Weekly Newsletter 06/10/11
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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 market slide continued on Friday with a distribution day for all the major indexes. As we anticipated last week, the NASDAQ Composite is headed for a test of support at its 200 day moving average and then at its March low of 2603.

NASDAQ Composite

The 200 dma is always a psychologically important level so we may see a bounce off that level before the downward slide resumes.

I believe we have been in a share market bubble and while the bubble may not actually burst, as it did at the end of 2007, there is certainly some air that is going to come out of the balloon. Stock prices had reached their pre-recession levels and yet the level of demand in the economy was nowhere near its 2007 level. Stock prices were supported by cheap money and quantitative easing but with QE2 coming to an end this month, the slide seems likely to continue unless we get some positive economic news. 

 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

Breakdowns Offer the Best Potential for Returns

The number of breakouts this week was just six while there were twenty-nine breakdowns.

When the number of breakdowns vastly overwhelms the number of breakouts then its clear that one should either be on the sidelines or taking some short positions. Betting on breakouts when the market is falling is generally a losing proposition although this week there were several breakouts that gave excellent returns. JVA jumped 84% before closing the week with a 57% gain and PCYC jumped 17% before closing for a 10% gain. For the six breakouts this week the average intraday gain was 20% and the average close was up 12%. Maybe it's tempting on this evidence to think that those stocks that do breakout against the trend can offer better returns, but longer term analysis shows that this is usually a losing proposition.

Instead I would suggest looking for breakdowns from our Flat Base, Head and Shoulders Top and 50 MDA Breakdown lists. Since June 1, there have been sixty-six breakdowns and only five of these are above their breakdown price. Some of them are well below it, as the following table shows.

Breakdowns Since June 1
Date Symbol List B'down Price Last Close Gain % at
Last Close
6/1/2011 TZOO SS 73.18 57.47 27.30%
6/7/2011 PBY SS 13.5 10.61 27.20%
6/1/2011 BKD HS 25.55 22.59 13.10%
6/3/2011 DECK HS 85.8 77.66 10.50%
6/2/2011 ICON HS 23.46 21.45 9.40%
6/1/2011 CLR HS 65.72 60.31 9.00%
6/1/2011 VPHM HS 19.32 17.76 8.80%
6/2/2011 EXXI HS 32.73 30.43 7.60%
6/3/2011 ACAS HS 9.38 8.75 7.20%
6/1/2011 DDM HS 62.45 58.54 6.70%
6/2/2011 BDJ FB 8.64 8.12 6.40%
6/6/2011 NVTL SS 5.33 5.01 6.40%
6/1/2011 XCO FB 20.1 18.97 6.00%
6/3/2011 AZPN HS 16.24 15.33 5.90%
6/1/2011 CAT HS 102.16 96.79 5.50%
6/3/2011 CAT HS 102.16 96.79 5.50%
6/2/2011 OAS SS 28.48 27.09 5.10%
6/2/2011 UGI SS 32.34 30.92 4.60%
6/2/2011 AEL HS 12.67 12.13 4.50%
6/3/2011 CE HS 48.62 46.65 4.20%
6/2/2011 PSLV HS 16.78 16.12 4.10%
6/6/2011 EXPR HS 20 19.31 3.60%
6/3/2011 IJJ FB 83.39 80.55 3.50%
6/6/2011 FTK HS 8.44 8.17 3.30%
6/8/2011 SNPS FB 26.12 25.28 3.30%
6/1/2011 BWA HS 70.07 67.93 3.20%
6/1/2011 CNX HS 50.34 48.83 3.10%
6/6/2011 ATW HS 41.51 40.28 3.10%
6/6/2011 IJT FB 78.15 75.77 3.10%
6/6/2011 AGP HS 67.31 65.36 3.00%
6/1/2011 FTK HS 8.41 8.17 2.90%
6/1/2011 ATLS HS 24.51 23.85 2.80%
6/3/2011 ICF FB 72.09 70.12 2.80%
6/10/2011 ATLS HS 24.51 23.85 2.80%
6/6/2011 FNX FB 34.62 33.73 2.60%
6/6/2011 IJJ FB 82.68 80.55 2.60%
6/9/2011 IYR FB 60 58.48 2.60%
6/10/2011 MOVE SS 2.15 2.1 2.40%
6/1/2011 ASX HS 6.13 6 2.20%
6/6/2011 ADX FB 10.89 10.66 2.20%
6/10/2011 ASX HS 6.13 6 2.20%
6/1/2011 PNC FB 60.34 59.07 2.10%
6/3/2011 AN SS 34.02 33.33 2.10%
6/6/2011 CWB FB 41.44 40.61 2.00%
6/10/2011 PKO FB 28.4 27.83 2.00%
6/3/2011 UGI SS 31.5 30.92 1.90%
6/2/2011 EXAS HS 7.29 7.17 1.70%
6/2/2011 IFF HS 62.55 61.48 1.70%
6/10/2011 EXAS HS 7.29 7.17 1.70%
6/6/2011 HNT HS 30.69 30.2 1.60%
6/2/2011 SLV HS 35.74 35.25 1.40%
6/2/2011 SIVR HS 36.43 35.96 1.30%
6/3/2011 CNW HS 36.95 36.52 1.20%
6/10/2011 IBB FB 104.5 103.31 1.20%
6/10/2011 TR FB 28.08 27.75 1.20%
6/2/2011 WABC FB 48.03 47.66 0.80%
6/6/2011 HS HS 41.44 41.17 0.70%
6/10/2011 CB FB 63.95 63.6 0.60%
6/1/2011 AKS HS 15.26 15.215 0.30%
6/6/2011 FXZ FB 24.32 24.25 0.30%
6/10/2011 LG FB 36.09 36.1 0.00%
6/10/2011 GAM FB 27.3 27.38 −0.30%
6/7/2011 WTI HS 23.34 23.46 −0.50%
6/7/2011 MSEX FB 17.78 18.02 −1.30%
6/6/2011 CVH HS 33.5 34.02 −1.50%
6/2/2011 ZQK SS 4.4 4.56 −3.50%






Average Gain
3.95%


 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 11951.9 -1.64% 3.23% Up
NASDAQ 2643.73 -3.26% -0.34% Down
S&P 500 1270.98 -2.24% 1.06% Up
Russell 2000 779.54 -3.54% -0.52% Down
Wilshire 5000 13404.6 -2.46% 0.86% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
Dow Jones
-1.64 %
Dow Jones
-0.77 %
Dow Jones
4.75 %
Dow Jones
3.23 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Cigarettes Cigarettes Long-Term Care Facilities Long-Term Care Facilities
 Most Improved Industry (by change in technical rank2)
Music & Video Stores
+ 63
Specialized Health Services
+ 88
Diagnostic Substances
+ 137
Aerospace/Defense - Major Diversified
+ 150
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 6 11.46 20.85% 12.09%
Last Week 19 11.92 2.99% -4.56%
13 Weeks 197 12.38 10.31%
-3.15%
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
Category
Symbol
Company Name
Expected Gain1
Best Overall CLFD Clearfield, Inc. 118
Top Technical BIOS BioScrip Inc. 77
Top Fundamental BUCY Bucyrus International, Inc. 7
Top Tech. & Fund. BPI Bridgepoint Education, Inc. 43
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
Category
Symbol
Company Name
Expected Gain1
Best Overall SQNM Sequenom, Inc. 85
Top Technical CORN Teucrium Corn Fund 33
Top Fundamental SQNM Sequenom, Inc. 85
Top Tech. & Fund. SQNM Sequenom, Inc. 85
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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