Weekly Newsletter 03/04/11
Login   Trial   Guest
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 'Doji' candlestick pattern exhibited by the NASDAQ Composite over the last two weeks indicates the indecision in the markets as encouraging domestic economic signals are offset by international tensions and rising oil prices which threaten to hold back the recovery.


Our equivolume chart for the NASDAQ Composite shows the picture in more detail with an equal number of down to up days over the last two weeks. Distribution days exceeded accumulation days, however, but notice how the index found support at the 50 day average level on 2/23, 2/24/and 3/1.

equivolume chart

We are likely to see this indecisive pattern continue until Libya resumes oil shipments or western economies adjust to the reality of higher oil prices at which point the underlying primary upward trend will reassert itself.

Despite the indecision, the number of successful breakout this week was almost twice the 13 week average gaining an average of over 4% by Friday's close - significantly better than the market averages.

You may have noticed that Silver has topped our best performing Industry for the last many weeks. The explanation may be found in this NY Times Article.

 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
Zacks Strong Buy Breakouts Back in Favor

Our Zacks Strong Buy Watchlist combines our watchlists with those stocks that are also rated a 'strong buy' by Zacks Investment Research. We have not discussed that watchlist very much lately because, frankly, it has not performed very well. Since last September that has changed and breakouts from this watchlist have done exceptionally well.

This chart (using the Zacks Backtest tool) shows how breakouts from the Zacks Strong Buy Watchlist would have performed over the last 12 months. You can see that performance was mediocre compared to the S&P 500 during the first six months and then started to change dramatically thereafter.

Zacls 12 Months

I don't have an iron-clad explanation for this but I suspect the following.The Zacks methodology is based on the well supported theory that companies that upgrade their forward earnings estimates will see a price increase following the revised earnings announcement and for several weeks thereafter. Now, until around September of last year, there was considerable fear that the economy would lapse into a double dip recession, so that may have led to doubts that the upwards earnings estimates would prove real with the result that the Zacks Strong Buy stocks underperformed in the market. Once the economy appeared to be on a stronger foundation, and fears of a double dip recession receded, it is possible that market participants regained confidence that the upwardly revised earnings estimates were real and bid the price of these stocks higher.

Our Zacks Strong Buy Backtest Tool is available to all readers of our newsletter.

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 12169.9 0.32% 5.12% Up
NASDAQ 2784.67 0.13% 4.97% Up
S&P 500 1321.15 0.1% 5.05% Up
Russell 2000 824.99 0.37% 5.28% Up
Wilshire 5000 13875.3 -0.45% 4.4% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
0.37 %
Russell 2000
9.07 %
Russell 2000
28.23 %
Russell 2000
5.28 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Silver Silver Silver Silver
 Most Improved Industry (by change in technical rank2)
Broadcasting - Radio
+ 139
Broadcasting - Radio
+ 152
Broadcasting - Radio
+ 172
Drugs Wholesale
+ 180
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 28 15.46 7.39% 4.37%
Last Week 14 14.69 2.07% -0.34%
13 Weeks 236 16.85 13.39%
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 PULS Pulse Electronics Corp 116
Top Technical CTE SinoTech Energy Limited - ADS 101
Top Fundamental CMG Chipotle Mexican Grill, Inc. 42
Top Tech. & Fund. CMG Chipotle Mexican Grill, 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 FVE Five Star Quality Care, Inc. 102
Top Technical SCSS Select Comfort Corp. 87
Top Fundamental FVE Five Star Quality Care, Inc. 102
Top Tech. & Fund. FVE Five Star Quality Care, Inc. 102
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.

If you received this newsletter from a friend and you would like to receive it regularly please go to the BreakoutWatch.com site and enter as a Guest. You will then be able to register to receive the newsletter.

Copyright © 2011 NBIcharts, LLC dba BreakoutWatch.com. All rights reserved.
" BreakoutWatch," the BreakoutWatch.com "eye" logo, and the slogan "tomorrow's breakouts today" are service marks of NBIcharts LLC. All other marks are the property of their respective owners, and are used for descriptive purposes only.

BreakoutWatch is not affiliated with Investor's Business Daily or with Mr. William O'Neil. Our site, research and analysis is supported entirely by subscription and is free from advertising.

To unsubscribe from further breakoutwatch.com newsletters, please click here.