Weekly Newsletter 09/23/11
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  

For the benefit of new subscribers, each week we focus on the NASDAQ Composite as it is from that exchange that most breakouts occur. The Russell 2000 is also a source of breakouts, but the index is more volatile (meaning more noise) than the NASDAQ, and so less useful as an indicator of market trend.

The NASDAQ market trend signal turned positive on August 29 and we can see from the chart that the index is trending upwards with higher highs and higher lows. At least it was until Wednesday this week, when the FOMC shattered expectations by failing to announce a new round of QE and issued a downbeat view of economic prospects. The markets inevitably over-reacted, as they usually do, by collapsing Wednesday afternoon and plunging on Thursday before Friday brought a relief rally. Where we go from here is anyone's guess, but there is a risk of a new head and shoulders top forming, as I've indicated on the chart with the red arc.

It can be argued that the NASDAQ is less subject to global influences than the larger cap indexes of the DJI and S&P 500 so we have included a chart of the relative strength of the NASDAQ vs the S&P 500 and you can see that since mid-August, the NASDAQ has been outperforming the S&P. The direction for the NASDAQ is therefore, more linked to domestic economic activity and a turnaround in the domestic economy would be positive for the NASDAQ even if the European crisis, with its threat the global financial system, continues.


The number of breakouts increased this week but the steep declines on Wednesday and Thursday left most of them under water or with only slight gains.

In contrast, taking a short position on our breakdown alerts would have netted over 9%.

Symbol Base Brkdown
Last Close Gain % at
Last Close
9/23/2011 MAT SS 25.88 25.585 1.20%
9/23/2011 PCY FB 26.8 26.51 1.10%
9/22/2011 CAJ FB 43.01 43.28 −0.60%
9/22/2011 DXJ FB 31.49 31.83 −1.10%
9/22/2011 VIV HS 27.09 26.16 3.60%
9/22/2011 AUY HS 15.62 13.72 13.80%
9/22/2011 EGO HS 20.11 17.24 16.60%
9/22/2011 NSU HS 6.37 5.52 15.40%
9/22/2011 CAF FB 22.63 22.47 0.70%
9/22/2011 VPL FB 49.16 48.46 1.40%
9/22/2011 COG SS 70.03 61.11 14.60%
9/22/2011 PAAS SS 31.8 27.07 17.50%
9/22/2011 VIAB SS 45.4 40.68 11.60%
9/22/2011 APC SS 72.72 66.58 9.20%
9/22/2011 SGI SS 14.52 14.09 3.10%
9/21/2011 ELN HS 9.93 9.62 3.20%
9/21/2011 NWSA HS 16.75 16.11 4.00%
9/20/2011 CBOU HS 13.8 12.5 10.40%
9/19/2011 UNH HS 50.04 47.6 5.10%
9/19/2011 MNTA SS 17.43 11.47 52.00%
Average profit on Breakdowns 9.14%

You can see all recent breakdowns in our breakdown report on the site and also link to charts for each pattern.

 New Features this Week Additional Value that we added this week

Last week we introduced our new trend reversal signal (TRS) methodology and we have now substituted those trend reversal signals for the old market trend signals. We had considered keeping the two signals side by side as medium and short term trend indicators but have decided for simplicity to use the TRS only. They are shown on our daily market analysis page and email to subscribers and on this weekly newsletter below.

This Week's Top Tip Tips for getting the most out of our site
Using the new Trend Reversal Signals

Our 'Stock Timeliness Checkup' tool (under the Analytical Tools menu) allows you to see how an investment in a particular stock would have fared had you entered and closed long positions in the stock based on the TRS. It can also be used to see how simply trading the index would have performed.

To demonstrate that the TRS indicators are an improvement over the old trend signals, we ran the Stock Timeliness Checkup tool using our symbol for the NASDAQ Composite (IXIC). Firstly, here's the results over the last five years using the old trend signals. Trading NASDAQ using old trend signals Secondly, here are the results using the new TRS indicators.Trading NASDAQ using new TRS

As you can see, the new signals gave a 5% better return, that's a 15% improvement!.

So you can use the Stock Timeliness Checkup tool as a means to apply the TRS to any individual stock by using the appropriate index. The indexes for which we have TRS signals are the NASDAQ Composite (IXIC), Russell 2000 (RUT), S&P 500 (SPX), Dow Jones Industrials (DJI), and the Wilshire 5000 (DWC).

 Market Summary Overview of market direction and industry rotation
Index Value Change Week Change YTD Trend
Dow 10771.5 -6.41% -6.96% Down
NASDAQ 2483.23 -5.3% -6.39% Up
S&P 500 1136.43 -6.54% -9.64% Down
Russell 2000 652.43 -8.66% -16.74% Up
Wilshire 5000 11859.3 -6.69% -10.77% Down
 Best Performing Index
1 Week 13 Weeks 26 Weeks Year-to-Date
NASDAQ Composite
-5.3 %
NASDAQ Composite
-6.4 %
NASDAQ Composite
-9.47 %
NASDAQ Composite
-6.39 %
 Best Performing Industry (by average technical score over each period)
1 Week 3 Weeks 13 Weeks 26 Weeks
Personal Computers Personal Computers Personal Computers Cigarettes
 Most Improved Industry (by change in technical rank2)
Textile - Apparel Footwear & Accessories
+ 32
Toys & Games
+ 78
Drug Related Products
+ 161
Drug Stores
+ 197
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 19 12.92 3.66% -1.72%
Last Week 13 12.08 5.05% -2.39%
13 Weeks 270 13.77 6.65%
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 GNMK GenMark Diagnostics, Inc   108
Top Technical OXM Oxford Industries, Inc.   50
Top Fundamental AAPL Apple Inc.   28
Top Tech. & Fund. AAPL Apple Inc.   28
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 ULTA Ulta Salon, Cosmetics & Fragrance, Inc.   56
Top Technical ULTA Ulta Salon, Cosmetics & Fragrance, Inc.   56
Top Fundamental CELG Celgene Corporation   26
Top Tech. & Fund. ULTA Ulta Salon, Cosmetics & Fragrance, Inc.   56
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.