

While, our MTC designation is useful in selecting stocks that are more likely to perform well after breakout, the designation should be used with an understanding of what it means, and why some potentially high performing stocks cannot receive the rating. For the reasons we'll now discuss, if you select only MTC stocks you could be missing some potentially high performing stocks.

To receive our MTC designation, a stock must meet these criteria:
  • must be on our cup-with-handle watchlist
  • Average daily volume >= 100,000
  • Breakout price >= $6
  • Relative Strength (RS) Rank >= 92
  • CANTATA Fundamental Criterion #2 (CEF2) >= 0.6
  • CANTATA Fundamental Criterion #3 (CEF3) >= 0.6
  • Must be in an industry group that ranks 1-149 in our industry technical rankings (new)
You should note that we adjust the RS Rank and Industry rank daily, so a stock could get an MTC rating on the watchlist one day, but lose it the next, even though it stays on the watchlist. Likewise, stocks on the CwH list can gain an MTC rating from one day to the next.

An ETF can never qualify for an MTC designation because we don't have fundamental data for them. Nevertheles, ETF's can be excellent performers. For example, ProShares UltraPro MidCap400 (UMDD) with an RS Rank of 92 broke out on December 1, and has since gained 24.6%.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 11787.4 0.96% 1.81% Up
NASDAQ 2755.3 1.93% 3.86% Up
S&P 500 1293.24 1.71% 2.83% Up
Russell 2000 807.57 2.51% 3.05% Up
Wilshire 5000 13672.7 1.82% 2.88% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
2.51 %
Russell 2000
14.85 %
Russell 2000
32.3 %
NASDAQ Composite
3.86 %
 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)
Textile Industrial
+ 100
Textile Industrial
+ 92
Gaming Activities
+ 183
+ 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 17 19.15 7.45% 3.91%
Last Week 27 20 8.7% 4.31%
13 Weeks 298 21.62 16.77%
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 LSCC Lattice Semiconductor 111
Top Technical PATH NuPathe Inc 82
Top Fundamental MELI MercadoLibre, Inc. 41
Top Tech. & Fund. PCLN priceline.com Incorporated 34
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 LNG Cheniere Energy, Inc. 108
Top Technical LNG Cheniere Energy, Inc. 108
Top Fundamental MTL Mechel OAO (ADR) 54
Top Tech. & Fund. MTL Mechel OAO (ADR) 54
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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