Weekly Newsletter 05/14/11
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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  

NASDAQ in Equilibrium (Almost)

The NASDAQ Composite bounced off support at the 2015 level (line B) last week but has been constrained by the descending triangle (line C). A breakout above trend line C would confirm that the rally still has legs despite gathering headwinds (see below) while a fall through support line B would signal weakness and a failure to find support at ascending triangle A would be distinctly bearish.

NASDAQ Composite

Speaking of headwinds, here are the threats facing the economy as seen by Peter Brookvar of The Big Picture

1) CPI, PPI continue to rise with CPI now back above 3% y/o/y
2) Inflation takes bite out of April retail sales as sales ex gasoline rise just .2%
3) Initial Jobless Claims above 400k for a 5th straight week and 4 week average now at the highest since Nov
4) Weak US$, energy prices and higher Chinese labor costs lead to 11.1% y/o/y gain in Import Prices
5) NFIB small business optimism index falls to lowest since Sept with most growth categories lower and price index higher
6) BoE’s King says UK in stagflationary environment, is it headed here?
7) Political infighting amongst the EU, IMF, ECB and individual country members continue to drag out the fate of the Greek’s.

I highlighted number seven because the Tea Party wants the US to follow similar austerity measures to the UK which I believe would be disasterous inthe short term.
 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

I buy almost all my toys - cycling accessories, books, computer hardware, on-line and usually at Amazon.com. They usually have  the best prices and free shipping if you spend at least $25 (which encourages you to buy more to meet the threshold - smart). Because of this I had already bought some AMZN stock and was pleased to see the big breakout on 4/27. Unfortunately, AMZN didn't figure on our watchlists on that date because its RS Rank was only 73 and we have a minimum requirement of 80. We did confirm it as a breakout three days later, though.


I think Amazon has a compelling business model with no major competitors and because of the infrastructure they have built. a high barrier to entry. Click this image to see a slide show that shows a breadth to their business that I wasn't aware of amd makes a strong case that there is further value to be derived.

Amazon: The Hidden Empire
 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 12595.8 -0.34% 8.8% Up
NASDAQ 2828.47 0.03% 6.62% Up
S&P 500 1337.77 -0.18% 6.37% Up
Russell 2000 835.67 0.28% 6.64% Up
Wilshire 5000 14138.8 -0.1% 6.39% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Russell 2000
0.28 %
Dow Jones
1.65 %
Russell 2000
16.18 %
Dow Jones
8.8 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Cigarettes Health Care Plans Long-Term Care Facilities Silver
 Most Improved Industry (by change in technical rank2)
Tobacco Products - Other
+ 62
Aerospace/Defense - Major Diversified
+ 90
Apparel Stores
+ 159
+ 154
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 11 13.38 5.36% 2.1%
Last Week 15 14.38 5.28% 2.41%
13 Weeks 211 15.23 12.39%
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 CLFD Clearfield, Inc. 127
Top Technical WMG Warner Music Group Corp. 82
Top Fundamental SWI SolarWinds, Inc. 56
Top Tech. & Fund. SWI SolarWinds, Inc. 56
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 CALX Calix, Inc. 67
Top Technical KEM KEMET Corporation 65
Top Fundamental BIP Brookfield Infrastructure Partners L.P. 49
Top Tech. & Fund. KH China Kanghui Holdings 53
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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