Weekly Newsletter 07/29/11
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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  

All the major indexes suffered losses as concerns over the debt ceiling impasse grew and our trend indicator for the Russell 2000, the most volatile of the indexes we follow, turned negative.

Friday brought gloomy economic news as GDP grew at just 1.3% in the second quarter and earlier quarters were revised downward showing that the recession was deeper than we knew. Despite this news and and continued wrangling over the debt ceiling issue, the NASDAQ Composite closed down only 0.4% on Friday after being 1.2% lower shortly after the open. The larger cap DJI and S&P 500 indexes lost 0.8 and 0.7% respectively. That the markets are not more concerned over a possible downgrade by the ratings agencies seems to indicate that they are assuming that a compromise will eventually be reached that will allow the debt ceiling to rise, and even if it doesn't, that US Treasuries will remain the reserve currency of the world.

With spending cuts baked into whatever plan is finally adopted, GDP will fall further in the short term as government expenditure is cut and unemployment will remain high. Consumer demand, the engine of the economy, will therefore remain depressed so we may be entering another bear market. The NASDAQ closed below its 50 day moving average and the 50 dma line is ominously trending downward providing a technical indicator supporting the bear market hypothesis.

NASADQ Composite

 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

Does the Meets Target Criteria (MTC) Indicator Yield Better Results?


It is over 18 months since we introduced our Meets Target Criteria (MTC) indicator so we decided to see if choosing stocks flagged with the MTC 'thumbs up' indicator outperformed other breakouts.

To do this we looked at the highest intraday high made by stocks with the MTC indicator versus those that were not flagged as MTC over periods from 10 days to 180 days after breakout. If a stock fell by more than 8% intraday from its breakout price after breakout then we used the highest intraday high before that date in our analysis.

The analysis showed that for each period examined the MTC stocks reached higher intraday highs than the non-MTC stocks.

For example, in the first 10 days after breakout, MTC stocks gained 1.46% more than non-MTC stocks. That's an improvement of over 20%. As you can see, the degree of improvement fell off as the time given for the stocks to reach their intraday high lengthened, but the MTC stocks always outperformed the non-MTC stocks.

Our conclusion then is that when given a choice between taking a position in an MTC stock versus a non-MTC stock, then you should choose the MTC stock.

Days After Breakout MTC Avg. % Gain Non-MTC Avg. % Gain Difference MTC Improvement
10 8.53 7.07 1.46 20.65%
20 12.53 11.01 1.52 13.81%
30 17.25 14.28 2.97 20.80%
40 20.66 17.3 3.36 19.42%
50 23.93 19.96 3.97 19.89%
60 26.09 22.21 3.88 17.47%
70 28.81 24.4 4.41 18.07%
80 30.56 26.35 4.21 15.98%
90 31.98 28.23 3.75 13.28%
100 33.9 30.04 3.86 12.85%
110 35.23 31.37 3.86 12.30%
120 36.11 32.47 3.64 11.21%
130 37.25 33.86 3.39 10.01%
140 38.88 35.55 3.33 9.37%
150 40.15 36.72 3.43 9.34%
160 41.6 38.11 3.49 9.16%
170 42.47 39.57 2.9 7.33%
180 43.09 40.52 2.57 6.34%


 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 12143.2 -4.24% 4.89% Up
NASDAQ 2756.38 -3.58% 3.9% Up
S&P 500 1292.28 -3.92% 2.75% Up
Russell 2000 797.03 -5.32% 1.71% Down
Wilshire 5000 13643.1 -4.12% 2.66% Up
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
-3.58 %
NASDAQ Composite
-7.89 %
Russell 2000
2.79 %
Dow Jones
4.89 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Personal Computers Personal Computers Cigarettes Health Care Plans
 Most Improved Industry (by change in technical rank2)
Office Supplies
+ 66
Silver
+ 81
Music & Video Stores
+ 179
Music & Video Stores
+ 183
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 13 5.87% 2.06%
Last Week 29 12.85 6.31% -2.63%
13 Weeks 221 14.08 9.31%
-2.22%
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 KOG Kodiak Oil & Gas Corp. 106
Top Technical DBLE Double Eagle Petroleum Co. 71
Top Fundamental CHSI Catalyst Health Solutions, Inc. 40
Top Tech. & Fund. CHSI Catalyst Health Solutions, Inc. 40
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 KOG Kodiak Oil & Gas Corp. 110
Top Technical DBP PowerShares DB Precious Metals Fd (ETF) 37
Top Fundamental GPOR Gulfport Energy Corporation 55
Top Tech. & Fund. GPOR Gulfport Energy Corporation 55
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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