Weekly Newsletter 02/04/11
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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  

As usual, we consider the state of the NASDAQ Composite index as the majority of successful breakouts come from the NASDAQ exchange.

The index made a healthy gain of 3.1% for the week and closed on Friday two points above its recent high and at its best level since November 7, 2007. While the chart shows that it has struggled to reach this new high over the last two weeks,  volume for the week was above average which indicates that the index still has positive momentum. Had volume been lower than average, then this would have been a sign that the rally was stalling. As it is, the chart shows the index is in an ascending triangle pattern, which usually resolves with another breakout to the upside. While this will be good in the longer term, what we need now is a correction of 6-8 weeks in the short term for reasons we'll explain below.

NASDAQ Composite

As the recovery has progressed and markets are approaching their 2007 highs, it is interesting to note that the number of breakout possibilities has fallen. Since the start of the year, the average number of stocks on our cup-with-handle watchlist each day has been 58. At the same time a year ago, the average number was 105. This has happened, of course, because so many stocks have broken through former resistance levels and so fewer breakout patterns are forming. A short correction followed by a new rally would allow more patterns to form from which more, and healthier, breakouts could occur.

New Features this Week
Additional Value that we added this week

The ability to view the daily report archive was compromised by the "click here" advertisement and this has been corrected.

This Week's Top Tip Tips for getting the most out of our site
Understanding the Daily Email and the Market Analysis Page

The daily email includes information taken from our market analysis page. That information is explained in the "Market Help" but a link to that page is not (yet) included in the email, so some subscribers are having difficulty understanding what the various data elements mean. For their benefit, we are reproducing part of the market help page here.

As a reminder, the best source for help with the information we provide is on our Support > Learning Center > Help Reference page.

The Market Analysis and Daily Email provide a unique summary of market, industry and breakout performance for the day. In addition to showing the daily change in five major indexes, we provide some features unavailable elsewhere:
  • Accumulation/distribution (A/D) day count over the last twenty days
  • "Equivolume Charts" of each index showing gain/loss, volume, % of daily volume, accumulation and distribution. Equivolume charts are explained here.
  • Index trend signals and the date the signal was issued. Our index trend model is explained here.
  • Best perfroming index for the week, 3 months, 6 months and year to date.
  • Best performing industry for the day, 1, 3 and 13 weeks
  • Most improved industry
  • Our proprietary 'M' indicator of market strength. Positive values of M indicate the market is under accumulation, while negative values indicate the market is under distribution. M is calculated using a weighted sum of Accumulation Days minus a weighted sum of Distribution Days. More recent days are given a higher weight.
  • We do not calculate volume data for all the components of the Wilshire 5000, so equivolume charts and related data are not available (N/A) for that index.

Industries to Watch

As part of the Market Analysis display and the daily email, we also include a summary of the best performing industries and the industries that are moving to prominence. Our industry rankings are derived from our proprietary  ranking methodology which uses our technical ranking methodology. We do not use any third party (such as Morningstar). The industries that are moving up the rankings may be where the biggest price gains are to found.

Other Daily Email Information

  • The day's breakout alerts and final status (confirmed/unconfirmed)
  • The day's breakdown alerts and final status (confirmed/unconfirmed)
  • The top ten scoring stocks on our CANTATA Evaluator

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 12092.2 2.27% 4.45% Up
NASDAQ 2769.3 3.07% 4.39% Up
S&P 500 1310.87 2.71% 4.23% Up
Russell 2000 800.11 3.19% 2.1% Up
Wilshire 5000 13818.3 2.73% 3.98% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
3.19 %
Russell 2000
8.62 %
Russell 2000
22.97 %
Dow Jones
4.45 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Metal Fabrication Metal Fabrication Silver Auto Parts Stores
 Most Improved Industry (by change in technical rank2)
REIT - Hotel/Motel
+ 83
General Contractors
+ 106
Diversified Computer Systems
+ 143
Technical Services
+ 175
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 14 13.85 6.63% 4.72%
Last Week 21 16.69 3.32% -1.06%
13 Weeks 228 17.46 11.81%
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 MRT Morton's Restaurant Group, Inc. 110
Top Technical KRO Kronos Worldwide, Inc. 45
Top Fundamental BIDU Baidu.com, Inc. (ADR) 45
Top Tech. & Fund. TNAV TeleNav, Inc. 0
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 HEES H&E Equipment Services, Inc. 73
Top Technical KRO Kronos Worldwide, Inc. 50
Top Fundamental UA Under Armour, Inc. 45
Top Tech. & Fund. UA Under Armour, Inc. 45
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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